Agency reconsiders guidance on law helping small retail businesses.
The Federal Trade Commission (FTC) is seeking public comments on its Fred Meyer Guides which advise sellers on how to grant promotional payments and services to retailers on fair terms. The guides aim to help businesses comply with the Robinson-Patman Act of 1936, which helps small businesses compete against multi-chain stores by outlawing anticompetitive price discrimination by suppliers.
The decision to review the guides has raised considerable debate. Critics argue that the FTC’s move to review the guides is a waste of resources, since Robinson-Patman cases are relatively rare and plaintiffs rarely prevail. Others suggest that updating the guides is good governance, since the actual document has not been changed since 1990.
Although the guides are not legally enforceable, they help clarify the provisions of the Act. The law prohibits companies who sell products for resale from providing advertising allowances and promotional services unless they provide allowances and services to competing buyers on proportionally equal terms. Promotional services include cooperative advertising, catalogues, displays, and prizes for conducting promotional contests. Promotional benefits must also relate to the retailer’s resale or preparation for resale of the items in question. If the seller learns that the buyer is not using such payments or services for the purposes for which it was allocated, the entities covered by this act must stop providing the benefits.
While the guides do not prescribe a particular mechanism for granting advertising allowances and promotional services to buyers on “proportionally equal terms,” they do offer several examples of legal behavior. For instance, covered entities may provide payments or services to buyers on the basis of the dollar volume or quantity of the product purchased during a given period. Additionally, the guides provide that a seller should not feature certain buyers in its own advertisements unless it makes the same service available to competing buyers.
According to the guides, if a seller discriminates between buyers in providing promotional payments or services, it can defend by arguing that the payments or services were made in good faith to meet a competitor’s offer and that such payments were offered on an area-wide basis, or to both new and old buyers.
The FTC originally issued the guides pursuant to the U.S. Supreme Court’s decision in FTC v. Fred Meyer, Inc. (1968). In that case, the Court held that “when a supplier gives allowances to a direct-buying retailer, he must also make them available on comparable terms to those who buy his products through wholesalers and compete with the direct buyer in resales.” The guides are based on the language, purpose, and legislative history of the Robinson-Patman Act along with relevant case laws.
The FTC is now reviewing the Fred Meyer Guides as part of a regular review of its rules and interpretive materials. In soliciting public comment, the Commission seeks feedback on several issues, including: the extent to which the guides should incorporate the developments in commercial practices, especially those arising out of technological growth as a novel mechanism for promotion; overall costs and benefits of the guides on the sellers, buyers, and ultimate consumers; and the continuing need for the Fred Meyer Guides at all.
Comments may be submitted to the FTC electronically before January 29, 2013.