Reforming the Robinson-Patman Act to Serve Consumers and Control Powerful Buyers

Date01 December 2015
Published date01 December 2015
Reforming the Robinson-Patman
Act to Serve Consumers and
Control Powerful Buyers
John B. Kirkwood*
The Robinson-Patman Act suffers from two major flaws. First, its fundamental goal is not to promote
competition and benefit consumers but to protect small business. Second, it frequently fails to protect
either consumers or small business. In particular, the Act’s defenses for meeting competition and cost
justification ordinarily allow large buyers to extract discriminatory concessions from suppliers, even
when the concessions harm both small competitors and consumers. To eliminate these flaws, three
changes are needed. First, the Act’s injury language should be amended: a plaintiff should have to show
harm to competition, not just injury to a competitor. Second, the Act’s meeting competition and cost
justification defenses should be curtailed. Finally, though not the focus of this article, conforming
changes should be made in the Act’s treatment of promotional discrimination. These reforms would
create a statute that is much more likely to serve consumers and control powerful buyers. Indeed, if a
large buyer such as Amazon or Wal-Mart induces a concession that threatens to harm competition, a
reformed Robinson-Patman Act would provide the most desirable remedy. As a general rule, neither
structural relief nor common carrier regulation is likely to be preferable. For this reason, the
Robinson-Patman Act should be reformed, not repealed.
antitrust, Amazon, buyer power, Robinson-Patman Act
I. Introduction
Measured by the standards of contemporary antitrust policy, the Robinson-Patman Act has two major
flaws. First, it is a protectionist statute. Its fundamental aim is not to promote competition in order to
benefit consumers, but to protect small business from competition. As the Supreme Court has
*Seattle University School of Law, American Antitrust Institute, Seattle, WA, USA
Corresponding Author:
John B. Kirkwood, Seattle University School of Law, American Antitrust Institute, 901 12th Avenue, Seattle, WA 98122-1090,
The Antitrust Bulletin
2015, Vol. 60(4) 358-383
ªThe Author(s) 2015
Reprints and permission:
DOI: 10.1177/0003603X15602393
Congress was concerned that a large firm could use its buying power to obtain discrimi-
natory prices and promotional benefits from its suppliers and then wield the resulting competitive
advantage to take business from—or even eliminate—its smaller competitors. Prohibiting such beha-
vior, however, is frequently at odds with the proconsumer focus of the other antitrust laws. When a
large buyer uses the concessions it has induced to take business from small rivals, it normally does
so by lowering prices, increasing services, or otherwise benefitting its customers.
The second major problem with the Robinson-Patman Act is that it fails in many cases to control the
very buyer-driven discrimination it was passed to prevent. While several provisions in the Act limit its
the most important is the meeting competition defense, which allows a seller to grant a
discriminatory price or promotional benefit to a large buyer if the seller believes in good faith that a
competing seller is making a comparable offer. This provision, designed to protect innocent sellers,
frequently protects large, aggressive buyers as well, since they typically induce concessions by playing
sellers off against each other. This gives each seller a meeting competition defense but insulates the
resulting discrimination from attack.
As a result, the Robinson-Patman Act, the antitrust law most directly targeted at buyer power, is
usually unable to reach discrimination induced by a powerful buyer. It is highly likely, for example,
that Wal-Mart, the world’s largest retailer, and Amazon, the country’s largest book seller,
obtain pre-
ferential prices and promotional benefits from their suppliers. Yet no one has brought a successful
Robinson-Patman action against these buyers. To be sure, neither retailer has generally harmed con-
sumers through the exercise of its buyer power. But there are many ways in which the exertion of buyer
power could harm consumers, and as these buyers grow, those consequences become more probable.
There are two major reasons, then, to revise the Robinson-Patman Act. The first is to reorient the
statute, changing its fundamental goal from protecting small business to protecting consumers. This
would bring the Robinson-Patman Act into the antitrust mainstream, confining R-P enforcement, like
enforcement of the other antitrust laws, to practices that pose risks to competition and consumers.
This change would also increase the statute’s appeal, making government enforcers more willing to
bring R-P actions and courts more willing to sustain them.
The second reason to reform the Act is to convert it into an effective tool for combatting buyer-
driven discrimination that threatens competition and consumers. If a powerful buyer like Amazon does
1. See infra note 30 and accompanying text.
2. The Robinson-Patman Act’s protectionist thrust is now confined to ‘‘secondaryline’’ cases—cases in which the plaintiff is a
customer of the discriminating seller. Two decades ago the Supreme Court decided that in ‘‘primary line’’cases—cases in
which the plaintiff is a competitor of the discriminating seller—the plaintiff must demonstrate a threat to market-wide
competition and consumers. See infra Part II.
3. For example, the Act only applies to discrimination in the sale of commodities; it does not prohibit discrimination in the
furnishing of services. Moreover, it ordinarily requires ‘‘two sales’’ involving ‘‘competing purchasers’’ and one of those
sales must be ‘‘in commerce.’’ For a full discussion of the Act’s technical and jurisdictional requirements, see 14
4. See Jeffrey A. Trachtenberg, Amazon Defends Stance in Dispute,WALL ST. J., July 2, 2014, at B1 (‘‘Amazon’s overall share
of new books sold increased to 40%from 12%over the last five years, measured by units, according to the Codex Group
LLC, a book audience research firm. Its share of the e-book market grew to 64%from 58%, Codex said. ‘They’re the
most powerful book retailer today by far,’ said Peter Hildick-Smith, chief executive of Codex.’’).
5. For example, by exacting better terms from publishers than its smaller rivals receive, Amazon could weaken or destroy them,
and that reduction in choice, if it becomes severe enough, could outweigh the lower prices Amazon offers. Moreover, by
extracting greater concessions from publishers, Amazon could reduce their profits—and the earnings of authors—to such
a degree that the output of new titles is diminished. For a fuller discussion of the anticompetitive consequences of buyer
power and a brief review of the evidence, see infra Part III.
6. The other antitrust laws—the Sherman Act, the Clayton Act, and the FTC Act—also have a second fundamental goal. In
cases challenging the unjustified acquisition or maintenance of monopsony power, the aim is to protect small, powerless
suppliers from exploitation. See infra note 19 and accompanying text.
Kirkwood 359

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