by John Milner
A central national concern for the convenience store industry is how supply chains have caused price and product discrimination imposed by some major suppliers. The National Association of Convenience Stores (NACS) has gone on record with a letter to the Agriculture Committee of the U.S. House of Representatives (“Committee”) to address this issue by requesting legislation to require better enforcement of the federal Robinson-Patman Act (RPA), 15 U.S. C. Section 12, et seq. The RPA prohibits price discrimination among retailers by suppliers and the refusal to do business with certain retailers.
The NACS’s November 3, 2021 letter to the Committee frames this supply chain discrimination problem well:
For many years, manufacturers and suppliers of a number of goods have separated retailers who sell their products into different channel categories and discriminated among them with respect to both prices and availability of certain products (in particular, by not making certain product packaging sizes available). The companies making and distributing non-alcoholic beverages, sodas, sports drinks, and the like, have been the most aggressive and consistent at enforcing these distinctions along the lines of retail channels.
NACS points out that these price differentials are so large that convenience stores often pay more to buy these products at wholesale than their competitors sell them at retail. Convenience retailers also can’t get many sizes of soda, sport drinks, iced tea and other products that manufacturers and suppliers simply refuse to sell them. That is true even though the same sizes of those products are sold by the same manufacturer and suppliers to grocers and others that compete with convenience stores:
By creating walls between retail channels, suppliers make supply chains more fragile. Their actions not only disadvantage the convenience channel, they make products less fungible when supplies are stressed.
NACS also points out that price discrimination against the convenience channel hurts competition in the market and hurts consumers in a number of ways. For example, convenience store customers pay more for their beverages than they otherwise would due to this behavior. This has a particularly negative effect on consumers in underserved communities – both rural and urban. In many of these communities, convenience stores are a primary source of food and beverages for residents because those communities have few, if any, grocery stores. Convenient stores fill this gap but, due to price discrimination among channels, they cannot do so at the same price points that are available through other retail channels.
The NACS letter to the Committee requests legislation that requires better RPA enforcement:
Enforcing the Robinson-Patman Act and bringing sense to the competitive landscape around the food and beverage supply chain would provide consumers with better prices and with more choices of products. That is especially true during times when the supply chain is stressed because enforcing antitrust laws would lead to more product fungibility across the supply chain.
In addition to legislation to improve RPA enforcement, there is also a current need for federal administrative enforcement through the Federal Trade Commission’s (FTC) authority. On March 30, 2022, a group of 43 members of the House of Representatives sent a letter to the members of the FTC to request it to ‘investigate and bring enforcement actions” under RPA and other antitrust laws. This letter requests the FTC to address the “anticompetitive effects of discriminatory pricing and product supply directed to certain businesses (sometimes but not always small and medium-sized businesses) [that] ripple through the entire supply chain – harming consumers as well as independent producers.”
The letter points out that “small and medium- sized businesses are increasingly subject to discriminatory terms and conditions, including less favorable pricing and price terms, less favorable supply, less favorable retail packaging, and sometimes an inability to access products and short supply federal available to their competitors.” The letter concludes by pointing out that the RPA has not been properly enforced and by urging the FTC to correct this serious problem:
Despite Congress’s broad goals in 1936, the FTC has not brought a case under the Robinson-Patman Act in more than 20 years. Nor has the FTC brought an enforcement action against economic discrimination using the other antitrust laws. We urge the Commission to make enforcement against economic discrimination targeting small and medium-sized businesses a top priority.
We will continue to monitor this emerging issue through the NACS and our Mississippi Congressional delegation. These are difficult times economically on many levels. Special attention and actions are needed with regard to anticompetitive actions throughout the supply chain that adversely impact convenience stores and other small and medium-sized businesses.
If you have any questions concerning this article, please feel free to contact the author, John Milner of Brunini Law Firm, MPMCSA counsel; and Philip Chamblee, MPMCSA Executive Director. You can reach John at firstname.lastname@example.org or 601-960-6842 and you can reach Philip at Philip@mpmcsa.com or 601-353-1624.