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What is the Robinson-Patman Act?

Ken Black
Ken Black

The Robinson-Patman Act is a 1936 law that prohibits discriminatory pricing practices. The law specifically prohibits different prices being charged to different buyers, based solely on that fact that the buyers are different. The act is supposed to help smaller buyers who may be at a competitive disadvantage when it comes to competing against larger buyers who buy larger quantities. For example, the Robinson-Patman Act may be invoked if large, big box retailers are being sold goods at a lower rate than other retailers can get them for.

Under the Robinson-Patman Act, goods have to be sold for the same price, no matter who the buyer is, unless certain conditions were met. While the act applies to many different products, some products were exempt from the law. These exemptions included products such as telecommunications services and newspaper advertising. Also the act does not apply unless the products being bought are comparable in quality, and are bought at nearly the same time as the purchase from other buyer.

Woman holding a book
Woman holding a book

The overall purpose of the act is to make sure there is fair competition and gives smaller retailers equal footing with larger ones. This may not ensure the survival of the smaller businesses, but it provides them with a way to get the products from the supplier at a price comparable to other retailers. Thus, it gives the smaller retailer a chance to compete based on profit margins.

There are a number of different obstacles that make violations of the Robinson-Patman Act difficult to prove. While the pricing difference may be easily to prove once the information is received, finding a way to get that information could be extremely difficult. Often, the prices larger buyers negotiate are proprietary information, and those prices are not generally available to the general public, and especially not to competitors.

One of the main defenses of the Robinson-Patman Act is that cost differences account for the differences in the prices charged. For example, if it costs a business owner more to deliver a smaller quantity, per unit, then the price can be adjusted accordingly. This leads to one of the main criticisms of the act—that it is almost impossible to enforce when it comes to price discrepancies based on quantity.

The Robinson-Patman Act was not the first or the last act to try to eliminate price discrimination. Its immediate predecessor was the Clayton Antitrust Act of 1914. Congress passed both of these acts in an effort to follow up on the Sherman Antitrust Act of 1890, which tried to break up monopolies. The Robinson-Patman Act was later followed by the Celler-Kefauver Act of 1950, which put further restrictions on monopolies in an effort to increase competition.

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