The Anti-Price Discrimination Act, better known as the Robinson-Patman Act of 1936, is a United States federal law that prohibits price discrimination. Price discrimination refers to the unethical and illicit act of transacting different prices for identical goods.
The Robinson-Patman Act of 1936 is an amendment of section 2 of the Clayton Antitrust Act of 1914. The main purpose of the Robinson-Patman Act is to prohibit large multinational companies from using their buying power as a way to influence the prices of suppliers.
Needless to say, the Robinson-Patman Act protects the welfare of small suppliers while at the same time providing an equal opportunity for small retailers to compete against large multinational companies.
Significance of the Robinson-Patman Act of 1936
Prior to the passing of the Robinson-Patman Act, large companies exercise their market power to gain discounts, rebates and other transaction preferences over small suppliers. Such scenarios became a threat for smaller retailers and even suppliers.
For retailers, the onset of such unethical sales practices was a major disadvantage. They content themselves with the leftovers of the large companies. On the other hand, the suppliers are forced to sell their goods at a lower and sometimes unreasonable price due to pressure from their monopolistic customers (large companies/retailers.)
Price discrimination can negatively impact the economy and has implications on the small business industry.
History of the Robinson-Patman Act of 1936
Before the passing of the Robinson-Patman Act, a similar federal law governs trade and industry. In 1914, the Clayton Antitrust Act was introduced by Alabama Democrat, Judge Henry De Lamar Clayton Jr. The Clayton Antitrust Act also prohibits such anti-competitive transactions.
Nevertheless, the increase in the prevalence of such unethical trade practices required stronger and stricter regulations.
Senator Joseph Robinson and Representative Wright Patman argued that the large multinational companies negotiate in an unfair manner, forcing the supplier to give discounts and other price concessions.
The main idea behind the Robinson-Patman Act is to require suppliers to sell their goods or services to retailers at the same price.
Crucial elements to put the Robinson-Patman Act into play
There are several elements that should be present in order to determine if the Robinson-Patman Act has been violated. The Robinson-Patman Act comes into play when two or more consummated sales of the same commodity (in terms of quality and preferences) commenced at the same or at least close in time by the same supplier to two or more purchasers. Another element Federal investigators look into is competitive injury, if there is any.