FTC v. PepsiCo: Another Attempt to Resurrect the Robinson-Patman Act Ahead of Administration Changes
In a 3-2 party-line vote (Democratic majority), the Federal Trade Commission (FTC) followed up its recent resurrection of the Robinson-Patman Act (RPA) with another RPA suit—now, alleging price discrimination through promotional pricing. The FTC's redacted complaint alleges that PepsiCo violated the RPA by providing promotional pricing to a specific big-box retailer, thereby discriminating between large and small retailers. Like in its recent suit against Southern Glazer's Wine & Spirits, the blistering dissents issued by the two Republican commissioners cast serious doubt on whether this litigation will continue once the FTC flips to a 3-2 Republican majority. Nevertheless, this complaint serves as a reminder that the RPA remains a tool in the antitrust enforcement arsenal—and incoming Chair Ferguson's dissent provides insight into what that enforcement may look like under the new Administration.
The Robinson-Patman Act
In 1936, Congress enacted the RPA, also known as the Anti-Price Discrimination Act, to deprive large buyers of competitive advantages solely derived from their size or their quantity purchasing ability. Congress intended that the act would level the playing field and reduce competition among retailers in an era when large retail stores were opening.
In December, for the first time in decades, the FTC filed an action alleging price discrimination under Section 2(a) of the RPA. Section 2(a) prohibits preferential pricing to preferred retailers that are not based on real efficiencies created by selling goods at different quantities (i.e., diminished costs due to quantity manufacture, delivery, or sale).
And on January 17, 2025, the commission resurrected RPA Sections 2(d) and (e), authorizing staff to file suit against PepsiCo under the provisions. Sections 2(d) and (e) prohibit sellers from engaging in price discrimination by using cooperative advertising and promotional allowances—financial incentives given to select retailers by manufacturers to promote a brand.
The FTC's Suit Against PepsiCo
In a statement affirming the investigation and suit, Democratic Chair Lina M. Khan and Commissioner Alvaro M. Bedoya alleged that the FTC's investigation unearthed "clear reason to believe that Pepsi has violated Sections 2(d) and (e)" by giving special treatment to a big-box retailer. Specifically, the statement alleged that under certain circumstances, Pepsi runs self-funded promotions through a big-box retailer, which thus lowers Pepsi's prices in the store relative to its prices at smaller competitors that do not receive the same promotional funding. Unlike mere price differentials, the preferential advertisement funding further obscures disparate treatment and discriminatory pricing.
Chair Khan and Commissioner Bedoya further underscored the importance of RPA enforcement, arguing that through such enforcement, the FTC eliminates a major impetus for corporate consolidation that leads to higher prices, lower quality, and reduced wages.
Commissioners' Dissents
But two Republican commissioners—Commissioner Andrew N. Ferguson and Commissioner Melissa Holyoak—again issued blistering dissents, specifically invoking the political lines that had gone unaddressed in their Southern Glazer's dissents.
Commissioner Holyoak argued that the complaint incorrectly applies Section 2(d) and (e) in alleging promotional pricing in lieu of the straightforward pricing discrimination under Section 2(a). While violations under Section 2(a) require a showing of injury, violations under Section 2(d) and (e) are per se violations that are thus easier to prove. In her dissent, Commissioner Holyoak asserted that the complaint failed to allege that Pepsi made any payments to the retailer and only asserts that Pepsi provided a favored price, which would be more appropriately analyzed under Section 2(a). She further alleged that even if a price discount was considered a payment from Pepsi to the retailer, it did not facilitate the resale of the product (only its original sale), which is required by Section 2(d).
Former Commissioner (now Chairman) Ferguson further argued that the FTC's complaint against PepsiCo is a "cynical attempt to tie the hands" of the incoming administration despite a dire deficit in evidence. In his dissent, Commissioner Ferguson agreed with Commissioner Holyoak's analysis that the case is a Section 2(a) issue, rather than a Section2(d) and (e) issue as the majority and complaint purport. Moreover, he argued that under all sections, the RPA always requires evidence of discrimination, but here, there is no evidence of disparate treatment or competition.
Although Commissioner Ferguson made clear that he does not agree with the underlying policy of the RPA, he explicitly stated in his dissent that he was willing to enforce the RPA where "(1) [the FTC has] solid evidence that a firm violated the Act, and (2) the retailer benefitting from the discrimination [has] market power sufficient to pose a danger to competition."
What Comes Next
Given the change in executive administration and the commissioners' critical dissents, it is questionable whether this suit will move forward once the FTC is controlled by a 3-2 Republican majority. However, we note that the notoriety of the suit may inspire private actors to bring suit and incoming Chair Ferguson has pointed to specific instances in which suits under the RPA may be appropriate.
What You Need To Prepare
Now, it is an appropriate time for companies to (1) review their pricing policies to ensure RPA compliance, (2) ensure their teams are up-to-date on RPA developments, and (3) speak to counsel on the topic.
For help in navigating this evolving area, don't hesitate to reach out to DWT's antitrust group, which is closely following these developments.