Robinson Patman Act Flashcards, test questions and answers

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What is Robinson Patman Act?

The Robinson Patman Act of 1936 is a United States federal law that seeks to protect small businesses and consumers from discriminatory pricing practices by large companies. The act was enacted in response to the increasing concentration of economic power among large corporations at the time, as well as their tendency to use their power to limit competition. The primary purpose of the legislation is to ensure that competing sellers are able to compete on an equal footing, regardless of size or market share.The primary component of the act prohibits companies from charging different prices for identical goods or services sold in different locations based on customer identity. This prevents larger companies from using their market power and volume discounts to gain an advantage over smaller competitors who sell similar products in local markets. Additionally, it prevents retailers from discriminating against certain buyers when offering discounts or other promotional incentives. In order for a company’s actions under this law to be considered illegal, they must meet specific criteria outlined by the Federal Trade Commission (FTC). These include whether: 1) there is a substantial difference between prices charged; 2) sales were made in commerce; 3) there was intent to injure competition; 4) discrimination has an anticompetitive effect; 5) customers were selected with respect solely or primarily due differences in price charged; 6) buyers were discriminated against with respect solely or primarily due differences in cost structure not related exclusively buying volume; 7) discount levels varied substantially enough that could create competitive injury data shows injury occurred despite absence evidence showing any deliberate intent harm competition. The Robinson Patman Act has proven essential in protecting small businesses and consumers alike from unfair business practices. Without it, many small firms would likely struggle against larger competitors whose predatory pricing tactics would drive them out of business without consequence.