The Robinson-Patman Act prohibits price discrimination based on buyer identity, helping smaller buyers compete with larger ones. Exceptions exist for products of different quality or purchased at different times. The act aims to ensure fair competition, but proving violations can be difficult. The act has been followed by other laws to increase competition.
The Robinson-Patman Act is a 1936 law that prohibits price discrimination practices. The law specifically prohibits different prices from being charged to different buyers, based solely on the fact that the buyers are different. The act is expected to help smaller buyers who may find themselves at a competitive disadvantage when it comes to competing with larger buyers who buy larger quantities. For example, the Robinson-Patman Act can be invoked if large retailers sell for less than what other retailers can buy them for.
Under the Robinson-Patman Act, goods must sell for the same price, whichever buyer, unless certain conditions are met. While the act applies to many different products, some products were exempt from the law. These exemptions included products such as telecommunications services and newspaper advertising. Furthermore, the act does not apply unless the products purchased are of comparable quality and are purchased nearly simultaneously with the purchase by another buyer.
The general purpose of the act is to ensure fair competition and to give smaller retailers an equal footing with larger ones. This may not ensure the survival of smaller businesses, but it does provide them with a way to get products from the supplier at a price comparable to other retailers. Thus, it gives the smaller retailer a chance to compete on profit margins.
There are a number of different hurdles that make proving Robinson-Patman Act violations difficult. While the price difference can be easily demonstrable once the information is received, finding a way to obtain that information could be extremely difficult. Often, the prices negotiated by the largest buyers are proprietary information and those prices are generally not available to the general public, especially not to competitors.
One of the main defenses of the Robinson-Patman Act is that cost differences explain the differences in prices charged. For example, if it costs more for a business owner to deliver a smaller quantity, per unit, the price can be adjusted accordingly. This leads to a major criticism of the act, which is nearly impossible to apply when dealing with quantity-based price discrepancies.
The Robinson-Patman Act was neither the first nor the last act to seek to eliminate price discrimination. Its immediate predecessor was the Clayton Antitrust Act of 1914. Congress passed both of these acts in an attempt to follow up on the Sherman Antitrust Act of 1890, which sought to break monopolies. The Robinson-Patman Act was later followed by the Celler-Kefauver Act of 1950, which placed further restrictions on monopolies in an effort to increase competition.
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