Robinson-Patman Act

What Is the Robinson-Patman Act?

The Robinson-Patman Act is a federal law passed in 1936 to outlaw price discrimination. The Robinson-Patman Act is an amendment to the 1914 Clayton Antitrust Act and should forestall "unfair" competition.

Grasping the Robinson-Patman Act

The Robinson-Patman Act requires a business to sell its products at a similar price paying little mind to who the buyer is. It was expected to keep huge volume buyers from acquiring an advantage over small-volume buyers. The act just applies to sales of unmistakable goods that are completed inside a sensibly close time period and where the goods sold are comparative in quality. The act doesn't matter to the provision of services, for example, cell telephone service, cable TV, and real estate leases.

The law came to fruition to combat unfair trade practices that permitted chain stores to purchase goods at lower prices than different retailers. It was the primary legislation to endeavor to forestall price discrimination. It required that the seller offer a similar price terms to customers at a given level of trade. The act founded criminal punishments for infringement yet contained a specific exemption for "helpful associations."

Enforcement and support for the law have confronted difficulties throughout the years in light of the complexity of the Act and pressures between it, common business practices of price competition, and different parts of antitrust law. Bowing to industry pressures, federal enforcement of the Robinson-Patman Act stopped for quite a long time in the late 1960s. This left enforcement of the act up to private actions of individual offended parties against different businesses, which have forever been troublesome due to the complexity of grasping the law and its application. During the 1970s there was a fruitless endeavor to rescind the Act. The Federal Trade Commission briefly resuscitated its utilization in the late 1980s. Enforcement has again declined since the 1990s.

How the Robinson-Patman Act Works

The Act generally prohibits sales that separate in price on the sale of goods to similarly arranged wholesalers, when the effect of such sales is to reduce competition and may give inclined toward customers an advantage in the market unrelated to their actual productivity. Price alludes to net price and incorporates all compensation paid, including compensation for advertising or different services. The likewise seller may not toss in extra goods or services to bring down the effective price. Harmed parties or the US government might bring action under the Act.

Charges might be brought on sales that include:

Discrimination in price on no less than two fulfilled sales from similar seller to two unique purchasers.
Sales must cross state lines.
Sales must be contemporaneous of "products" of like grade and quality sold for "use, consumption, or resale" inside the United States.
The effect must be to "significantly to decrease competition or will generally make a monopoly in any line of commerce."

A Hypothetical Example of the Robinson-Patman Act

For instance, the Robinson-Patman act requires that assuming Wholesale Company ABC sells two 32-inch level screen TVs of equivalent quality — one to Target on August 10 and one to Mom and Pop's Shop on August 11 — the two stores must be charged $250 per TV. In any case, the act doesn't need that Wholesale Company ABC and Wholesale Company XYZ both sell 32-inch level screen TVs to all big-box retailers for $250 per TV.

Reactions of the Robinson-Patman Act

The Robinson-Patman Act has been widely scrutinized by financial analysts and legal researchers. From almost the beginning the Act was scrutinized as possibly hostile to serious itself and in pressure with different parts of antitrust law; as inclining toward the interests of certain businesses over the interests of consumers; and, as a practical matter, highly subject to expected abuse.

In that the Act raises expected legal ramifications at charging lower costs, it generally runs the risk of effectively rebuffing price competition, which is generally considered to be economically beneficial. Moreover, in light of the fact that the practices outlawed by the act commonly include transactions between businesses as opposed to straightforwardly including consumers and frequently include business charging lower prices on bigger volumes, it is in many cases contended that it will in general lean toward the interest of higher-cost resellers who thusly charge higher prices over the interests of consumers who might benefit from lower retail prices.

At last, on the grounds that charging various prices to various business customers is a particularly common practice among businesses in practically all industries and on the grounds that antitrust enforcement resources are essentially limited and small relative to the size of the economy, examiners must be highly specific in when and which cases to seek after or, more than likely depend on private civil actions to implement the law. Both of these alternatives present a high potential for abusive suits under the law through fanciful or politically roused indictments or through civil actions persuaded by advantage instead of the economic welfare of society.

Highlights

The act just applies to interstate trade and contains a specific exemption for "helpful associations."
The law keeps wholesalers from charging various prices to different retailers.
The Robinson-Patman Act is a federal law planned to forestall price discrimination.
The act has been widely censured by financial specialists and legal researchers on different grounds.