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The Robinson-Patman Act and Its Applicability in the Modern Age - Research Paper Example

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The Great Depression brought about unequal business practices as large corporations began to use their economy of scale to influence the prices of goods and services, monopolizing the markets. There were instances when big businesses were allowed to purchase goods at relatively cheaper prices than the small retailing firms. …
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The Robinson-Patman Act and Its Applicability in the Modern Age
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Download file to see previous pages This unfair business practice created a price discrimination problem that threatened the survival of small companies or retailers (McElvain 35). Then the Robinson-Patman Act was implemented during the Great Depression when these large businesses that had emerged then were having competitive advantages over smaller retailers. There is no doubt that Robinson-Patman Act doused this economic problem by fighting against price discrimination. And the critics believe that the Act was most effective during this time period when price fixing posed a serious threat on competition and the economy.
As a matter of fact, Robinson-Patman Act tended to reduce criminal business practices during the Great Depression. Therefore, four major requirements must occur for a claim to arise under the Robinson-Patman Act.
There must be:
1. a sale of products that are of like “grade and quality”
2. from the same vendor to different purchasers in which there
3. is a discrimination in the prices of the products sold
4. that causes a restraint in competition.
This necessitates that if a big company offers to sell a product of similar “grade and quality” at an expressly cheaper price, the small retailer affected by this action may seek legal recourse for redress and compensation. This action would discourage big businesses from using their economies of scales to have an advantage over the small businesses. Potentially, if the price of a good is reduced, a company can sell as many pieces of the product to several purchasers at a price that is far cheaper than the offering price by a smaller retailer. This discrimination in price kills competition, and it was discovered to be an inhibition to the economic growth during the Great Depression. The Court's opinion in FTC v. Morton Salt, 334 U.S. 37 (1948), illustrates how it was applied during the age of booming large businesses. Interestingly, the Supreme Court ruled that Morton Salt had acted illegally by selling its finest “Blue Label” salt to large chain-stores at a relatively cheaper price instead of making the same product available for customers nationwide at the same price. The Federal Trade Commission made sure that the Robinson-Patman Act was enforced to discourage the criminal trade practice of selling goods at a discount price to large stores simply because they could afford to purchase large quantities of the products at a time. One of the possible effects of this practice is that small retailers would be pushed out of business as consumers could not afford to buy the same product or good that are offered at a competitive price by the 3 large stores. This instance of price discrimination was what Robinson-Patman Act fought against in the earliest time. The Congress then perceived the act of price fixing as an inhibitive and unhelpful to the American economy that had already been battered by the Great Depression. Critics have always pointed to the fact that the World World I contributed to the emergence of the Great Depression, and that the sharp practices by big retailers to cheat the smaller ones was caused by the need to earn higher profitability at the expense of other retailers (McElvain 48). Therefore, enacting the Robinson-Patman Act served as a salvaging force to discourage large businesses from making life unbearable for ordinary Americans who had already had enough hardship due to the effects of ...Download file to see next pagesRead More
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