The FTC Brings Back the 1930s

The agency may sue an alcohol distributor for sale-volume discounts.

WSJ editorial. 

"Dinosaurs roam the earth again, and not merely in the movies. They’ve been spotted at the Federal Trade Commission, which is excavating ancient bones like the long out of favor 1936 Robinson-Patman Act to harass business as an inflation scapegoat. 

Our sources say the FTC is preparing to file a complaint against Southern Glazer’s Wine and Spirits, the nation’s largest alcohol distributor, for giving big retailers discounts on volume purchases. Robinson-Patman says suppliers cannot “discriminate in price between different purchasers of commodities of like grade and quality.”

Congress in that era wanted to protect small grocers from larger competitors, but the law has rarely been enforced in the past four decades because of its unintended harms. A 1977 Justice Department report documented how Robinson-Patman resulted in higher prices and price-fixing among competitors, while inhibiting small-retail cooperatives from negotiating discounts with suppliers.

Progressives are nonetheless urging the FTC to revive this legal velociraptor. “Dominant retailers can extract more favorable prices and terms from suppliers,” which “make up their losses by charging higher prices to independent, smaller grocery stores,” 16 Members of Congress wrote FTC Chair Lina Khan this spring.

Manufacturers often set different prices for customers based on purchase volumes, among other reasons. But there’s little evidence that these select discounts increase food or any other prices. Food prices roughly tracked overall inflation during the 1960s and ’70s, yet they rose more slowly than the consumer-price index in the 40 years before the pandemic.

One reason is that competition from big-box stores has helped keep prices down. Yet the Biden-era inflation has given Americans sticker shock in the grocery aisle. Since the start of the pandemic, food prices have increased at the fastest rate since World War II as energy, labor, commodity and material costs have surged.

Progressives want to scapegoat big business, and they have found unexpected allies among some conservatives. Last month a bipartisan House letter led by Reps. Zoe Lofgren (D., Calif.) and Tom Tiffany (R., Wis.) asked the chamber’s appropriators to designate $10 million of the FTC’s budget for Robinson-Patman enforcement.

“As Congress and federal antitrust authorities continue to expend time and resources scrutinizing the tech industry, we should not do so at the expense of kitchen table issues and the health of competition on Main Street,” they wrote. They say workers at mom-and-pop businesses have been harmed by the FTC’s failure to enforce Robinson-Patman.

Show us the evidence. Liquor and convenience stores have added roughly 26,000 jobs—about a 7.8% increase—since the start of the pandemic. Big-box stores have expanded, but Americans shop around.

In addition to Southern Glazer’s, the FTC has launched an investigation into Coca-Cola Co. and PepsiCo. Robinson-Patman is a blunt tool that lets the government fix prices, and it is so malleable that virtually all supplier discounts could be deemed illegal no matter if they benefit consumers.

Nostalgia for the 1930s is a Biden trend. The Federal Communications Commission recently invoked the Communications Act of 1934 to regulate broadband providers as common carriers under the pretext of protecting “net neutrality.” Now the FTC wants to use another New Deal law to mandate price neutrality. Bernie Sanders may have lost the 2020 Democratic primaries, but he has persuaded the Biden Administration that 2024 is really 1936."