Pepsi Suffers the Wrath of (Lina) Khan
Outgoing FTC Chair Lina Khan sues Pepsi for violating Robinson-Patman Act.
Alongside the outgoing administration's spate of executive orders and last-minute rulemaking, the Federal Trade Commission (FTC) sued Pepsi on Friday for providing promotional payments to an unnamed big-box retailer. The Commission claims Pepsi's conduct violates the Robinson-Patman Act (RPA), a 1936 law that outlaws price discrimination. Dissenting commissioners Melissa Holyoak and Andrew Ferguson regard the majority's argument as tortured and tendentious.
In a heavily redacted statement, FTC Chair Lina Khan alleges that Pepsi unfairly advantages one large retailer by providing it with promotional allowances and services such as advertising budgets and signage. Khan contends that Pepsi's conduct violates Sections 2(d) and (e) of the RPA, which prohibit the provision of "services or facilities connected with the processing, handling, [or] sale…upon terms not accorded to all purchasers on proportionally equal terms."
In other words, she believes you can violate the RPA by providing advertising billboards for a big-box store but not the local grocer. That is absurd: The cost of both is the same, but the revenue generated by the former is much greater. Furnishing the one and not is not illegal under Sections 2(d) and 2(e), because those sections outlaw proportionally unequal payments and services to retailers, as Holyoak argues in her dissent.
Ferguson's dissent laments the "paucity of evidence" included in the majority's complaint; the commissioner says he has "no evidence that Pepsi denied to any firm the promotions or services it offered to the big-box store." Ferguson's concerns are substantiated by the majority's admission that it would not direct the FTC's "staff to continue to spin their wheels in terabytes of Pepsi data" before filing suit.
The FTC filed another RPA suit in December 2024—the first in decades—against Southern Glazer's Wine and Spirits, alleging that the beverage distributor unlawfully sold alcohol to larger distributors at lower per-unit prices. Holyoak explained in her dissent that Section 2(a) of the RPA allows wholesalers to charge retailers different prices as long as this price discrimination reflects a difference in the cost of sale or delivery. This exemption is important, since it ultimately means lower prices for consumers. And under that logic, the law could allow Pepsi's promotions for yet another reason: They are actually price discounts.
In any event, the FTC has no business rushing a case like this out the door just because it lacks the time to conduct a diligent investigation first. Khan's decision to "spend the American people's money on a political lark," Ferguson says, betrays the Commission's staff and the American people.
