Towards a More Reasoned Application of the Robinson-Patman Act

• Date: 01 December 2015
• Author: Lara A. Swensen,David G. Mangum,Mark A. Glick
• Published date: 01 December 2015
• DOI: 10.1177/0003603X15602397

Article
The Antitrust Bulletin
2015, Vol. 60(4) 279-317
Towards a More Reasoned
ª The Author(s) 2015
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Application of the Robinson-
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DOI: 10.1177/0003603X15602397
Patman Act: A Holistic View
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Incorporating Principles of Law
and Economics in Light of
Congressional Intent
Mark A. Glick*, David G. Mangum**, and Lara A. Swensen**
Abstract
We take an economic perspective to analyze the recurring criticisms of the Robinson-Patman Act as being
anticompetitive or inefficient. We determine that the legislative history of the Act identifies economically
rational objectives that are consistent with the efficiency concerns of so-called modern antitrust law.
Further, we reject (as unnecessary and inconsistent with the Act’s clear goals and legislative intent) recent
attempts to narrow the Act’s applications through judicial interpretation of provisions such as the
cost justification defense, the ‘ like grade and quality’’ requirement, and the competitive injury element.
Keywords
Robinson-Patman, legislative intent, cost justification, competitive injury
I. Introduction
The Robinson-Patman Act (RPA or the Act) is under attack and has been for some time by economists
and critics willing to dismiss the goals of the Act as out of step with modern economics and ‘‘antitheti-
cal to core antitrust principles.’’1 That position, in our view, unduly minimizes the value of the con-
gressional goals behind the law and is largely based on a mischaracterization of the Act—a ‘‘Straw
RPA’’ if you will—that is easier to knock down than the actual Act.
1. ANTITRUST MODERNIZATION COMM’N, REPORT AND RECOMMENDATIONS iii (2007).
*University of Utah, Salt Lake City, UT, USA
**Antitrust Department at Parsons Behle & Latimer, Salt Lake City, UT, USA
Corresponding Author:
Mark A. Glick, University of Utah, Department of Economics, 260 S. Central Campus Drive, Room 343, Salt Lake City, UT,
84112, USA.
Email: glick@economics.utah.edu

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The Antitrust Bulletin 60(4)
The explicit goal of the RPA is to protect small businesses—a goal not recognized by many econ-
omists as a priority, despite its relatively narrow scope under the Act. As clearly laid out in the Act and
its legislative history, the statutory protection granted to small business was intended to eliminate the
competitive advantages a larger firm may gain by exercising buyer power. The Act was never intended
to preclude differential treatment based on any efficiencies derived from a firm’s larger size or sources
other than buyer power. Yet much of the criticism of the Act is leveled at just such allegedly
efficiency-robbing concerns—a misinterpretation or misapplication of the RPA, in our view.2
In enacting the RPA, Congress attempted to balance the goals of protecting small business and local
economies while preserving the legitimate efficiency-based competitive advantages resulting from
economies of scale and scope. But the standard microeconomic model does not emphasize protecting
small business and local economies. Failing to recognize the explicit congressional balancing of effi-
ciencies and competitive impact underlying the RPA, limits economists’ (and commentators’) ability
to contribute to an informed understanding of the essential elements of a RPA claim. When those criti-
cisms find their way into judicial opinions and motivate judicial tightening of the Act, however, the
real and legitimate purposes of the Act are frustrated.
In this article, we discuss several important elements of an RPA claim, with the goal of bringing
more clarity to these provisions through the lens of economic theory tempered by legislative intent.
Our approach accepts the congressional goals for the RPA as a legitimate policy decision with a basis
in economic and sociological facts. We maintain that being true to Congress’ purposes in enacting the
RPA mandates interpreting the Act’s requirements with an eye towards protecting small business from
competitive advantages derived from buyer power, while preserving businesses’ rights to price discri-
minate based on other efficiencies.
Our view is that the Act was and is based on valid objectives and that recent judicial trends—fueled
by academic criticism—that seek to reduce the Act’s effectiveness are unwarranted and inconsistent
with clear legislative intent underlying the Act. More fundamentally, however, if the RPA has in fact
outlived its usefulness—as its critics maintain—then the solution is for Congress to repeal it, not for
the judiciary to undermine it through judicial burden-shifting that makes it more difficult for an anti-
trust plaintiff to state and prove an RPA claim. This article examines three examples of this unfortunate
trend towards judicial narrowing: (1) the expansion of, and shifting of burdens in, the cost justification
defense through functional discount analysis; (2) the increasing scrutiny applied, often at inception of
the case and without the benefit of discovery, to the ‘‘like grade and quality’’ requirement; and (3) the
enhanced burden placed on RPA plaintiffs, again often at case inception without the benefit of discov-
ery, to establish competitive injury. We conclude that none of these court-imposed hurdles is necessary
or justified when viewed consistent with the legislative history of the Act and its early jurisprudence.
We then offer what we view as a workable solution to allocating the burdens in an RPA case consistent
with congressional intent and as a reasonable acknowledgement of the disparate information available
to the parties in such cases. We maintain that, properly understood, construed, and applied, the RPA
has a place in American jurisprudence: a place promoting an important social value and, as we explain
below, benefitting consumers in many ways.
II. Historical Context, Legislative Intent, and Early Jurisprudence
of the Robinson-Patman Act
Examining the historical context and legislative history of the RPA reveals that its objective was lim-
ited to prohibiting price discrimination that (1) harms a competitor and (2) is not justified by cost-
2. In this article, we discuss only secondary line RPA cases. A secondary line case involves the sale of commodities to two
competing buyers, usually wholesalers or retailers.

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Glick et al.
281
saving efficiencies. The mere fact of a price difference was never sufficient evidence of illegal price
discrimination, unless that price differential could not be justified by efficiencies (such as lower costs)
the ‘‘favored’’ buyer enjoyed. Efficiency-justified price differentials, or those with no competitive
implications, were preserved through proper interpretation of the Act’s statutory requirements and
affirmative defenses. This section outlines the evidence of this efficiency-focused intent in both the
historical context for the Act and the debates surrounding its enactment, as recognized in early court
cases interpreting the Act.
A. Historical Context of the RPA
The primary congressional goal in enacting the Act was to protect small businesses from being under-
priced by larger competitors who possessed buyer power that allowed them to extract concessions from
manufacturers. The RPA was a revision to section 2 of the Clayton Act of 1914, which itself was the
result of lobbying by the small business community and political action by progressive movement pol-
iticians. Champions of small business like Robert LaFollette pushed forward the Clayton Act in reac-
tion to the Supreme Court’s 1911 adoption of a ‘‘rule of reason’’ interpretation of the Sherman Act.3
Louis Brandeis, one of the Clayton Act’s original authors, staunchly opposed big business, in particular
chain stores, because they threatened the decentralized economic power he believed was critical to a
workable democracy.4 The original Clayton Act section 2 language (prior to amendment by the RPA)
read,
[I]t 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 purchases of commodities, which commodities are
sold for use, consumption, or resale . . . where the effect of such discrimination may be to substantially
lessen competition or tend to create a monopoly in any line of commerce: Provided, That nothing herein
contained shall prevent discrimination in price between purchasers of commodities on account of differ-
ences in the grade, quality, or quantity of the commodity sold, or that makes only due allowance for dif-
ference in the cost of selling or transportation or discrimination in price in the same or different
communities made in good faith to meet competition.5
As applied by the courts, there were two serious limitations to the original section 2 of the Clayton Act.
First, in the 1920s, two Second Circuit cases held that the Clayton Act did not apply to so-called ‘‘sec-
ondary line’’ cases—cases where price discrimination impacts competition downstream from the
seller.6 In Mennen Co. v. FTC,7 the Second Circuit held that the language ‘‘where the effect of such
discrimination may be to substantially lessen competition or tend to create a monopoly in any line of
commerce’’—which replaced language referring specifically to ‘‘purchaser or seller’’ in an earlier ver-
sion of the Clayton Act—reflected Congress’s intent to limit Clayton section 2 to primary line cases.8
One year later, in National Biscuit Co. v. FTC,9 the Second Circuit reaffirmed Mennen’s interpretation
of the legislative history and its policy...