how the robinson patman act works
the act generally prohibits sales that discriminate in price on the sale of goods to equally situated distributors when the effect of such sales is to reduce competition and may give favored customers an advantage in the market unrelated to their actual efficiency price refers to net price and includes all compensation paid including compensation for advertising or other services the also seller may not throw in additional goods or services to lower the effective price injured parties or the us government may bring action under the act charges may be brought on sales that involve 26a hypothetical example of the robinson patman actfor example the robinson patman act requires that if wholesale company abc sells two 32 inch flat screen televisions of equal quality one to target on august 10 and one to mom and pop s shop on august 11 both stores must be charged 250 per television however the act does not require that wholesale company abc and wholesale company xyz both sell 32 inch flat screen televisions to all big box retailers for 250 per television criticisms of the robinson patman actthe robinson patman act has been widely criticized by economists and legal scholars from nearly the beginning the act was criticized as potentially anti competitive itself and in tension with other aspects of antitrust law as favoring the interests of some businesses over the interests of consumers and as a practical matter highly subject to potential abuse 7in that the act raises potential legal consequences for charging lower prices it always runs the danger of effectively punishing price competition which is otherwise generally viewed as economically beneficial furthermore because the practices outlawed by the act typically involve transactions between businesses rather than directly involving consumers and often involve business charging lower prices on larger volumes it is often argued that it tends to favor the interest of higher cost resellers who in turn charge higher prices over the interests of consumers who would benefit from lower retail prices finally because charging different prices to different business customers is such a common practice among businesses in virtually all industries and because antitrust enforcement resources are necessarily limited and small relative to the size of the economy prosecutors have to be highly selective in when and which cases to pursue or else rely on private civil actions to enforce the law either of these alternatives present a high potential for abusive suits under the law through capricious or politically motivated prosecutions or through civil actions motivated by opportunism rather than the economic welfare of society 