Small, independent grocery stores are unable to compete against large volume grocery stores due to many factors including volume discounts that can be passed to consumers. As a result, large stores are able to flex their volume muscle and force small stores out of existence by charging customers less. This leads to a few large companies being able to control most of the food supply. In addition, their food may not be the healthiest food but the only option nearby for consumers. The Robinson-Patman Act was originally created to help small businesses compete. Proposal would be to enforce the Robinson-Patman Act or begin interpreting the Act again in a way that allows small grocery stores to compete on price. Some large volume grocery stores turn a >30% Gross Profit Margin on a yearly basis yet are still able to sell products at less that what a small grocery store could BUY that same product for at a break-even Gross Profit Margin. Proposal would be to:
- Increase tax incentives and grants for small independent grocery stores
- Mandate the % difference in volume pricing be no more than X% (say 10% for example) which would allow a small grocery store to compete with a large grocery store on price and still turn a profit and stay in business.
I. The Robinson-Patman Act
A. General Principles
The history of the Robinson-Patman Act actually begins in 1914, when section 2 of the Clayton Act became the first federal statute that expressly prohibited certain forms of price discrimination. In 1936, section 2 of the Clayton Act was amended by the Robinson-Patman Act, and it became a far more complex statute.(2) It is important to consider the context in which the amendments were adopted. In 1936, Congress believed that large firms could dominate markets through predation and other forms of economic warfare directed against smaller firms, and felt that “power buyers” such as large retailers could use their market power to extract price concessions from manufacturers and other sellers that were unavailable to their smaller competitors. As the Commission has stated, [t]he major legislative purpose behind the Robinson-Patman Act was to provide some measure of protection to small independent retailers and their independent suppliers from what was thought to be unfair competition from vertically integrated, multi-location chain stores.(3)