Jul 29, 2025
On July 25, The Capitol Forum held a conference call with Catherine Simonsen, co-founder of Simonsen Sussman LLP, for a conversation on how under-enforcement of our federal and state antitrust laws over the last 50 years has led to excessive levels of corporate consolidation, rent-seeking and the under-production of goods and services. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Good afternoon, everyone. And welcome to our Conference Call today on Price Discrimination Laws. I’m Teddy Downey, Executive Editor here at The Capitol Forum.
And I’m joined by Catherine Simonsen, Co-Founder of Simonsen Sussman. She’ll be talking with us about how under enforcement of our federal and state antitrust laws over the last 50 years has led to excessive levels of corporate consolidation, rent seeking, and the underproduction of goods and services and services. Catherine, thank you so much for doing this today.
CATHERINE SIMONSEN: Of course, it’s great to be here with you.
TEDDY DOWNEY: And really quick, before we get going, if you have questions during the call, please type them into the questions pane on this control panel to your site here. And we’ll collect them and try to get to them at the end of the conversation.
Catherine, you have a new law firm. I was wondering if you could just quickly tell us the idea behind that, how that came together. And then I want to get into and talk about price laws after that.
CATHERINE SIMONSEN: Awesome. Yeah, thanks, Teddy. So, I recently founded a boutique antitrust plaintiff-side litigation law firm with some colleagues from the Federal Trade Commission and the USDOJ. Back at FTC, one of my partners, Shaoul Sussman, and I worked very closely on a Robinson-Patman Act investigation.
He was in the front office under Chair Khan as the Associate Director of Litigation. I was over on the West Coast as the Assistant Regional Director for the Western Competition Group. And we saw really eye-to-eye on just the need for more rigorous enforcement of the laws, the need to dust off some of the precedent from the first half of the 20th century that really wasn’t being used to get after the conduct that we all see as problematic, but more and more is hard to get at using the full-blown rule-of-reason framework that most people use under the Sherman Act.
And so, coming out of the FTC and having been inspired to dust off some of these laws that have been under-enforced, such as Robinson-Patman Act, we have at our law firm, our colleague, Nicolas Stebinger, from the litigation group at FTC. And Kate Brubacher, the former U.S. Attorney for the District of Kansas, joined us.
We launched a little over a month ago, and we’re really trying to do as much as we can to represent small and independent businesses or victims of anti-competitive conduct, get in there and shape the fastest, most efficient way to get relief. And that may not always be damages, right? More often than not, it can be, let’s go in there and actually get an injunction, not even ask for damages. Kind of like Epic did in the Epic v. Apple case under the California unfair competition law. So, that’s a little bit about our law firm and its origins.
TEDDY DOWNEY: So, interesting. So much room to run, I think, as well. And we’ll get into one area momentarily here. You wrote a super interesting paper, “Taking on Power Buyers: Expedient, High‑Impact Enforcement of Federal and California Price Discrimination Laws.”
I’ve been covering antitrust for 15 years, really longer than that this point. So, little conversation and focus on price discrimination laws in that period of time. This paper suggests that there is actually a lot of law on the books. Would love to hear how you thought of this paper. What’s the idea behind the paper? And then we can get into specifics from there.
CATHERINE SIMONSEN: Yeah, absolutely. So, this is a paper that Shaoul and I wrote. In addition to founding the firm, I’m also a Senior Legal Counsel or Senior Legal Fellow for the American Economic Liberties Project and was really lucky to have the opportunity to work with that group of people after I left the FTC. It’s such an inspiring organization.
And so, as part of my fellow work for the organization, we thought let’s put a piece together that kind of demonstrates, in practice, what is a problem that could be solved with the Robinson-Patman Act, as well as the California laws that you can kind of use to make the federal law predicate? And I’ll get into what that means.
And we wanted to focus on power buyers. Because on its face, the Robinson-Patman Act—and I’ll maybe just give a little bit of background. The Robinson-Patman Act was passed in 1936. It amended the Clayton Act, which was passed in 1914. So, the Clayton Act already actually had a price discrimination prohibition in it.
The Robinson-Patman Act of the 1930s strengthened those prohibitions. But a lot of the way the Robinson-Patman Act is written, it talks about outlawing price discrimination, which a supplier technically does, right?
So, if you have a supplier up here and it’s distributing to big box store A and little guy B, the supplier is technically doing the discrimination, but the real problem is big box retailer over here demanding that discrimination, demanding that lower price. And the problem that the legislature was trying to solve was the unfair advantage that power buyer gets when he gets a better deal than the little guy down the street.
And so, we wanted to come up with a set of strategies and just put them out there for anyone to use who think they’re having issues with power buyers.
So, first of all, we talk in the paper about two provisions, mostly one, in the Robinson-Patman Act that provides for per se illegality. So, we’re used to price fixing conspiracies being per se illegal and maybe that’s it. These days it’s very hard to get a court to say anything is per se illegal. There is very, very firm precedent on the books saying a violation of Section 2(d) of the Robinson‑Patman Act, which outlaws the provision to the power buyer of promotional payments in connection with resale unless that supplier gives the little guy down the street the same opportunity to participate in those promotional payments.
So, if a supplier gives a big box retailer certain payments to run an advertising campaign and a sale to promote and sell its products, the supplier has to give the little guy down the street a proportional opportunity to do the same thing and to get those monies from the supplier. And if the supplier doesn’t do that, then that’s a per se violation.
So, you don’t actually have to show that the little guy was harmed. Harm to competition is presumed if you meet the elements of 2(d). And so, it’s a very efficient and straightforward way to get at the problem.
Now, you’re not always going to see discrimination take the form of these section 2(d) violations. So, for example, if there’s a discrimination in price that only relates to the original sale from the supplier to the dominant retailer, that’s probably not going to satisfy 2(d). But if you’re a small business and you’re sitting there and you’re looking at your big box competitor down the street and you see that you think he’s getting promotional payments from a supplier, you can use 2(d) to quickly go after that.
Now, what you might want to do, and the paper gets into this layer some California law on top. Because some courts have said you can only sue the supplier for providing those promotional payments in connection with resale. You can’t sue the power buyer demanding them. Some courts have said that under the Robinson‑Patman Act. But what courts have said is the FTC, under Section 5 of the FTC Act, can sue the power buyer for inducing those illegal payments.
So, you can take that same logic and say, well, if the FTC can sue the power buyer under Section 5 of the FTC Act, then any private business in California can use the unfair competition law in California to sue the power buyer for effectively violating the policy and spirit of the antitrust laws. And so, that part of the paper talks about the different ways that a private business or an association can use the California laws to go after that conduct. And I would do one more plug for the California Unfair Practices Act.
So, the paper also talks about using the California price discrimination law, which I love and which is even a more straightforward and expansive, broadly read piece of legislation meant to protect the small competitors against power buyers.
TEDDY DOWNEY: Is it too early to go into that? Well, let’s back up a second. So, one of the things that gets tricky, at least from a reporting standpoint when you’re looking at power buyers, is the myriad of ways in which these payments flow back and forth. And which of these count as like marketing or inducements or what have you?
You’ve got slotting fees. You’ve got advertisements. You’ve got promotions. You’ve got just so many things now, ways which you can pay. It’s almost like your Walmart is what Amazon does to their third-party sellers, where it’s like you need to advertise here. You need to do all this stuff. And it’s pretty complicated.
And is 2(d) a way to like cut through all that complexity? Or how should people who want to use this strategy think about muddling through that complex interaction between the supplier and the power buyer?
CATHERINE SIMONSEN: Yeah, yeah. It’s a good question. And you’re right, I think one of the things that power buyers have done to insulate themselves from scrutiny or to make it harder to prosecute them is to create really elaborate ways of accounting for pricing and sending payments here and there in lots of different ways. Actually, the impetus for Section 2(d) of the Robinson‑Patman Act was precisely this.
So, the reason why a violation of 2(d) is per se legal is because Congress wanted to basically say, look, we want to kind of force price discrimination into the 2(a) fold. Like if you’re going to discriminate in price, we want to be able to see that easily. And so, we will be able to see that easily if you’re just doing it on the face of the invoices, right?
But if you’re playing games and you’re sending extra special promotional payments to one retailer and not another, we’re not going to put the FTC or a private plaintiff to the burden of breaking that payment down and trying to say which part of it goes to marketing and which part of it goes to price. We’re not going to ask whether it’s cost‑justified because you’re playing games, defendant. And so, yes. You’re absolutely onto something.
And I will say that I think the California Unfair Practices Act goes a long way towards that too. It doesn’t have a lot of the same technical requirements as a Robinson-Patman Act 2(a) claim would have. And it really gets more at, look, are you giving an advantage to the dominant buyer or aren’t you? And if you are, then there’s a problem. So, yes, 2(d) is a way to kind of get at some of that gamesmanship.
TEDDY DOWNEY: One of the things that you mentioned is that the way the law works, you go after the price discrimination by the supplier. But at the time these laws were passing, they were known as anti-chain store laws. The language around that has changed so much. I’ve spoken to people who want to enforce Robinson-Patman who don’t like calling it that. Because they think it’s hard to win in court when you’re kind of going after the chain store specifically.
Why is that? Why do you think that is? Does that need to be overcome as well? Just this hesitation around making it clear that, hey, this is actually fundamentally about the power buyer.
CATHERINE SIMONSEN: Right.
TEDDY DOWNEY: Not the supplier inducing, demanding, the discrimination.
CATHERINE SIMONSEN: Yeah, it is. And it’s also, I think—I want to be clear. When Congress passed the Robinson-Patman Act, it fully wanted to account for the fact that a big chain store might very well be more efficient than the little guy down the street. And it wrote into the law that if it’s less costly for a supplier to deliver to the big chain store than it is to deliver to the little guy—maybe because you only need one shipment or maybe the larger retailer has its own warehouse. So, the supplier just gets to deliver to the warehouse—those are legitimate cost savings and those can be passed through to that power buyer. And then if that power buyer wants to pass those cost savings through to customers, then that’s great and that happens. And that’s, I think, something that gets overlooked.
So, the Robinson-Patman Act is not an anti-big company law. It’s really, what it is it’s trying to say, look, we are going to—when we see, on the face of things, a large organization getting lower prices than everybody else—we’re going to use that as a proxy to say, this company probably has buying power, right? In economic terms, monopsony power. We’re going to say that’s sort of prima facie evidence to us, that the reason it’s getting a lower price than everybody else is because it has monopsony power. And we believe that the exercise of monopsony power is very damaging to society.
And the interesting thing is, I mean, I don’t think any economist would dispute that, right? A monopsonist, a power buyer sitting here, extracting lower than competitive levels of prices from suppliers, what does that do? That disincentivizes suppliers from fully investing in research and innovation and quality. Because they’re not getting paid enough by that dominant power buyer.
And I think that is an evil that the Congress, when passing the Robinson-Patman Act, sought to get at. It wasn’t just the unfair competition that results between the power buyer and its competition. When you have a power buyer that’s extracting too low prices from suppliers, you are really damaging things at the supply level as well.
So, that’s the genius, I think, of this law, is that it gets at harm to competition at multiple levels of the distribution chain. And it’s a way of regulating the pure extraction of monopsony rent. And it’s saying, we’re not going to get in the business of regulating rates. We’re not going to tell the power buyer what it has to pay. But what we are going to say is, if the power buyer is paying a lot less than its competitors, then we’re going to infer that that means it’s paying prices below what would prevail on a competitive level. And we’re going to fix that by saying either those prices have to come up, or the prices to the smaller independents have to come down. And that’s how you solve a lot of problems in the market that we’ve now seen develop today because we haven’t been enforcing this law.
TEDDY DOWNEY: I want to stay on that for one second and take a step back before we get into more details. You just mentioned we have a lot of problems from under-enforcing this law—actually basically, not enforcing at all until very, very recently. What are the consequences of letting that power imbalance accrue and letting this type of conduct not only permeate the economy, but at this point define the economy, right?
If we look at particularly retail, Amazon, Walmart, we’re just talking about the biggest companies ever completely dominating commerce. But I would love for you to talk about connecting those two things and what ends up happening to the economy writ large when you stop enforcing laws like this.
CATHERINE SIMONSEN: Yes, absolutely. And I think this is really critical. So, the number one thing that happens is when the little guy sees the power buyer getting better prices than he can get solely because the power buyer’s bigger, right? The little guy’s become as efficient as he can be and he’s innovating and he’s got really great customer service, but he can’t get the same prices. And he looks and he sees this power buyer is just blatantly violating the law. But the FTC isn’t suing him and he’s getting away with it. Then the only thing he can do is go and try to merge with somebody else to get big enough to try to extract those same low prices that the big power buyer’s getting.
And that has literally been the cause of a lot of the consolidation sprees we’ve been seeing at the retail level. I mean, the number one defense that Kroger and Albertsons put up when they said we need to merge is because we need to get big enough to get the same prices that the even bigger big box stores are getting. I mean, it’s insane.
So, if you actually enforce the law, then the little guys, or even the not so little guys like Kroger and Albertsons, know that the big box store down the street isn’t allowed to obtain those special prices. So, there’s no reason to merge. And in fact, if we could see the revitalization of the enforcement of the act, we might see voluntary divestitures, voluntary breakups.
Because let’s face it, when a company gets big enough to extract the kind of prices that these power buyers are getting, it becomes oftentimes very inefficient and bloated. And so that’s the number one consequence.
But then there are following consequences at the supplier level, right? Once you have retailers merging and consolidating and growing their market power so they can get these really great low prices, suppliers start thinking we’ve got to do the same thing. The only way we can bargain effectively with the big box store is to merge with our competitors. So, then you see consolidation at the supplier level as well. And again, we have seen that as well.
So, get rid of the buyer power ability to extract prices, you get rid of the incentive to merge at the retail level. You get rid of the incentive to merge at the supplier level. And you have a much more deconcentrated market with much healthier levels of competition.
You also, if you enforce the Robinson-Patman Act, you help protect those smaller companies to stay in business, right? So, if we had vigorous enforcement and suppliers knew they had to give roughly the same pricing levels that they give to the big box stores, you would see a flourishing of small and independent businesses who are able to compete on the merits because they’re not getting screwed solely by virtue of the fact that they’re small. So, there are just so many beneficial effects that we would see if we actually enforced the law.
Now, I want to be clear, right? In the short run, is it possible that when big box store demands lower prices from the supplier, that it then passes those prices through to consumers and for some period of time, consumers get kind of the benefit of the power buyer being able to bargain its way to a really low price? Sure. But that’s a short run effect, if at all. And there’s a lot of assumptions that need to be true in order for that to happen.
But in the long run, the smaller retailer can’t compete with that, right? They can’t compete with the low prices that are being subsidized by the price discrimination. So, they go out of business and then you’re left with a single dominant retailer. And what does that dominant retailer do then? It jacks prices up to consumers.
So, it’s extremely short-sighted to keep saying, oh my God. What are you doing? Like you’re preventing the big box store from negotiating low prices. This is such a stupid law. It’s like, well, only if you don’t fully think about the problem, right? Like play it out.
And there are some really nice quotes in the legislative history from Congress making this point that in the long run, you’re just going to have more and more buyer power. And then before you know it, they are absolutely going to be charging higher prices to consumers.
TEDDY DOWNEY: But even in the short run, I mean, aren’t you ultimately also raising prices on the other non-dominant retailers, right? Isn’t the supplier typically doing this waterbed effect where they’re losing money on the big box, the big chain, the dominant buyer, and then they’re making up with higher margins, really much higher margins on the less powerful retailers?
CATHERINE SIMONSEN: That’s correct, right? So, that’s essentially what you see is you see the power buyer getting the best price and then suppliers are sort of desperately thinking how do I make this up? So, they try to add fees and raise prices wherever they can to try to keep themselves in business.
So, yes, a short run casualty is the smaller retailer and really their customers, right? Because their customers then, unless the small retailer just in perpetuity incurs a loss, it’s going to have to pass those prices through. And then the customers who prefer that store, who want to shop there, pay the higher price.
TEDDY DOWNEY: And one of the other things you say in the paper is you call price discrimination law the other half of our antitrust laws. I think most people look at price discrimination and think it’s like a tiny little niche area. Why do you call it the other half?
CATHERINE SIMONSEN: Yeah, I do really believe it’s the other half for a couple of reasons. So, going back to the legislative history, you had the Sherman Act passed in the late 1800s. And then in 1914, Congress said, the Sherman Act is not enough to protect our economy. We’re seeing enormous trusts come into the picture, charge exorbitant prices, huge amounts of consolidation. It’s not enough.
So, they passed the Clayton Act. The Clayton Act added some specific provisions that the Sherman Act was already getting at, like exclusive dealing and tying. It added the mergers and acquisitions prohibition if they substantially lessened competition.
But what Congress said is it’s not enough to just have the Sherman Act set of laws that outlaw anti-competitive conduct, that basically try to prevent the amassing of monopoly power, or to try to prevent the collusion between two companies that results in effectively the extraction of monopoly prices.
What Congress said is we want to have a law that gets at the actual exercise of monopoly power, not just the anti-competitive conduct that could get a company into the position of charging monopoly prices.
So, I want to read an excerpt from a famous U.S. Supreme Court, the Trinco case. This is Justice Rehnquist. And this is what he said about our nation’s antitrust laws. He said, “The mere possession of monopoly power and the concomitant charging of monopoly prices is not only not unlawful, it is an important element of the free market system. The opportunity to charge monopoly prices, at least for a short period, is what attracts business acumen in the first place. It induces risk-taking. It produces innovation. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anti‑competitive conduct.”
Now that, I could go on and on about how kind of crazy that is. I mean, as a law student, which is the first time you read these types of things, you read that and you think to yourself this isn’t how the world works. Like people go into certain lines of business because they want to make change and they want to innovate and they want to serve customers. They don’t need like a man in a tall hat in the corner making excessive levels of profits to signal to them where to go into business, right?
But you read this as a law student, and you’re like, oh, I’m like, maybe this is how I’m supposed to think about things when I’m a lawyer. And this is part of the problem. It’s like law students read this kind of indoctrination and then they think, oh, this is how the world works. And it doesn’t.
And the Congress that passed the RPA recognized this, that the mere possession of monopoly power—or in this case, buyer power—and the mere charging of buyer power prices is a problem that we want to address in and of itself, regardless of whether that buyer did anything to get to the point of having the buyer power. The buyer should not be able to extract such rents from the system, extract rents from the suppliers, not pay the suppliers enough to produce enough of the products they want to produce. And then on the other end of the spectrum, run their competition out of business and then raise prices down below.
And it was kind of this genius way of combating and outlawing the charging of buyer power prices without regulating rates. So, it’s the other half of our antitrust laws because it reflects this philosophy and this idea that in America, we will not stand for someone with market power ripping everyone else in the chain of distribution off. We will not stand for it. And this is a law we’re going to pass to go after it. And we haven’t enforced it for the last 50 years. And I don’t have to tell you where we are as a result.
TEDDY DOWNEY: I want to get into the history of how big business diminished this law. You mentioned Trinco, but I want to go a little bit further. You have some additional thoughts there.
But first I want to ask, there’s been some bipartisan interests in the revival of Robinson‑Patman Act. Obviously, the erosion of that law being enforced coincided with globalization, neoliberalism. Generally, it seems to fit pretty nicely that, oh, you’re just trying to get low prices and you don’t care about quality. You don’t have real competition. That allows you to be importing a lot of junk that might be just what the big bot chain wants to sell from abroad, as opposed to higher quality things here or just more diverse product assortment. That’s one potential explanation for some bipartisan interests here is sort of a reaction to globalization, neoliberal economic thought.
But why do you think this area right now has enjoyed a little bit of bipartisan interest around Robinson‑Patman?
CATHERINE SIMONSEN: Yeah, I think it’s because we all can look around us and we are all asking generally the same question. Like, how did we get here? Why do we have so many dominant companies controlling so many industries? And why haven’t our antitrust laws been sufficient to get after the problem, right?
And we’ve had so much consolidation. Think about the pharmaceutical space, the retailer space. There are so many places where we’ve had mergers and we have consolidation and we have companies ripping people off and charging too high prices.
So, I think whether you’re a Democrat or Republican, you have to see that as a problem. And I think there’s a renewed interest in Robinson‑Patman because it holds out hope and it holds out the possibility that we actually have a tool that’s on the books right now.
And it’s not too late. If we start enforcing this law, power buyers won’t be able to keep extracting profits from the system. And we’ll sort of like immediately stop incentivizing these excessive levels of consolidation.
TEDDY DOWNEY: Yeah. And also, to your point about just opening your eyes. I mean, we’ve had supply shocks that have been exacerbated by this kind of monopsony power, massive inflation. Well, if Amazon and Walmart are so great, how come prices are going up so much? So, there’s just like real world evidence of this not ending up that great for people as it is without it being forced for so long.
Let’s get into how the big business sidelined our price discrimination laws. You talk about a robust period of RPA enforcement. We’d love to drill down on that. And then what happened when the big corporations fought back?
CATHERINE SIMONSEN: Yeah. After the Robinson-Patman Act was passed in the mid-1930s, you saw several decades of treating the law like a legitimate law, right? It wasn’t just dismissed as a silly, simple law that doesn’t understand economics. You have some really great cases.
The FTC in particular was extremely active, not only in getting to the point of having published opinions on the books, but just a number of consent decrees, extremely active, making sure companies knew that price discrimination wasn’t going to be tolerated, which is entirely appropriate because Congress passed this law. And as enforcers, you’re not supposed to pick and choose which laws you think are smart and which laws aren’t. You’re supposed to enforce the laws that Congress passed.
But there came a point around the 1970s when big business just frankly got fed up and really started infiltrating every corner of academia and government with what I would call a misinformation campaign. And it’s the same kind of propaganda that we hear today about, oh, the Robinson-Patman Act is going to cause higher prices. The Robinson-Patman Act rewards inefficiency.
None of these things were backed by evidence or analysis. It was theory. It was politics. But when you have a lot of money behind an information or disinformation campaign, it’s amazing what you can accomplish.
So, I think one of the prime examples of how effective this campaign was, in 1977, the U.S. DOJ Antitrust Division published a report proclaiming, “Robinson-Patman reduces pricing flexibility, discourages the development of efficient distribution systems, and frequently operates to the detriment of consumers.” And it’s this extremely lengthy report that’s just really like maligning the law with very little actual evidence.
And now, recently, fast forward many decades later, we had the U.S. DOJ retract that report. So, now if you look, pull that report up online, there’s a big statement branded at the top of each page that says “this report is out of date. It is retained for historical purposes. It no longer reflects contemporary economics or market realities and should not be relied on for current matters related to the Robinson‑Patman Act.” But that’s the kind of evidence of how strong this information campaign was.
So, judges, economists, lawyers, everybody almost came to believe that it would be embarrassing to say that one should promote the Robinson-Patman Act. It was sort of like prove your worth as a lawyer, prove your worth as an economist. Just get up there and say that the law is silly or damaging. And the FTC and DOJ simply stopped enforcing the act. And to the extent it was enforced by private parties, we got some really, really bad opinions from courts just going out of their way to try to narrow the act as much as they possibly could.
And so, that’s kind of what’s happened over the last 50 years. That kind of started in the 1970s, following a period of really vigorous enforcement, which not coincidentally coincided with the golden years of American capitalism. I don’t think it’s a coincidence that our best years of not only equality and fairness and middle class and all of that, but also growth and innovation. That all happened during a period of time where we gave credit to this law and we were enforcing it.
TEDDY DOWNEY: Yeah, I also wonder—and we’ve got some questions here from the audience that I want to get to before we talk about the path forward to provide further revitalizing it. I wonder what it does to community. Like when you have flourishing small business, it feels like communities where that’s going on feel a lot different, a lot more interesting than what you get when you just have a bunch of chain stores in a strip mall or in your neighborhood. It’s just like you see the same thing when you’re going to any part of the U.S. It’s the same store. It just feels like monotonous and a bit empty as opposed to sort of a vibrant, flourishing community where you know the small business owner and things like that.
The other thing that came up when you were talking, you mentioned just calling the law silly and not enforcing it. That seems like there’s bipartisan interest in pushing back against this type of lawlessness, at least at some level.
Two Republican commissioners at least, I think, have said, hey, we enforce laws here. If you want to change the law, you’ve got to go to Congress. You can’t just unilaterally decide not to enforce a law. That’s just ridiculous.
So, that seems to have changed as well. And before I get into these questions, I want to get your response either to that point on community or also have we evolved past this? Well, if we think a law is economically silly, we just don’t enforce it.
CATHERINE SIMONSEN: Right. On the community point, I couldn’t agree more. I think it’s a positive externality of the Robinson Patton Act. I really don’t think the reason it was passed was to protect a vibrant Main Street or something. What it was meant to do is just make sure there’s robust competition.
But I think in the back of everyone’s minds was an understanding of exactly what you touched on. Like, we don’t want to live in a world where everywhere we go and everywhere we travel, we see the same companies with the same practices, the same prices, like the same food on the menu, the same products on the shelves. We’re human beings. We want to see change and diversity and innovation and difference. Like, that’s what makes life fun, right?
And so, I think it’s absolutely a beneficial effect that we will see. And just having more small businesses in this country is a good thing for us. It’s like you have more people taking ownership over interesting enterprises, putting their new ideas to work. You’re just going to have better products, better services, and more interesting things going on in this country. The more different organizations are contributing. That’s like a bedrock concept in First Amendment law. Marketplace of ideas. The same is true for the economy. More diversity is better.
And to your point, it protects against supply shocks. There is some amount of redundancy that comes with competition, but it’s necessary because it has all these positive externalities.
On the second point, I think it’s too soon to say whether we actually are at a point now where everyone is in agreement that this is a law on the books and therefore it should be enforced. I think I’m still waiting to see if the money is where the mouth is in that respect.
TEDDY DOWNEY: We’ve got a question here about that specifically. I don’t think you’re going to be able to answer this, but maybe you could see if there’s any aspect of this that you could talk about. Is there any truth to the commissioner meter take on FTC’s recently dismissed Pepsi RPA case that the investigation was rushed or that the elements were not proven in the FTC’s investigation before FTC filed its complaint?
I mean, maybe you probably can’t answer that specifically. But anything about the two cases that have been that are in front of the FTC, one that continues and one that was repealed. Any thoughts on that, that you’re allowed to discuss? I’m not sure what you’re allowed to talk about.
CATHERINE SIMONSEN: Yeah, I’m going to just stay away from that because I have obligations to not discuss matters that were pending at the FTC during my time there.
TEDDY DOWNEY: Perfect. I thought that was the case. We’ve got another question here. Two more questions. And then we’ll get into the path ahead here. Do you have a sense of how much private litigation has been ongoing in the RPA space during the period when the government has been dormant?
CATHERINE SIMONSEN: There has been private litigation and I’m starting to educate myself about that and get into the cases. It’s not anywhere near the level of enforcement we see on the Sherman Act side of things. Mark Poe and Randy Gaw are an example of a small law firm out in San Francisco. They have recently been having some really big successes with Robinson-Patman Act and making some really nice law, including a case a couple years ago about the five-hour energy drink confirming the per se rule of liability under Section 2(d).
There have been some class actions in the space. But yes, it is litigated. And when district court judges, by and large, when they get a case, they look at the opinions from the 40s and 50s and 60s and they say, yeah, this is a viable case. Like, go ahead and proceed. And so, if we just had the level of attention and enforcement that we do with Sherman Act, I think we would see a lot of results. So, it’s there, but there’s a long way to go.
TEDDY DOWNEY: Last question here. On the basis of what can the dominant buyer demand lower prices? Aren’t the features of bigness better promotional powers, other cost efficiencies, greater number of customers accounted, for in the exceptions to RPA? What other aspect of them being big allows them to induce lower prices? Presumably a supplier is not going to give a lower price without some benefit to them.
I would just say personally, a lot of suppliers do not like dealing with these big buyers. So, just my anecdotal evidence of interviewing them, they don’t seem to love being bullied by the power buyers. But that said, Catherine, what’s your take on these?
CATHERINE SIMONSEN: I mean, I think if I’m understanding the question correctly, I’m in agreement, which is to say the only way they are—well, or maybe I’m not agreeing with the question or the way I would answer the question—is what the Robinson-Patman Act is trying to do is it’s saying we’re going to take away any actual cost justifications or efficiency justifications that might be justifying the lower price. And we’re going to say if the lower price remains after examining those cost justifications, then the reason the power buyer is getting that lower price is simply because it’s bigger. It has more leverage.
I mean, this is a commonsense idea. Like if you have Goliath versus David, Goliath is going to be able to extract more of the rents from the transaction. And the same is true of a power buyer. And the question is that something we want to reward? Is that a good thing? And the answer is no, it’s not. Because that’s monopsony power. And that results in prices that are too low. And it results in suppliers not getting compensated enough for the products they’re producing.
I mean, what I would love to see is suppliers are the ones that have the most evidence of what’s going on. They’re the ones that are being forced to discriminate in favor of the power buyers. Come out and sue your power buyer. You’re going to benefit from this law being enforced. There are ways you can do this. Think about it.
That’s sort of the fastest way to get at the problem. But hey, suppliers, you benefit when this law is enforced. It’s not to your benefit to sit on the sidelines and not expose what’s happening.
TEDDY DOWNEY: Yeah, I mean, you get, well, first of all, they complain about specific things like, oh, Walmart makes me deliver at a specific time. And I incur fees if I don’t get the truck in that exact way and unloaded in a specific way. There are just so many terms that are hard to deal with. They’re being told how to run their business. There are just a lot of complaints by the suppliers about the Walmarts of the world.
Ostensibly, if they were so happy about this, they would not be complaining. And then obviously, if you have a bunch of different customers, typically, that’s viewed as a good thing, as opposed to one really big customer.
CATHERINE SIMONSEN: Yeah
TEDDY DOWNEY: Like you said, common sense, I think. One thing, and then let’s get into the real future, but not only would it be a solution for the producer to sue the big box store, but wouldn’t they—I was surprised that there wasn’t more like, hey, come look at my power buyer when the FTC started poking around.
And then you’d think they would just be like, oh, here’s all the stuff. Like, oh, you’re going to say we can’t do this anymore. Oh, sure, we’ll settle. That seems like (a) if that started to happen, that could be a way for a huge turnaround in how things go in this world.
Because instead of having to go seven to ten years of litigation, you do enough of these cases with a state enforcer or whatever, where you have a producer who’s perfectly fine to agree not to do it anymore, as long as they get protection on the other side from retaliation by the big chain. Why do you think we don’t see that? Or could we see that? Or could that be a shortcut?
CATHERINE SIMONSEN: Yeah, probably. I think the reason we don’t see that so much is because suppliers are afraid that then someone’s going to go after them, right? For being sort of a party to the discrimination, even though they were forced kind of beyond their—of their own volition. They did not give the big box retailer a better price. They were forced into it. But I think that’s probably the reason why you don’t see that.
But I think suppliers need to realize that if they don’t stand up and just provide the information necessary, and like you said, just assure FTC—“fine, I won’t discriminate anymore.” Like, “I’ll follow your order not to give better prices to the big box store.”
If they all did that, they would have a much longer future ahead of them, right? It’s a short term strategy to say, oh, I don’t want to open myself up to litigation. Or I don’t want to open myself up to cost. I’m just going to keep quiet. Like you may find yourself out of business before not too long, unless you actually get this law enforced. And the suppliers are the ones that have the information.
TEDDY DOWNEY: One last question. We’ve got another question. Then I promise we’ll get into the road ahead here. What are your thoughts about how price discrimination affects products with inelastic demand, such as food or medicine versus products with elastic demand, like televisions?
CATHERINE SIMONSEN: I’ve got to say I haven’t thought a whole lot about that.
TEDDY DOWNEY: You’ve written a little bit or talked a little bit about PBMs.
CATHERINE SIMONSEN: Yeah.
TEDDY DOWNEY: And PBMs we’ve been enforcing against PBMs that haven’t really gone after price discrimination. Maybe that could be a good place to focus.
CATHERINE SIMONSEN: Yeah, I think what’s happened in the pharmaceutical supply chain is a really good example of what happens when you don’t enforce the Robinson-Patman Act. What do I mean?
So, at the wholesaler level, you have three dominant wholesalers selling drugs to pharmacies, they control like over 90 percent of the market. Why did they merge and consolidate? So that they could get leverage over manufacturers? They have so much leverage over the generic manufacturers now that we simply have supply shortages. We have lack of innovation. We have manufacturers who won’t even put drugs on the market because they’re simply not going to make enough money. That’s how bad the buyer power problem is at that level of supply chain.
Then you have the pharmacies. They’ve all consolidated. You have these huge chain pharmacies. They think they have to consolidate so they can get lower prices from the wholesalers than they otherwise, would. So, then what problem do you have there? Well, you have the chain pharmacies extracting much lower prices from the wholesalers than the small and independent pharmacies. How do the small and independent pharmacies compete when they simply can’t get the same drug?
And they’re paying, according to public information, for example, we saw recently this sort of public index NADAC of prices pharmacies pay. And apparently a large chain recently started reporting and NADAC plummeted, meaning this big chain is paying much lower prices than small and independent.
So, you have consolidation at the pharmacy level. You also have seen enormous consolidation at the pharmacy benefit manager level with three to six pharmacy benefit managers controlling the majority of the pharmacy benefit manager market. What problem results there?
Well, pharmacy benefit managers that have market power are able to reimburse pharmacies at much lower rates than pharmacy benefit managers without market power. Here again, you see the small and independent pharmacy squeeze. They’re paying more to the wholesalers for the drug and they’re getting way under reimbursed for the product.
And they’re going out of business. Everyday a small pharmacy closes. And meanwhile, billions of dollars of money are being sucked out of that distribution system by every single layer, by the consolidated entities that have amassed power at each of those levels.
So, just stop and ask yourself, is this efficiency? Is this low prices? In America, we have the highest drug prices of anywhere in the world. We have a shortage of drugs. Everything that could possibly go wrong with a segment of the economy is going wrong in the pharmaceutical supply chain. And I think it’s because we’re not enforcing the Robinson‑Patman Act.
TEDDY DOWNEY: It’s pretty compelling. I’m not going to lie. It’s a lot of consolidation. You didn’t even get into how the PBMs sometimes own the pharmacy as well. So, we could spend all day talking about consolidation and market power in the pharmacy supply chain, pharmaceutical supply chain. But I want to get to your thoughts on the road ahead.
You’ve painted a pretty bleak picture of where we are right now. Where are some of the bright spots? What do you see as the opportunity here, the playbook here? And how do you see this playing out going forward?
CATHERINE SIMONSEN: Yeah, I mean, I have a lot of hope because I don’t think it’s too late. Yes, there have been a lot more mergers and there’s been a lot more consolidation than there would have been if Robinson-Patman had not been enforced. But if we start really enforcing it today, then we take away the fruits of that consolidation, right?
And I’m not saying we can address all consolidation problems in this economy with the Robinson-Patman Act. I mean, it’s primarily focused on buyer side power. So, it’s less directly getting at sell side power. But as soon as you start enforcing it, you stop the big box retailer, for example, from demanding lower prices. And so, he may be big in his current state, but he’s not able anymore to extract rents from the system that he previously was.
And then you start planting in his mind the seed of like, well, if I’m not getting like the like bargaining leverage, that was the reason for my buying spree that I conducted over the last 50 years, then maybe I should like start divesting some business units and start basically creating smaller pieces of myself to go out in the world and specialize, right? And specialize in one particular set of products or ways of distributing.
And so, you can actually imagine a world where companies are voluntarily divesting. Because I really do think that when you don’t have the ability to extract such profits out of the system by being big, you eliminate the reason to be big.
And actually, there’s not a lot of reasons to be big. Because it adds bloat. It adds more people you have to hire to manage the people you hired and systems and tracking and all of that. You can be a lot more nimble as a smaller company. We certainly feel that way about our law firm. We can move around and be more nimble because we’re smaller.
So, I think it’s something like we can turn on a dime. Like we can turn this law on and immediately see effects. But we need to do it soon. And I do think in the pharmacy space, for example, it’s urgent so that we quell the mass closings that we’re seeing in the pharmacy space. And pharmaceuticals are not something to play around with. This is people’s lives. We need to have an economy that’s properly incentivizing full production of pharmaceuticals and the ability of an elderly person to get to the pharmacy of their choice and get the service that they want and need.
And so, yeah, I think it’s just a matter of will. We have to do this collectively. It can’t just be the FTC. It has to be private enforcers. It has to be state enforcers, associations. There’s ways consumers can enforce the act. And I could do a whole separate podcast about that. But the state price discrimination laws, we need to look at the state price discrimination laws and use them.
The RPA is not a panacea. You have to have interstate commerce. That was the jurisdictional hook. You don’t need interstate commerce for state price discrimination laws. Some of them are much better.
So, there’s just a lot of promise and a lot of opportunity. State AGs, you can get penalties. You can get damages if you bring the case the right way. So, we can do this.
And I think also just restore a little bit of what I think is supposed to be—was at one point—the spirit of America. America is not a land of monopolists. It’s not a land of money hungry people. It’s a land of people who want to innovate and create businesses and have a diverse economy, have the type of community you were talking about. So, there should be a will and there is a way. It’s on the books right now.
TEDDY DOWNEY: And we’ve got one question here which is asking to talk more about the potential of state law and enforcement. One thing that maybe we could talk about, you mentioned this path where you look at 2(d) as a way to just try to force everyone into being more transparent about how they do their pricing and get a per se treatment.
But also, I think you mentioned that services are covered in the California law, is that correct? I mean, I believe that a lot of big chain retailers are aware that there is a Robinson-Patman Act, even if they don’t believe in it or don’t have any compliance program that meaningfully would address enforcement.
But what about services? And does that make it easier to sort of put up a more robust package of enforcement? If you’re a committed AG, you’re committed private plaintiffs, to really take advantage of this law.
CATHERINE SIMONSEN: Yeah, the way the article or product is defined in the California Unfair Practices Act, I believe it’s broad enough to cover services. So, if there’s discrimination in the provision of services that are being sold to an intermediary and then passed on, you should be able to get at that under the California Unfair Practices Act.
But the other thing you can do potentially is not even use California Unfair Practices Act. Let’s say you have a really good Robinson‑Patman Act to a claim, but it’s not like a good. It’s a service at issue. You can use the California Unfair Competition Act to say this is illegal because it violates the policy and spirit of the Robinson-Patman Act.
So, for example, Judge Gonzalez Rogers in the Northern District of California, in the Epic v. Apple case said, well, Apple didn’t violate the Sherman Act, but it violated the policy and spirit of the Sherman Act. And so, I’m going to stop it from pursuing these anti-steering restraints under the unfair competition law of California.
So, there’s a number of ways you can be creative. If there’s some technical limitation with Robinson-Patman Act, do it under like a California UCL or something. There’s a lot of ways to be creative to try to—it’s to really get at the problem that Congress is trying to stop.
TEDDY DOWNEY: And in one respect, the cat is out of the bag. We have had a price, an RPA, case move forward with the FTC on the liquor distributors or big liquor distribution and total wine, basically. Do you think there’s a likelihood that you’ll just see a lot more of these because people say, hey, you can win on this? And there’s a lot of opportunity here. And, oh, the minute that you actually get into the meat and potatoes of these cases, because there has not been expecting enforcement for so long, that actually the facts make it pretty easy to win. Do you see that as being likely? Or do you still think that the judges are just so indoctrinated to think it’s a silly law that it’s going to be an uphill climb?
CATHERINE SIMONSEN: No, I do. I’m hopeful. I think it’s going to take lawyers opening their minds. Because as our law firm is starting to get off the ground, we’re starting to talk to people about partnering on cases and things. And the instant reaction to using the Robinson-Patman Act is kind of this, oh, I don’t know. No one ever learns about the law.
So, I think it’s going to start with lawyers. If you’re a litigator out there, go pick up the treatise. And also, non-antitrust lawyers, get in the mix. You don’t have to be some expert on supply and demand to go prosecute a Robinson‑Patman Act case.
So, don’t think that antitrust law is too difficult or too hard for you. I find that people who haven’t been entrenched in the antitrust law world are much more open and you can do it. Anyone can do it. Bring an RPA claim.
TEDDY DOWNEY: Yeah. It’s interesting because if you didn’t go to law school, you just can look at power just for power’s sake without any of the hindrance of thinking that some economist will think you are silly.
CATHERINE SIMONSEN: Right.
TEDDY DOWNEY: If an economist calls me silly, I find it to be very—makes me feel good about myself. Makes me think that I must be doing something right when they call me silly.
But you’ve been very generous with your time. I’m super excited to see what you and Shaoul will do with your new firm. I hope everyone gets a chance to read “Taking on Power Buyers: Expedient, High-Impact Enforcement of Federal and California Price Discrimination Laws,” which came out today. Is that correct?
CATHERINE SIMONSEN: Yeah, that’s right.
TEDDY DOWNEY: Just came out. Take a look. It’s super interesting. I think we’re going to be following this issue for some time to come. And Catherine, thank you so much for doing this today.
CATHERINE SIMONSEN: Thank you, Teddy. This was really fun.
TEDDY DOWNEY: And this concludes today’s call. Thank you so much for joining us. If you liked the conversation, thought it was thought-provoking, please be sure to follow The Capitol Forum on LinkedIn for breaking news, policy updates, and info on upcoming events.
And we’d love to hear from you. Drop us a line at info@thecapitolforum-news.com. I know it’s a mouthful. But if you have any ideas for topics that you want to hear from, please connect with us. And have a great weekend, everyone. Thanks again. Bye, Catherine.
CATHERINE SIMONSEN: Bye.
