Robinson-Patman Act (1936)
Robinson-Patman Act (1936) refers to a federal law that was passed by the U.S Congress in 1936 in order to outlaw discrimination on price basis. The act, which prevents unfair competition, is based on the amendment of the Clayton Antitrust Act of 1914. According to this act, businesses are required to sell their products at a similar price regardless of who buys them. The intention of this act was to prevent an advantage for large-volume buyers over small-volume buyers. It applies to tangible goods or commodities’ sales only whose completion lies within a close timeframe and where the quality of the sold goods is the same. This act does not cover services like cable TV, leases of real estate and mobile phone services.
Why the Congress enacted Robinson-Patman Act (1936)
The main reason why RPA was enacted by Congress in 1936 was to offer protection to small businesses against the use of size advantages by larger businesses in extracting favorable terms and prices from the small businesses. While Clayton and Sherman Acts have open-ended language, whose practical meaning is understood via court interpretation, RPA uses a highly specific language.
Basically, this act was established to ensure the following:
- Equal competition opportunity for small businessmen
- Controlled predatory practices in pricing
- Prevention of monopoly encroaching in distribution
- Efficient behavior by companies
The proponents of this act argued that this act promotes equal opportunity for competition while prohibiting predatory practices as well as deterring distribution concentration without inhibiting efficient behavior by companies.
How a case can be made out under this act
For a prima facie case to be made out under this act, the following conditions must be established by a plaintiff:
- A seller makes more than one sales at varying prices.
- The sales in question are of tangible goods or commodities.
- A minimum of one sale has crossed or crosses the state line.
- The commodities in question are of the same quality and grade.
- The commodities or goods are for consumption, use or resale within the United States.
- The sales have been made within the relevant time frame or period.
- The sales have been made by a seller to more than one buyer.
- The variation in price affects the competition adversely.
- There was an actual injury that was suffered by the victim of the resulting price discrimination.
- The resulting injury was seen as an antitrust injury.
Who is affected by Robinson-Patman Act (1936)?
This act affects sellers and buyers of certain commodities. Almost all sales as well as promotion of goods or commodities in different states in the United States especially via channels like wholesale distribution is affected by the terms of this act. It affects sales by protecting businesses from any competitive disadvantage.
The Federal Trade Commission and the Courts recognize that this act allows price variation as long as it is justifiable based on cost differences that can be attributed to the cost advantages of a seller or that are caused by the efforts of a seller to meet other sellers’ competition. The courts also recognize that this act allows sellers to give certain purchasers functional discounts as well as reasonable reimbursement and recognition for marketing and distribution functions that a purchaser performs. Under this act, price discrimination does not constitute this act’s violation unless a requisite degree of or a threatened injury of the competition occurs.
Where cases have been made out under this act
Since this act became a law, many cases have been presented before the Supreme Court. These involve retailers as well as other entities that allege the violation of this act by manufacturers. They include the FTC v Morton Salt in the 1940s and the Lewis v Texaco case in 1976.
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