Stop Making Sense: Reviving the Robinson-Patman Act and the Economics of Intermediate Price Discrimination
I. Introduction
Early in the 20th century, a new model for retail sales arose: chain stores. One chain, the Great Atlantic & Pacific Tea Company (A&P), became America’s largest retailer during 40 mid-century years. Emphasizing scale, vertical integration, and superior use of data, chain stores had lower costs, greater variety, and often other measures of improved quality. The previously dominant model featured wholesalers, middlemen who connected manufacturers, many growing in size, to the myriad, mostly small retailers. Incumbent retailers and wholesalers reacted fiercely to the new competition, attempting to use government to limit their growing, more efficient rivals.
President Franklin Delano Roosevelt’s first attempt to end the Great Depression, the National Industrial Recovery Act of 1933, preached business-government cooperation and sought to raise prices to provide relief to struggling businesses. Chain store opponents seized the opportunity. Under the new law, codes of conduct emerged, some of which attempted to prevent chain stores from bypassing traditional wholesalers, while others aimed at crippling the new model. In practice, the codes proved hard to enforce, and the Supreme Court ended the experiment less than two years after the underlying statute was enacted, declaring it unconstitutional.
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