Consistent with the neo-Brandeisian penchant for downplaying (some would say ignoring) consumer-welfare concerns, the Federal Trade Commission (FTC) recently touted its interest in “reinvigorating” enforcement of the Robinson-Patman Act (RPA). This would stand sensible antitrust-enforcement policy on its head, by devoting resources to actions that predictably would tend to diminish consumer welfare.
In the hope that FTC leadership might rethink such a disastrous policy pivot, my colleague Satya Marar and I prepared a Mercatus policy brief that highlights the sad history of the RPA: a special-interest protectionist law that was from the start intended to limit competition (and thereby harm consumers) by protecting small businesses from more efficient competitors. Specifically, by prohibiting a seller from charging competing buyers different prices for the same “commodity” (subject to a few complex exceptions), the RPA discourages efficient discount pricing, thereby tending to reduce competition and raise consumer prices.
Sound antitrust scholarship consistently has condemned the RPA. What’s more, in 2007, the bipartisan Antitrust Modernization Commission recommended its repeal, stating that the RPA “appears antithetical to core antitrust principles” and “punishes the very price discounting and innovation in distribution methods that the antitrust laws otherwise encourage.”
For those who want more details on the RPA:
Th[e] [Mercatus] brief charts the legislative, judicial, and enforcement history of the RPA. It critically appraises the potential consequences for consumers and competition of stricter and more zealous RPA enforcement by today’s FTC. The brief also assesses the justifications provided by proponents of renewed RPA enforcement and evaluates suggestions for alternative, pragmatic reforms to address the ability of small businesses and entrepreneurs to compete effectively.
The Mercatus brief concludes:
Net welfare is likely to be maximized by an outright repeal of the RPA, which will prevent ideologically motivated officials from expending public resources in RPA lawsuits that are likely to diminish consumer welfare and make the American economy less competitive. Failing to give due weighting to efficient business practices that benefit consumers is antithetical to the procompetition purpose of the antitrust laws. It is also unfair to consumers—and, in particular, to the vast majority of Americans in poverty, who benefit from the negotiating power of large, vertically integrated entities—and to the majority of entrepreneurs who serve them. Regulatory reform that reduces unnecessary government-imposed costs, not the RPA, is an appropriate means to promote the interests of small businesses in an economically efficient, welfare-promoting manner.
FTC Bureau of Economics Director Aviv Nevo is a distinguished and thoughtful economist. Chair Lina Khan stressed when announcing his FTC appointment that “[h]is insights and expertise will be an asset to our agency and to our work serving the American public.” It is to be hoped that Nevo will explain to the FTC commissioners the economic harm that would attend reinvigorated RPA enforcement, and that they will see the light, bowing to his insights and expertise.
One looks forward to an FTC press release stating that, in the interest of protecting consumer welfare, and in the exercise of its prosecutorial discretion, the FTC will not devote resources to RPA enforcement.
