Federal Trade Commission by Kurt Kaiser is licensed under CC0 1.0
At a recent forum, FTC commissioner Alvaro Bedoya questioned “why [ he is being] charged by statute with stopping unfair methods of competition, and not ‘inefficient’ ones” if “efficiency [was] the goal of antitrust.” In effect, Commissioner Bedoya challenged the effectiveness of the long-standing consumer welfare standard – which has been used to guide antitrust policy for the past four decades – in a concerted effort to promote the standard outlined by the Robinson-Patman Act which places greater emphasis on the “fairness” and “equity” of the market as opposed to its efficiency.
For context, the dormant Robinson-Patman Act of 1936 was initially passed to address the rise of big retailers. The reason the act was passed was because “Congress considered it to be an evil that a large buyer could secure a competitive advantage over a small buyer solely because of the large buyer’s quantity purchasing ability.”
The obvious consequence of this act was that it limited the extent to which firms were able to utilize economies of scale, thereby artificially increasing production costs and thus prices. Rather than ensure that firms were able to engage in more efficient production practices and consumers were granted access to goods at lower prices, the FTC engaged in a crusade against large manufacturers that utilized their large purchasing power to negotiate discounts for raw materials and other inputs integral to the production of goods.
The standard established by the Robinson-Patman Act was eventually overturned when “the Supreme Court unanimously adopted …—the “consumer welfare standard”—in 1979 [which] continues to guide antitrust enforcement today.” Rather than punish large organizations for engaging in efficient cost-reducing practices, the consumer welfare standard ensured that the FTC would pursue outcomes that were in the best interest of consumers which oftentimes meant permitting large organizations engage in economies of scale. The standard is considered by many experts in the field of antitrust policy to be the principal reason for the unprecedented improvement in the purchasing power of consumers.
Commissioner Bedoya’s insistence regarding the reinstatement of the Robinson Patman Act at the forum for fair markets does not seem to have been an isolated event. Commissioner Bedoya “argued during a recent speech that the agency should resurrect the Robinson-Patman Act.” The resurrection of this obsolete and wrongheaded standard would have unintended consequences that undermine exactly “what the Biden administration claims to be working toward” which is a reduction in the prices of goods and a subsequent reduction in inflation.
In essence, not only would the restoration of the moribund antitrust standard present within the Robinson-Patman Act lead to greater market inefficiency and force firms to engage in unproductive practices, but it would also needlessly increase the prices of goods in an era of the highest inflation in a generation under the auspices of protecting smaller less productive firms. It is paramount that Commissioner Bedoya, now more than ever, reconsider his stance on the Robinson-Patman Act.