Price Discrimination Laws

The Robinson-Patman Act

The Robinson-Patman Act (1936) prohibits certain forms of price discrimination that may harm competition. Unlike price fixing (which is criminal), Robinson-Patman violations are civil matters. But penalties can still be significant: injunctions, damages, and attorney fees.

Robinson-Patman is complex, inconsistently enforced, and often criticized. Enforcement has declined in recent decades, but the law remains on the books and can be invoked in private lawsuits.

What Robinson-Patman Prohibits

The Act prohibits charging different prices to different purchasers for 'commodities of like grade and quality' where the effect may be to harm competition. Key requirements for a violation:

Interstate commerce: The transaction must involve interstate commerce
Commodities: Applies to goods, not services
Like grade and quality: Products must be essentially the same
Different customers: Price discrimination between competing purchasers
Competitive injury: The price difference must harm competition If any element is missing, there's no violation. This creates important exceptions and defenses.

Legal Price Differences

Several situations permit different prices to different customers:

Cost Justification

Price differences justified by cost differences in manufacturing, selling, or delivery are legal. If it costs less to serve large-volume customers, you can charge them less. Maintain documentation showing the cost savings that justify discounts.

Meeting Competition

You can lower price to meet (not beat) a competitor's equally low price. This is a complete defense, but you must act in good faith based on reliable information about the competitive price, and you can only meet the price, not undercut it further.

Services vs. Goods

Robinson-Patman applies to goods, not services. Discriminatory pricing for pure services faces no Robinson-Patman scrutiny. This is why consultants can charge different clients different rates without legal concern.

Non-Competing Purchasers

Price differences don't violate Robinson-Patman if purchasers don't compete with each other. You can charge different prices to wholesalers and retailers, or to customers in different geographic markets who don't compete.

Practical Implications

For most businesses, Robinson-Patman risk is modest but not zero:

Document cost justifications for volume discounts and customer-specific pricing
Be prepared to show that meeting competition defenses apply when matching competitor prices
Avoid obviously discriminatory pricing between competing customers with no business justification
Remember Robinson-Patman doesn't apply to services—service companies have more pricing flexibility
Consider geographic price differences carefully when customers compete across regions

Case Study: Robinson-Patman in Practice: The Supermarket Cases Classic Robinson-Patman cases involved manufacturers giving large grocery chains better prices than small independents, potentially harming competition at the retail level. Courts examined whether price differences reflected genuine cost savings (legal) or simply rewarded buying power (potentially illegal). Modern enforcement is rare, but private plaintiffs occasionally bring cases. A distributor that gives Walmart significantly better prices than small retailers could face Robinson-Patman claims from those retailers if they can show competitive injury. Defense: Document the cost savings from serving Walmart's volume, standardized ordering, and centralized delivery.

Key Takeaways

Robinson-Patman prohibits price discrimination that harms competition among competing purchasers
Cost justification and meeting competition are complete defenses
The Act applies to goods, not services—services can be priced discriminatorily
Document cost justifications for price differences to defend against potential claims

Price Discrimination Laws

The Robinson-Patman Act

Robinson-Patman is complex, inconsistently enforced, and often criticized. Enforcement has declined in recent decades, but the law remains on the books and can be invoked in private lawsuits.

What Robinson-Patman Prohibits

The Act prohibits charging different prices to different purchasers for 'commodities of like grade and quality' where the effect may be to harm competition. Key requirements for a violation:

Interstate commerce: The transaction must involve interstate commerce

Commodities: Applies to goods, not services

Like grade and quality: Products must be essentially the same

Different customers: Price discrimination between competing purchasers

Competitive injury: The price difference must harm competition If any element is missing, there's no violation. This creates important exceptions and defenses.

Meeting Competition

Services vs. Goods

Practical Implications

For most businesses, Robinson-Patman risk is modest but not zero:

Document cost justifications for volume discounts and customer-specific pricing

Be prepared to show that meeting competition defenses apply when matching competitor prices

Avoid obviously discriminatory pricing between competing customers with no business justification

Remember Robinson-Patman doesn't apply to services—service companies have more pricing flexibility

Consider geographic price differences carefully when customers compete across regions

Case Study: Robinson-Patman in Practice: The Supermarket Cases Classic Robinson-Patman cases involved manufacturers giving large grocery chains better prices than small independents, potentially harming competition at the retail level. Courts examined whether price differences reflected genuine cost savings (legal) or simply rewarded buying power (potentially illegal). Modern enforcement is rare, but private plaintiffs occasionally bring cases. A distributor that gives Walmart significantly better prices than small retailers could face Robinson-Patman claims from those retailers if they can show competitive injury. Defense: Document the cost savings from serving Walmart's volume, standardized ordering, and centralized delivery.

Key Takeaways

Robinson-Patman prohibits price discrimination that harms competition among competing purchasers

Cost justification and meeting competition are complete defenses

The Act applies to goods, not services—services can be priced discriminatorily

Document cost justifications for price differences to defend against potential claims