The Robinson–Patman Act: Boon or Bane for Retailers?

• Date: 01 September 1986
• Published date: 01 September 1986
• Author: Stanley C. Hollander,Mary Jane Sheffet
• DOI: 10.1177/0003603X8603100306
• Subject Matter: Article

The Antitrust Bulletin/Fall 1986

The Robinson-Patman Act:

boon or bane for retailers?

BY STANLEY C. HOLLANDER and MARY JANE SHEFFET*

I.

Introduction

759

The Robinson-Patman Act) was passed in

1936

to strengthen and

expand the price discrimination prohibitions of section 2 of the

Clayton Act. As the other articles in this issue undoubtedly

indicate, the act applies to most United States goods-producing

and distributing industries (the armaments industry and most

other governmental supply businesses are notable exceptions).

Important cases have arisen in industries that produce such

diverse goods as cement, gasoline, groceries, and drugs. While

the law was adopted primarily to help small, independent re-

tailers, especially grocers, in their competitive struggle with large-

scale competitors such as chain stores and mail-order companies,'

the Federal Trade Commission's enforcement of this act has

actually fallen hard on that sector. Current FTC Commissioner

Calvani points out that FTC enforcement

of

the act against group

buying ventures or cooperatives also hits small retailers rather

than the large chain store operations which were the focus of

Respectively, Professor and Associate Professor, Department of

Marketing and Transportation Administration, Graduate School of

Business, Michigan State University, East Lansing, Michigan.

15 U.S.C. §§ 12-27 (1976).

2J. PALAMOUNTAIN,

THE

POLITICS OF DISTRIBUTION (1955).

©1986by Federal Legal Publications, Inc.

760 : The antitrust bulletin

congressional concern when the act was passed.' Thus, it would

seem that the onus of governmental enforcement has been on the

small retailers rather than on the large ones. This leaves the

private action. However, the costs

of

litigation are high and few

small retailers can afford protracted court battles.

It

is appropri-

ate, then, to ask how well small and large retailers have fared

during the statute's half century. What has the Robinson-Patman

Act been able to accomplish toward its goal of protecting small

retailers? What has been the effect

of

this act on the growth

of

chain stores and other large firms?

In the following sections we first review a few of the reported

cases and note some key cases that have strong implications for

retailing. Second, we comment on the enforcement vigor (and/or

anemia). Third, we present some notes on the dimensions of

change in the United States market structure and, fourth, some

of

the apparent causes

of

those changes. Finally, we summarize

and offer abrief conclusion.

II. Some relevant cases

While the debate continues as to the value and usefulness

of

the Robinson-Patman Act, private and government suits are still

filed. Some

of

the recent court decisions, however, have limited

the scope

of

the act. In this section we discuss some administra-

tive and judicial cases that have special importance in explaining

or predicting retail structural change.

Interstate commerce requirement

Like other federal antitrust laws the Robinson-Patman Act

regulates interstate commerce but not strictly intrastate com-

merce. The definition

of

what constitutes interstate commerce has

been greatly expanded over the years and few transactions can

3T. Calvani, Prepared Statement, Oversight

of

FTC Law Enforce-

ment: Hearing Before the Subcomm. on Commerce, Transportation and

Tourism

of

the House Comm. on Energy and Commerce, 98th Cong.,

2d Sess. (1984) [hereinafter cited as 1984 Hearings].

Boon or bane? 761

qualify as purely intrastate and thus not be covered by federal

statutes. Aprecedent-setting case in this area is Moore v.

Mead's

Fine Bread CO.4 in which Justice Douglas focused on the wording

in the Robinson-Patman Act which deals with the intent to

destroy or eliminate a competitor by selling goods at unreason-

ably low prices. He expressed his concern that by accepting the

appeals court's interpretation interstate business could grow and

expand by eliminating purely local, intrastate businesses and

ultimately build monopolies by financing their local price-cutting

sales with their higher-priced interstate sales.

This interpretation

of

the "in commerce" requirement and

Justice Douglas' interstate financing theory were rejected in the

1974 Supreme Court decision in

Gulf

Oil Corp. v. Copp Paving

Co., Inc,' The Ninth Circuit Court of Appeals had ruled that

since the product was used on interstate highways the

"in

com-

merce" requirement

of

Mead's

Fine Bread' was met. The Su-

preme Court reversed and said that the transaction itself must be

"in

commerce" and must cross a state line and that it was not

enough that the product was used to construct an interstate

highway. "[T]he jurisdictional requirements

of

these provisions

cannot be satisfied merely by showing that allegedly anticompeti-

tive acquisitions and activities

affect

commerce."?

This has been subsequently interpreted by the appeals courts

to mean that at least one

of

the purchases alleged to violate the

Robinson-Patman Act must cross a state line. This requirement

has restricted the number and type

of

cases which can be brought.

Distributors and retailers are thus prevented from bringing what

might have been successful actions under the

Mead

rule if the

sales concern only local outlets, regardless

of

whether those

outlets are owned by national or international businesses. Two

California decisions involving retail distribution of records and

4348 U.S. 115 (1954).

419 U.S. 186 (1974).

6348 U.S. at 115.

7419 U.S. at 194-95.