The Robinson-Patman Act and the Consumer Effects of Price Discrimination

• Author: Christina DePasquale
• Published date: 01 December 2015
• Date: 01 December 2015
• DOI: http://doi.org/10.1177/0003603X15602382

Article

The Robinson-Patman Act

and the Consumer Effects

of Price Discrimination

Christina DePasquale*

Abstract

For almost eighty years, economists have repeatedly maligned the Robinson-Patman Act. While some

of this is justified, I argue that it can improve and, at times, has improved, consumer surplus. In this

article, I examine the consumer effects of price discrimination and discuss three Robinson-Patman

cases and their positive effects on consumer welfare. I then discuss the recent theoretical and

empirical literature on the welfare effects of price discrimination.

Keywords

price discrimination, Robinson-Patman Act, monopoly, monopsony, welfare

1. Introduction

In the early twentieth century, the United States was particularly weary of firms with significant

market power. In 1911, the most famous antitrust case in U.S. history resulted in the Supreme Court’s

breakup of John D. Rockefeller’s Standard Oil Trust.

1

In the wake of Standard Oil, among other cases,

the Clayton Antitrust Act was passed in 1914 to address predatory pricing.

2

Over the next twenty years,

Congress became more focused on the protection of ‘‘mom and pop’’ stores. Specifically, legislators

were concerned with multimarket firms that priced differently across markets in an effort to force

local competitors to exit their markets. In 1936, the Robinson-Patman Act amended Section 2 of the

Clayton Act to account for price differences across markets. The Act aimed to protect small businesses

from paying higher prices than large firms for goods that were intended to be resold.

3

The Robinson-Patman Act is meant to protect against price discrimination. Economists define price

discrimination as differences in price for the same good that are not based on cost. Unfortunately, the

*Department of Economics, Emory University, 1602 Fishburne Drive, Atlanta, GA, USA

Corresponding Author:

Christina DePasquale, Department of Economics, Emory University, Atlanta, GA 30322, USA.

Email: depasquale@emory.edu

1. Standard Oil Company v. United States, 221 U.S. 1 (1911).

2. See United States v. American Tobacco Company, 221 U.S. 106 (1911).

3. CREATION WITHOUT RESTRAINT (Christina Bohanna & Herbert Hovenkamp eds., 2012).

The Antitrust Bulletin

2015, Vol. 60(4) 402-413

ªThe Author(s) 2015

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DOI: 10.1177/0003603X15602382

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