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Convenience Channel Price Discrimination Included in Anti-Trust Hearing

Convenience Channel Price Discrimination Included in Anti-Trust Hearing

The industry suffers when some major suppliers won’t give it access to products sold to other outlets.

January 21, 2022

Unlabeled Beverage Cans

ALEXANDRIA, Va.—On Wednesday, the Antitrust, Commercial and Administrative Law Subcommittee of the House Judiciary Committee held a hearing on “Addressing the Effects of Economic Concentration on Americas Food Supply,” and a letter written by NACS to the subcommittee was included in the hearing record.

The letter outlines NACS’ position on the impact that channel price discrimination has on the industry and specifically how it can exacerbate supply chain issues. This hearing was the fifth in a series on reviving competition that the committee has held.

“Regardless of size and purchasing power, however, the convenience industry suffers from price discrimination imposed by some of its major suppliers. … Convenience retailers also report to us that there are many sizes of soda, sports drink, 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 manufacturers and suppliers to grocers and others that compete with convenience stores,” the letter states.

These discrimination issues stem from the practices of manufacturers and suppliers—not retailers, according to NACS.

“Manufacturers and suppliers should comply with the antitrust laws in dealing with competitors. In this situation, that means that those manufacturers and suppliers should not make arbitrary distinctions based on retail ‘channel’ and should not provide pricing or product advantages that are not related to differential costs or legitimate business considerations such as purchase volume. Unfortunately, … the law is being ignored on a routine basis today,” writes the letter.

Earlier this month, Doug Kantor, NACS general counsel, argued in a letter to the editorpublished in the Dec. 31, 2021, edition of The Wall Street Journal, that an old antitrust rule can spur retail competition and help eliminate price discrimination in the supply chain that favors certain retail channels over others when it comes to packaged beverages.

Kantor was responding to a Dec. 20 op-ed by Noah Phillips, a commissioner of the Federal Trade Commission, and Joshua Wright, executive director of the Global Antitrust Institute at Scalia Law School at George Mason University. Kantor agreed with Phillips and Wright that “antitrust laws protect competition” and “competition benefits society—and consumers” but disagreed with their view that the Biden Administration should not enforce the Robinson-Patman Act.

Kantor writes: “Price discrimination based on arbitrary retail ‘channels’ raises prices and hurts competition. Even when they are larger and more efficient, convenience retailers pay higher prices than competitors on a range of products, particularly sodas.

“Convenience retailers regularly find that competitors can sell sodas for less than they can buy them wholesale. This happens regardless of purchase volume. Suppliers also refuse to sell some products to the convenience channel. These limitations make products less fungible and add to supply-chain problems.

“This happens because the law that prohibits it hasn’t been enforced in decades. The answer is to enforce, not throw out, the law. This wouldn’t stop discounts, but it could stop price increases based on channel distinctions. Old channel distinctions no longer have meaning. Today, consumers can buy a cold bottle of soda at the grocery store, drugstore, hardware store or electronics store—not to mention online.

“Lack of enforcement means that suppliers can artificially undercut price competition and extract excess profit. Unfortunately, critics of Robinson-Patman have missed this. The law can and should be used to ensure more vibrant price competition,” Kantor says.

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