Explain the applicability of the Robinson-Patman Act to indirect price discrimination.

Question

What will be an ideal response?

Answer 1

In passing the Robinson-Patman Act, Congress recognized that sellers could indirectly discriminate among competing buyers by making discriminatory payments to them or by furnishing them with certain services that were not available to their competitors. Section 2(d) prohibits sellers from making discriminatory payments to competing customers for services (such as advertising or promotional activities) or facilities (such as shelf space furnished by the customers in connection with the marketing of the goods). Section 2(e) prohibits sellers from discriminating in the services they furnish to competing customers. Thus, a seller would violate this provision if he provided a favored customer with a display case or a demonstration kit. Sellers may lawfully provide such payments or services only if these are made available to competing customers on proportionately equal terms. This means notifying customers of the availability of such services and distributing them according to some rational basis, such as the quantity of goods the customer purchases. The seller must devise a flexible plan that enables various classes of buyers, large chains or small independents, to participate.