News
October 6, 2014

Recent Changes to the FTC's Robinson-Patman Act Guidance

Arnold & Porter Advisory

The Robinson-Patman Act (the Act or law), the antitrust law prohibiting "price discrimination," has long been a source of confusion and a target of criticism by courts, commentators, and practitioners. Even the Supreme Court has acknowledged that the law "by no means represent[s] an exemplar of legislative clarity."1 Many critics have called for the repeal of the law, noting that it is often at odds with the efficiency and consumer welfare goals of the other antitrust laws. Indeed, in 2005, the Antitrust Modernization Commission recommended that the Act be repealed in its entirety.2 Nevertheless, the law has survived, and while the Federal Trade Commission (FTC or Commission) has dramatically scaled back its enforcement of the law over the years, the risk of private treble damage actions remains quite real. Those who choose to ignore the Robinson-Patman Act today do so at their peril. 

Some forty-five years ago, at a time when the Federal Trade Commission was still bringing many Robinson-Patman enforcement proceedings, the Commission issued a set of guidelines designed to assist businesses in complying with the provisions of the Act governing discrimination in promotional payments and services - i.e., "non-price" discrimination. (The Robinson-Patman Act provision restricting discrimination in price is set forth in Section 2(a) of the Act; the provisions restricting discrimination in promotional payments and services are set forth in Sections 2(d) and 2(e) of the Act.) These guidelines, formally known as the "Guides for Advertising Allowances and Other Merchandising Payments and Services," (Guides or Fred Meyer Guides) are colloquially known as the "Fred Meyer Guides" in honor of a Supreme Court decision that had suggested the need for such guidelines. See FTC v. Fred Meyer, Inc., 390 U.S. 341, 349 (1968). The last time the FTC revised the Fred Meyer Guides was in 1990. 

In 2012, the FTC issued a request for comments for its first revision of the Guides in over twenty years.3 Among the questions raised by the FTC was whether it should eliminate the Fred Meyer Guides altogether. However, after considering comments from several sources, including the American Antitrust Institute, the Section of Antitrust Law of the American Bar Association, and a few trade organizations, the Commission has decided to retain the Guides, albeit with some modifications to reflect developments in judicial interpretations and the nature of market competition since the last review of the Guides. The entire 48-page summary of the FTC's changes (and explanations for the changes) can be found at 79 Fed. Reg. 58,245 (Sept. 29, 2014). Some of the more notable aspects of the FTC's revisions are as follows:

The Commission Largely Retained the Guides in Their Current Form

One of the questions posed by the Commission was whether the Guides should be eliminated. No one submitting comments advocated such an action. This is not surprising. Because of the opaque nature of the statutory language, these Guides continue to serve as a useful roadmap for businesses in determining the types of conduct that are permissible under the law. 

There Is No "Injury to Competition" Requirement

One of the time-honored principles of antitrust law generally is that the antitrust laws are meant to "protect competition," not individual businesses. With few exceptions, conduct that does not cause "injury to competition" does not violate the antitrust laws. The Robinson-Patman Act, however, is different. For example, courts have held that the provisions of the Act governing non-price discrimination (Sections 2(d) and 2(e)) do not require a showing of injury to competition at all. Several of the comments urged the FTC to state affirmatively that Sections 2(d) and 2(e) prohibit only price discrimination that harms competition. Although the Commission acknowledged that requiring proof of competitive injury may be "sound enforcement policy," it declined to interpret the Act as imposing an injury-to-competition requirement. The Commission explained that neither the text of Sections 2(d) and 2(e) nor the case law supports a view that these provisions are limited to discrimination that harms competition. Accordingly, it concluded that if the Guides were to adopt such a limitation, the  Guides would not "provide accurate guidance to the business community about the risks of private litigation." While the Commission indicated that - as a matter of prosecutorial discretion - it would not bring enforcement actions against conduct that did not injure competition, this change is of limited practical import in light of the dearth of government Robinson-Patman enforcement efforts in recent years.

Price Discrimination and Promotional Discrimination Must Be Analyzed Separately

Section 2(a) of the Act limits a seller's ability to offer different prices in connection with the initial sale of goods to customers, while Sections 2(d) and 2(e) limit a seller's ability to provide different promotions or benefits that assist its customers in reselling such goods. In determining whether the Act is violated, courts have traditionally compared separately the specific discounts or benefits offered by a seller to customers with respect to specific products and promotions. One commenter suggested that the Commission should interpret the Act in a more holistic manner, and thus allow sellers to offer customers different discounts and different promotions, as long as the combined discounts and the promotions were of equal value (in the aggregate) for each customer. For example, a seller could charge one customer a higher price than another for the original sale, as long as the seller offered that customer increased promotional assistance to make up for the higher price. The Commission rejected this suggestion. 

The Internet

When the Fred Meyer Guides were last updated in 1990, Internet commerce barely existed. The revised Guides make clear that they apply to sales over the Internet just as much as brick-and-mortar sales, consistent with court rulings that have held generally that the Act protects competing customers from discrimination regardless of the manner in which they resell. Unfortunately, the Commission did not provide detailed guidance about how, as a practical matter, sellers are supposed to make advertising, merchandising, and other promotional benefits available to on-line retailers to the same extent that such benefits are made available to brick-and-mortar retailers. It concluded that sellers should apply "common sense and good faith." 

Disfavored Customers Might Have a Private Right of Action Against Other Customers

The Commission revised the Guides to clarify that the Act might authorize a private right of action against customers or third parties for knowingly inducing or receiving discriminatory promotional assistance. Whereas Sections 2(d) and 2(e) address only the conduct of sellers, Section 2(f) makes it unlawful for "any person . . . knowingly to induce or receive a discrimination in price which is prohibited by this section." The previous version of the Guides said that the Commission could challenge knowing inducement or receipt of discriminatory promotional allowances under Section 5 of the FTC Act, but it did not address whether Section 2(f) creates a private right of action to challenge this conduct. In the revised Guides, the Commission clarifies that courts might interpret Section 2(f) in a way that permits this private right of action. 

The Commission Rejected Suggestions for Reducing the Seller's Notice Obligations

The Commission declined to adopt several suggestions that would have reduced sellers' obligations to notify customers about the existence and terms of their promotional plans. For example, the Commission retained a provision that requires a seller to inform competing customers of alternative promotional plans that are available for customers who cannot take advantage of the primary plan. The Commission rejected a suggested change that would have placed the burden on the customer to contact the seller about alternative plans. Moreover, the Commission made it clear that a seller cannot meet its obligation to inform customers of the availability of promotional programs simply by posting a notice on the seller's website.

Conclusion

Despite the fact that the Federal Trade Commission has not been an aggressive enforcer of the Robinson-Patman Act in recent decades, the Fred Meyer Guides remain a useful tool for businesses seeking to conform their advertising, merchandising, and promotional programs to the requirements of the Act - in order to reduce the risks that may arise from private treble damage actions. In its first overhaul of the Guides in almost a quarter-century, the FTC has made some minor changes in the Guides, but for the most part has left them intact. If history is a guide, this new version of the Fred Meyer Guides could remain in place for the next ten or twenty years, if not longer.

  1. FTC v. Fred Meyer, Inc., 390 U.S. 341, 349 (1968).

  2. Antitrust Modernization Commission, Report & Recommendations at 311-32 (Apr. 2, 2007).

  3. 77 Fed. Reg. 71,741 (Dec. 4, 2012) (request for public comments).

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Douglas L. Wald
Douglas L. Wald
Senior Counsel
Washington, DC
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