Pepsi and Coke soda prices targeted in new federal investigation

The new investigation is the latest sign that the Biden administration is expanding its efforts to rein in big business and flex its antitrust muscles, and not just in the tech world. Under Lina Khan, the FTC has dug deep into the antitrust playbook, dusting off long rest laws in hopes of stunting the growth of the world’s biggest companies, from newcomers like Apple and Google, and now to stalwarts more Fortune 500 classics like Pepsi and Coke.

The Robinson-Patman Act was enforced regularly for decades by the FTC, then dropped more than 20 years ago. The agency’s latest case under the law was a settlement with the McCormick spice company. Before that, his most recent case was in 1988 against book publishers including Simon & Schuster and Random House. The Robinson-Patman app’s abandonment came as the FTC and Justice Department increasingly focused on harming consumers, namely higher prices, rather than harming competitors. .

The investigation is in its early stages, said the people, who were granted anonymity to discuss a confidential matter.

An FTC spokesperson declined to comment. Spokespersons for Coca-Cola, Pepsi and Walmart did not immediately respond to comments.

Coca-Cola is the largest US soda company with over 46% of the market in 2021, followed by Pepsi with a 26% share.

New FTC Commissioner Alvaro Bedoya has made revitalizing Robinson-Patman a top priority for his tenure at the agency. The FTC never officially abandoned the law, although in a 1977 report the Justice Department said it would cease enforcement of the Robinson-Patman Act. Bedoya has publicly criticized the lack of enforcement, blaming it for a sharp rise in prices offered by small businesses across the economy, arguing that large retailers can use economies of scale to keep prices low and undermine small operations.

To reinvigorate the law, the FTC “must not only find a good test case, but it must restore its skills and expertise in conducting investigations into the Robinson-Patman Act,” said Bill Kovacic, former commissioner and chairman of the agency, who teaches antitrust law at George Washington University. “Compared to other things that we were in a rush to do, it was a decidedly lower priority,” Kovacic said of his tenure at the agency.

FTC Chairwoman Lina Khan has also called for a revival of Robinson-Patman both in her academic writing and in her current position. In a July 2022 bipartisan policy statement, FTC commissioners unanimously said the agency could use the law to target illegal discounts on prescription drugs that block patients’ access to alternatives. less expensive.

Critics of the law say, however, that it actually has the opposite effect of the intended effect, and while it would boost small businesses, it would also raise prices at larger chains, hurting consumers.

“Bringing in more Robinson-Patman law cases would raise prices for low-income consumers,” said Alden Abbott, former general counsel for the FTC in the Trump administration, who is now a senior fellow at the Mercatus Center in the US. ‘George Mason University. Abbott said it was a “special interest law” designed to support small businesses.

But at an event late last year, Bedoya drew a straight line between lack of enforcement of the Robinson-Patman Act and high food prices in rural areas, including on reservations. Native Americans. “The idea that low prices at big box stores help everyone isn’t true in Pine Ridge [South Dakota], where 90% of people don’t have a car,” he said of the 180-mile round trip to the nearest major grocery store. “I think there’s a line you can draw from this fallow law, which is that the people of Pine Ridge can’t buy fruit for their kids because the prices have skyrocketed.”

Soda price targeting could be a good test for the FTC given the uniformity of the product. But that could present messaging challenges for the agency, given the health concerns associated with sugary drinks.

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