Essay On The Robison-Patman Act
As an amendment to the Clayton Antitrust Act, the Robison-Patman Act originated as a result of price fixing and biased preferential treatment by suppliers to specific members of their client base. Suppliers looking to aid in the development or expansion of a favored supplier may provide better prices than other customers of the same purchasing rate and quality, per the Federal Trade Commission, “This kind of price discrimination may give favored customers an edge in the market that has nothing to do with their superior efficiency” (Federal Trade Commission, n.d.). The Act penalizes suppliers for this anti-competitive behavior, thus deters future organizations from conducting themselves in this manner. According to the American Bar Association,
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seller price discrimination occurs under the following, “A violation of Section 2(a) occurs when a seller sells two of the same or similar products at different prices to different buyers within a brief period and those sales cause injuries to competition (Elfand, n.d.). It is important for suppliers and customers to understand the parameters that encompass the Robison-Patman Act to ensure they avoid any intentional or unintentional acts of violation.
The Federal Trade Commission Website outlines requirements set forth by the U.S.
Supreme Court, that must be satisfied to render a violation of the Robison-Patman Act, these requirements include, “The Act applies to commodities, but not to services, and to purchases, but not to leases. The goods must be of like grade and quality. There must be likely injury to competition (that is, a private plaintiff must also show actual harm to his or her business, and the sales must be "in" interstate commerce (that is, the sale must be across a state line)” (Federal Trade Commission, n.d.). There are two types of injury that can occur because of violations of the Robison-Patman Act, including Primary Line and Secondary Line. Primary line is the result of one supplier reducing the price within a defined geographic market, thus causing loss to competitors situated within that market. Secondary Line is the result of a supplier offering favored pricing to a single customer within their customer base and not offering those pricing concessions to other customers. An interesting dynamic to the Act includes the sale of product to Non-profit organizations. In select cases, suppliers are afforded the ability to sell their goods to Nonprofits at prices lower than those extended to general customers. This allowance is heavily regulated to ensure it is not being misused, but allows nonprofits to receive significant discounts individual to their business
models.
Debate has arisen as non-profit healthcare companies have attempted to gain access to this benefit. Some believe that purchase made by the healthcare industry, specifically discounted medicine, is unfair to those in the public (at the consumer level) who are forced to pay normal cost (Federal Trade Commission, n.d.). While the overarching construct of the Act secures a level playing field for customers and suppliers alike, it is far from perfect, and still succumbs to the manipulation of savvy strategists. The act however does serve its purpose of deterring massive exploitive violations. Although violations will first impact the supplier, it will eventually trickle down to the consumer who will be faced with higher prices in a non-competitive environment. Without the Act, consumers would have far less power in demanding a level of excellence concurrent to their dollar. An environment without this Act would render the consumer opinion obsolete and competition for consumers would be a non-issue to suppliers.
seller price discrimination occurs under the following, “A violation of Section 2(a) occurs when a seller sells two of the same or similar products at different prices to different buyers within a brief period and those sales cause injuries to competition (Elfand, n.d.). It is important for suppliers and customers to understand the parameters that encompass the Robison-Patman Act to ensure they avoid any intentional or unintentional acts of violation.
The Federal Trade Commission Website outlines requirements set forth by the U.S.
Supreme Court, that must be satisfied to render a violation of the Robison-Patman Act, these requirements include, “The Act applies to commodities, but not to services, and to purchases, but not to leases. The goods must be of like grade and quality. There must be likely injury to competition (that is, a private plaintiff must also show actual harm to his or her business, and the sales must be "in" interstate commerce (that is, the sale must be across a state line)” (Federal Trade Commission, n.d.). There are two types of injury that can occur because of violations of the Robison-Patman Act, including Primary Line and Secondary Line. Primary line is the result of one supplier reducing the price within a defined geographic market, thus causing loss to competitors situated within that market. Secondary Line is the result of a supplier offering favored pricing to a single customer within their customer base and not offering those pricing concessions to other customers. An interesting dynamic to the Act includes the sale of product to Non-profit organizations. In select cases, suppliers are afforded the ability to sell their goods to Nonprofits at prices lower than those extended to general customers. This allowance is heavily regulated to ensure it is not being misused, but allows nonprofits to receive significant discounts individual to their business
models.
Debate has arisen as non-profit healthcare companies have attempted to gain access to this benefit. Some believe that purchase made by the healthcare industry, specifically discounted medicine, is unfair to those in the public (at the consumer level) who are forced to pay normal cost (Federal Trade Commission, n.d.). While the overarching construct of the Act secures a level playing field for customers and suppliers alike, it is far from perfect, and still succumbs to the manipulation of savvy strategists. The act however does serve its purpose of deterring massive exploitive violations. Although violations will first impact the supplier, it will eventually trickle down to the consumer who will be faced with higher prices in a non-competitive environment. Without the Act, consumers would have far less power in demanding a level of excellence concurrent to their dollar. An environment without this Act would render the consumer opinion obsolete and competition for consumers would be a non-issue to suppliers.