Pepsi, cola soda prices are targeted in new federal probe

Pepsi, cola soda prices are targeted in new federal probe
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The new investigation is the latest sign that the Biden administration is expanding its efforts to rein in big companies and flex its antitrust muscle, not just in the tech world. Under Lina Khan, the FTC dug deep into its antitrust playbook, scrapping long-quiet laws in hopes of curbing the growth of the world’s biggest firms, from relative newcomers like Apple and Google to more traditional Fortune 500 stalwarts like Pepsi. and coke.

The Robinson-Patman Act was routinely enforced by the FTC for decades, then abandoned more than 20 years ago. The agency’s latest work under the law is a settlement with spice company McCormick. Before that, his the latest case Since 1988, it has been against book publishers including Simon & Schuster and Random House. The move away from Robinson-Patman came amid a growing focus at the FTC and the Justice Department on harming consumers, namely higher prices, rather than harming competitors.

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

“The Coca-Cola Company is committed to fair and legal competition in the marketplace,” the company said in a statement. “Any allegation that the company has engaged in any illegal activity in connection with the sale and distribution of its products is without merit, and we are prepared to defend any specific allegations accordingly.”

An FTC spokeswoman declined to comment. Pepsi and Walmart did not respond for comment.

Coca-Cola is the largest carbonated beverage company in the United States 46 percent of the market Pepsi is in second place with a 26 percent share in 2021.

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

To reinvigorate the law, the FTC not only needs to “find a good test case, but it also needs to rebuild its skills and expertise in conducting investigations related to the Robinson-Patman Act,” said Bill Kovacic, the agency’s former commissioner and chairman. He teaches antitrust law at George Washington University. “It was the landlord’s priority compared to other things we were forced to do,” Kovacic said of his tenure at the agency.

FTC Chair Lina Khan also called for a revival of Robinson-Patman in both cases academic writing also in his current position. In July 2022 bipartisan policy statement FTC commissioners unanimously said the agency could use the law to target illegal prescription drug discounts that prevent patients from accessing lower-cost alternatives.

However, critics of the law say that it actually has the opposite of the intended effect, and while it will bolster small businesses, it will also raise prices at the biggest chains, thereby hurting consumers.

“Bringing more Robinson-Patman Act cases will 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 line between the lack of Robinson-Patman enforcement and high food prices in rural areas, including Native American reservations. “The idea that low prices at a big box store help everyone is not true in Pine Ridge [South Dakota], where 90 percent of the people don’t have a car,” he said of the 180-mile round trip to the nearest large grocery store. “I think there’s a line where you can use this law, people in Pine Ridge won’t be able to buy fruit for their kids because the prices are through the roof.”

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

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