Business

New federal investigation targets Pepsi and Coke prices

The new investigation is the latest sign that the Biden administration is expanding its efforts to rein in big companies and flex its antitrust muscles, and not just in the tech world. Under Lynn Kahn, the FTC has dug deep into the antitrust ledger, dusting off long-gone laws in hopes of halting the growth of the world’s biggest firms, from relative newcomers like Apple and Google, and now to more traditional Fortune 500 stalwarts like Pepsi and Coke.

The FTC regularly enforced the Robinson-Patman Act for decades, then all but abandoned it more than 20 years ago. The agency’s last case under the law was a settlement with the spice company McCormick. Before that, his most recent case was in 1988 against book publishers including Simon & Schuster and Random House. The move away from applying Robinson-Patman came amid an increasing focus by the FTC and the Justice Department on harming consumers, namely higher prices, rather than harming competition.

The investigation is in its early stages, said the people, who spoke on condition of anonymity to discuss the confidential matter.

A spokesman for the FTC declined to comment. Spokesmen for Coca-Cola, Pepsi and Walmart did not immediately respond to requests for comment.

Coca-Cola is the largest American juice company with more than 46 percent of the market in 2021, followed by Pepsi with a 26 percent share.

The FTC’s newest commissioner, Alvaro Bedoya, has made reviving Robinson-Patman a top priority during his tenure at the agency. The FTC never officially abandoned the law, although in a 1977 report the Justice Department said it would end Robinson-Patman’s enforcement. Bedoya has publicly criticized the lack of enforcement, blaming it for skyrocketing prices offered by small businesses across the economy, arguing that large retailers can use economies of scale to hold down their prices and undercut smaller operations.

To reinvigorate the law, the FTC not only “must find a good test case, but must regain its skills and expertise in conducting Robinson-Patman Act investigations,” said Bill Kovacic, the agency’s former commissioner and chairman, who now teaches in antitrust law from George Washington University. “Compared to the other things we had to do, that was a definite priority for the landlord,” Kovacic said of his tenure at the agency.

FTC Chair Lina Kahn has also called for a revival of Robinson-Patman, both in her academic writing and in her current position. In a bipartisan July 2022 policy statement, FTC members unanimously said the agency could use the law to target illegal prescription drug discounts that block patients’ access to cheaper alternatives.

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

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

But at an event late last year, Bedoya drew a straight line between the lack of Robinson-Patman enforcement and high food prices in rural areas, including on American Indian reservations. “The idea that low prices at big box stores help 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 big-box store. “I think there’s a line you can draw from that law lying fallow, to people in Pine Ridge not being able to buy fruit for their kids because the prices have gone up.”

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

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