The Federal Trade Commission has sued PepsiCo, accusing it of “rigging” the soft drink market by offering special deals to one big-box retailer but not others.
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Michael M. Santiago/Getty Images
A new federal lawsuit accuses Pepsi of rigging competition by providing unfair deals to a major big-box store at the expense of competing retailers, resulting in higher prices for shoppers.
The Federal Trade Commission is suing Pepsi for its special deals with a company whose name is redacted. Industry experts point to Walmart, America’s largest retailer, as the likely company, which is not accused of wrongdoing.
The FTC alleges that because Pepsi did not provide the same offers to others who sell its products, it disadvantaged other retailers “ranging from large grocery chains to independent local convenience stores.” Pepsi called the lawsuit “factually and legally flawed.”
The case comes amid the FTC’s recent revival of long-pending legislation to try to crack down on high food prices, which dominate Americans’ economic concerns. The 1936 law prohibits suppliers from giving preferential treatment to large companies over small ones, but with certain qualifications.
“When companies like Pepsi give a boost to big retailers, it tips the scales against small businesses and ultimately inflates prices for American consumers,” said FTC Chair Lina Khan, in a press release.
Pepsi, in a statement, said its “practices are consistent with industry standards and we do not favor certain customers by providing discounts or promotional support to some customers and not others.” Walmart declined to comment. The redactions in Friday’s lawsuit could be lifted over time as part of the legal process.
It is unclear how this matter will continue under the Trump administration. Some Republican legal scholars favor reviving the old law, called the Robinson-Patman Act.
But the FTC’s vote to sue Pepsi split along party lines, with the two Republican commissioners dissenting. Trump’s choice to lead the FTC, Commissioner Andrew Ferguson, had challenged the Pepsi proceedings. Republican Commissioner Melissa Holyoak called Friday’s lawsuit “the worst case” she’s seen at the agency, saying she believed Democrats “rushed the matter.”
The Pepsi lawsuit brings new scrutiny to Walmart’s power to use its size to get cheaper prices. It also highlights PepsiCo’s power as the owner of numerous soft drink brands, including Gatorade, Mountain Dew, Lipton and Bubly.
The National Grocers Association, which represents independent retailers and wholesalers, welcomed the FTC’s lawsuit Friday.
“Suppliers pay a lot of money for the privilege of doing business with these big companies, and the cost is passed on to everyone,” said Chris Jones, the trade group’s director of government relations. “The FTC’s lawsuit focuses on the heart of the problem, which is a dominant retailer abusing its market power to force suppliers to make unreasonable and costly concessions.”
Independent grocers, in coalition with pharmaceutical, agricultural and other groups, have called for stronger enforcement of the Robinson-Patman Act. Prominent anti-monopoly activist Stacy Mitchell has argued that the government’s withdrawal of the law in the 1980s helped decimate competition in the U.S. food industry.
“By favoring a single major chain, Walmart, with discriminatory pricing, PepsiCo’s actions have fueled the decline of local retailers, the proliferation of food deserts and rising food prices,” said Mitchell, co-executive director of the Institute for Local Self-Government. Dependence. “By filing suit against PepsiCo, the FTC is sending a clear message that it is illegal for a large supplier to work with a large retail chain to drive small retailers out of business and dominate the market.”
Last month, the FTC also sued America’s largest alcohol distributor, Southern Glazer’s Wine and Spirits, alleging it illegally denied small businesses rebates and rebates it offered larger chains.
