The Robinson-Patman Act and Cases Regarding Price Discrimination in the United States

The Robinson-Patman Act (1936)

The highly controversial Robinson-Patman Act stated, in Section 2(a), that "it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality,... where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them, PROVIDED, that nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered."

The way this legislation has been typically interpreted by the courts is: "if a firm's price discrimination drives a competitor out of business, then the firm is violating the Robinson-Patman Act."

But this interpretation flies in the face of the alleged purpose behind antitrust laws in general. The very act of competition, after all, is rivalry, in which firms try to drive out the competition and capture more sales for themselves. The point of competition is not to play nice or try to split the market, but the drive the competitor out of business. Ironically, firms that are successful in competing can be found to violate the Robinson-Patman Act.

Furthermore, the Robinson-Patman Act has not performed well at attacking genuine attempts at predatory price discrimination. Rather, the act is mostly used against standard rivalrous behavior. The Robinson-Patman Act has been interpreted to protect not competition, but competitors themselves.

In Antitrust: The Case for Repeal, Dominick T. Armentano argues that antitrust laws have usually been used to help producers, not consumers, and have acted to reduce competition. The Robinson-Patman Act is the most obvious example of this.