FTC should return to bipartisan consensus deemphasizing Robinson-Patman enforcement in competition policy
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The Federal Trade Commission (FTC) under two consecutive administrations is reviving enforcement of a 1930s law that was dormant for decades after a bipartisan consensus found enforcement of the law, the Robinson-Patman Act, harmed consumers and proved inconsistent with the goals of the rest of antitrust law. In a pair of new papers for the Competitive Enterprise Institute (CEI), former FTC leaders Tim Muris and Bruce Kobayashi advocate a return to the status quo by deemphasizing enforcement of the Robinson-Patman Act.
In the wake of a 1935 decision by the Supreme Court to strike down the National Industrial Recovery Act (NIRA), Rep. Wright Patman (D-Texas) introduced a new bill to reenact parts of the NIRA by restricting new and innovative chain stores. Originally drafted by the wholesalers’ trade association and tellingly titled The Wholesaler Grocer’s Protection Act, the law sought to protect the then-dominant producer-wholesaler-retailer business model against disruption brought by chain stores’ new model, bypassing wholesalers to deliver lower prices and greater efficiency to consumers.
The original version faced strong opposition, including from the Roosevelt administration, so Rep. Patman and his cosponsor Sen. Joseph Robinson (D-Ark.) had to modify the bill, leaving key language vague, ambiguous, and subject to multiple interpretations. Once enacted, the Robinson-Patman Act became the FTC’s main competition enforcement weapon, with the agency too often acting as if Patman’s original protectionist purposes had been enacted.
As early as the 1940s, enforcement of the Act led to recognition that the FTC was harming consumers and that recognition increased by the early 1960s, when hundreds of Robinson-Patman cases were filed. By the last decades of the 20th century, Robinson-Patman was vilified throughout the antitrust community and consensus developed that antitrust should focus on competition and consumer welfare, not the protection of competitors. This led to the FTC first deemphasizing Robinson-Patman enforcement in the 1970s and eventually to complete abandonment.
In 2021, then-President Joe Biden, with FTC Chair Lina Khan at his side, personally condemned the long, bipartisan antitrust consensus he inherited as a forty-year “experiment failed.” His appointees, including at the FTC, praised and filed cases under Robinson-Patman as part of their program to return to what they felt were old verities wrongly abandoned. More recently, the FTC under President Trump has stated it will not return to the pre-Biden, anti-Robinson-Patman consensus. Each Republican commissioner professed a fealty to Robinson-Patman enforcement and the agency continues to litigate a Biden-era Robinson-Patman case.
In the companion paper by Muris and Kobayashi, the authors address the economic literature and its limitations for guiding policy involving uniform and differential pricing. Specifically, they discuss theories that discounts (“subsidies”) to large firms necessarily harm smaller ones; then, more general theories in modern economics regarding the effects of differential pricing; and, finally, a deeply flawed empirical study the FTC cited in support of its first case under the Act in decades. They show that, despite some suggestions in economic theory that uniform pricing under limited conditions can produce better results for consumers than differential pricing, modern economic analysis gives the same answers as those who condemned FTC action 50 and more years ago: the proposed use of Robinson-Patman is inconsistent with protecting competition and consumers.
“The FTC’s reliance on such a flawed statute as Robinson-Patman led the antitrust community to conclude, based on first-hand experience, that the decades-long centrality of the Act had to end. Both consumers and competition itself would be better off if antitrust enforcers returned to the long, bipartisan consensus to deemphasize Robinson-Patman enforcement,” said former FTC Chairman and study author Tim Muris.
Read Zombie Antitrust: Is Robinson-Patman a Dead Law Walking? on CEI.org.