As companies get bigger, they get more powerful. For instance, they can buy in bulk, Costco style, getting each unit of good for cheaper than your neighborhood Mom 'n' Pop store.
Congress saw this exact thing happening, and they didn’t like it. They liked their Mom 'n' Pop shops, and saw what suppliers were doing as price discrimination, and anti-competitive practice. Supplying goods to some firms at a discount would make the other firms go out of business, which means less market competition. American likes competition; that’s what market mechanisms are all about. Low prices, innovation to boot, the works.
The Robinson-Patman Act (no relation to vampire Robert Pattinson) was passed by Congress in 1936 as federal law. The law zeroed in on anti-competitive price discrimination practices by producers who supply things to firms. This act was meant to help out the little guys against the big box stores that dominate the market today.
For instance, Morton Salt got in trouble with the Supreme Court in 1948 for offering discounted salt to stores that bought an amount that only a handful of national chains could reasonably buy. All thanks to the Robinson-Patman Act. Still, it’s clear that big box chain stores are winning in the long run.
Related or Semi-related Video
Finance: What are the Clayton Act and th...72 Views
Finance a la shmoop what are the Clayton Antitrust Act and the Sherman Antitrust
Act? well they're all about controlling monopolies which a century ago were
called Trust's ironic in that well they essentially stole the trust from the
people, the common Jo, Ma and Pa Kettle well in late 19th century even more so [Ma and Pa Kettle standing together]
than today white men generally ruled the Western
world and were you know very clubby, Bob here in church pew seven likes to do
business with Mike here in pew eight Bob ran a tugboat shipping line hauling [Bob sailing a tugboat]
grain down the Mississippi, Mike here had a bunch of farms and liked to do
business with Bob and well there's Jim here in pew six who runs the entire
region's worth of banks then he liked loaning money to farms because well back [Jim with stack of cash]
then they were always money good to pay their debts yeah there was a time farms
were considered you know safe bet and the three of them formed essentially a
vertical monopoly controlling grain distribution in the center of the [Ship travels through center of the US]
country from creation to distribution to sales to you know all the financing and
banking and stuff underneath it if they wanted to raise prices on the grain for
bread well who was to stop them you know there were no competitors why were there
no competitors, because the three had teamed up to elbow out anyone else [competitor appears and Mike elbows him away]
who might come along and well you know cut them out of the precious resource
flows of whatever was needed and soon the three had enough scale so that if
they were buying resources for a million acres of farmland well, their volume
discount pricing discount discount discount were so massive that they could
undercut anyone who came along wanting to compete fair and square [Prices of grain appear]
well the Sherman Antitrust Act of 1890 was the first set of anti monopoly laws
to come down the pike like it says right there in the name the act was anti
trusts it was passed to bust up any unfairly organized legal arrangements or [Sherman Antitrust Act strikes company]
would-be monopolies which would prevent from taking advantage of unknowing
consumers and provide for a competitive marketplace because then who wins and a
consumer that's who the government's protecting right so what did this mean [Jim Bob and Mike in a farm]
for poor old Mike Bob and Jim well now they couldn't just raise grain prices
Willy or nilly suddenly there were strictures in place
and our gruesome threesome had to abide by this new rule of law which meant [Jim Bob and Mike in court and judge holds up Sherman Antitrust Act]
pricing their product fairly and reasonably whatever that meant so that
no one was having to sell the family farm to afford to buy a loaf of
sourdough you know for their kids and then clever lawyers defending bazillionaires
poked so many holes in the Sherman Act it looked like one of the real [Lawyer poking holes through document]
housewives after her latest Botox treatment so along came the Clayton
Antitrust Act in 1914 to fill in those holes and puff up the cheeks of law as
it were well any little loopholes discovered by the clever lawyers were [Plasters appear on Sherman Antitrust Act]
closed and more specifics were added to the language so it was even harder for
folks like Mike Bob and Jim to pull one over on Ma and Pa Kettle, so yeah you
know it's a Billy Joel famously saying 'It's just a matter of trust'.... [Man in club singing]
ask your parents
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