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Pepsi and Coke Prices Under New Federal Investigation

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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 delved deeper into the antitrust playbook, dusting off long-dormant laws in hopes of slowing the growth of the world’s biggest companies, from relative newcomers like Apple and Google, to now more traditional strongholds of Fortune. 500 like Pepsi and Coke.

The Robinson-Patman Act was regularly enforced for decades by the FTC, then virtually abandoned over 20 years ago. The agency’s last case under the law was a settlement with the McCormick spice company. Prior to that, his most recent case was from 1988 against book publishers including Simon & Schuster and Random House. The removal of the Robinson-Patman application came amid an increasing focus by the FTC and the Department of Justice on harm to consumers, i.e., higher prices, rather than harm to competitors.

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

“The Coca-Cola Company is committed to fair and lawful competition in the marketplace,” the company said in a statement. “Any claim that the company has done anything illegal with regard to the sale and distribution of its products is unfounded and we are prepared to defend any specific allegations accordingly.”

An FTC spokesman declined to comment. Pepsi and Walmart did not respond for comment.

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

The FTC’s newest commissioner, Alvaro Bedoya, has made reinvigorating Robinson-Patman a top priority in his tenure at the agency. The FTC never formally abandoned the law, although in a 1977 report the Justice Department said it would cease enforcement of Robinson-Patman. Bedoya has publicly criticized the lack of oversight, 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 their prices low and undermine smaller operations.

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

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

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

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

But at an event late last year, Bedoya drew a straight line between the Robinson-Patman lack of enforcement and high food prices in rural areas, including on Native American reservations. “The idea that low prices at the big box helps everyone is not true in Pine Ridge. [South Dakota], where 90 percent of the people don’t have cars,” he said of the 180-mile round trip to the nearest large supermarket. “I think there’s a line you can draw from that fallow law to people in Pine Ridge not being able to buy fruit for their kids because prices have skyrocketed.”

Setting the soda price as a target could be a good test case for the FTC, given the uniformity of the product. But it may present some messaging challenges for the agency, given the health concerns related to sugary drinks.