Purchasing power play?
Roosevelt-era antitrust law could boost small retailers
When R.F. Buche buys Cheerios to stock his grocery and convenience stores in rural South Dakota, he pays $6.30 for an 18-ounce box. Walmart pays so much less that it can sell the cereal to customers for just $4.78.
That’s just one example where suppliers offer lower prices to big retailers than to the wholesalers who serve small grocers like Mr. Buche, forcing his customers — many of whom are poor and lack cars to travel to the nearest Walmart — to pay more.
“The pricing that these big box stores and chains are getting is made on the backs of us retailers who don’t have the strength to stand up and do anything about it,” said Mr. Buche, owner of Buche Foods and Gus Stops convenience stores. “We have no leverage, no negotiation power whatsoever.”
He and thousands of other small retailers hope to gain some relief in the Biden administration’s embrace of an antitrust law signed by President Franklin D. Roosevelt in 1936. Known as the Robinson-Patman Act, it was designed to counter the growing market dominance of the Great Atlantic & Pacific Tea Co. — better known as A&P — the largest grocery chain at the time.
Under the law, suppliers can give discounts for large orders, but they must extend the same offer to all retailers. They can’t selectively offer preferential terms, such as lower prices, promotional packaging or access to scarce inventory.
The law hasn’t been actively enforced for decades amid debate over whether it would push up prices for consumers. The U.S. Federal Trade Commission thinks it’s time to bring it back.
“Congress’s intent in those laws is clear,” said Democratic FTC Commissioner Alvaro Bedoya, who visited Mr. Buche’s store on the Pine Ridge Indian Reservation in South Dakota last month. “The reality is that the failure to enforce RobinsonPatman has raised prices on consumers in rural America and in urban America.”
With the encouragement of a bipartisan group of lawmakers, FTC Chair Lina Khan says she intends to resume using Robinson-Patman. The agency has already opened a preliminary probe into how Coca-Cola and PepsiCo price their products and is examining other sectors.
In a policy statement last year, the FTC vowed to investigate the pharmaceutical industry and insulin costs in particular — invoking Robinson-Patman if needed — to curb illegal bribes and rebate schemes involving benefits managers.
Revived enforcement could shake up industries increasingly dominated by giant retailers such as Walmart, Amazon. com and Kroger as well as warehouse stores such as Costco. It comes as the FTC reviews Kroger’s almost $25 billion deal to buy Albertsons, which would unite the U.S.’s two biggest traditional supermarket operators.
Its unclear how reviving enforcement might impact prices, a point that opponents raise when pointing to inflation that, according to the latest U.S. consumer price index report, is running at a 6.5% annual rate. A 1977 Justice Department report on the law cited a Citibank consultant’s estimate that Robinson-Patman increased prices as much as $6 billion per year.
The National Grocers Association, a group of independent retailers including Mr. Buche, has lobbied the Biden administration to reinvigorate Robinson-Patman enforcement. Sean Heather, the U.S. Chamber of Commerce’s senior vice president for antitrust, said that’s a bad idea that “ignores its decadeslong record of failure and would ultimately hurt consumers through less market competition and higher prices.”