Antitrust Legislation: The Robinson-Patman Mistake All Over Again

Shortgo Posted On May 26, 2022

In 1936, in the name of “protecting” competition, Congress passed a law that prevented price discrimination by requiring a business to offer the same price for a good or service. As one might expect, the law failed miserably: it harmed consumers, proved impossible to administer, and led a Congressionally chartered bipartisan group of experts to call for its repeal. The antitrust agencies refused to enforce it, and the courts whittled away at it.

So why are some in Congress trying to repeat this mistake with aggressive antitrust proposals that would restrict competition and potentially lead to higher prices?

First, a little background. During the New Deal, the Robinson-Patman Act sought to make “price discrimination” an antitrust violation. Price discrimination is a selling strategy that charges customers different prices for the same product or service. For instance, when a purchase is made in bulk, a lower price is routinely offered. When you buy an airline ticket well in advance, you often pay less than someone who buys a ticket at the last minute. Most obviously price discrimination is itself the function of companies trying to compete for consumers. This can lead to lower prices.

However, a plain reading of the Robinson-Patman Act would make discriminatory practices, even those that are good for consumers, unlawful. Thankfully, over time, the courts, consistent with interpretation of the full range of our antitrust laws have interpreted that law in a manner that puts the consumer first. Recognizing the Act, as written, is deeply flawed, the Congressionally chartered bipartisan Antitrust Modernization Commission has even called for its full repeal.

There are now voices that want to bring Robinson-Patman back from the wilderness and reinvigorate it. Doing so would serve only one purpose: to limit price competition in the market, which would translate to higher prices for consumers. Such an idea is particularly troubling when the American consumer is currently experiencing record inflation. Luckily, few in Congress have yet to endorse any serious revitalization effort.

But wait, is that entirely true? Rewind the clock to the 1930s, before the enactment of the Robinson-Patman Act. The concern in the economy at the time was that smaller competitors were not able to “fairly” compete with larger competitors.

Sadly, this sounds all too familiar. Robinson-Patman is the grandfather to today’s antitrust legislative proposals targeting “big-tech” – only the legislation in Congress today is far worse. Worse because bills like the American Innovation and Choice Online Act seek to make discrimination null and void, not only for price, but for non-price factors as well.

The legislation would prohibit companies from not only offering competition on price but also extend a ban to prohibit them from competing on quality, service, security, privacy, and innovation. The aim of the legislation is to stop companies from competing altogether and require them to instead start servicing their competition.

If we do not learn from our mistakes, we are doomed to repeat them. Antitrust places the consumer ahead of the competitor. Tipping this balance will have disastrous unintended consequences on our economy and on consumer pocketbooks. Very few in Congress would support legislation that revitalizes the Robison-Patman Act, but if we are not careful, Congress will do exactly that just under a new name—the so-called American Innovation and Choice Online Act.