US lawsuit accuses PepsiCo of price discrimination that favored Walmart
over smaller stores
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[January 18, 2025] By
DEE-ANN DURBIN
The Federal Trade Commission sued PepsiCo on Friday, alleging that it
has engaged in illegal price discrimination by giving unfair price
advantages to one large retailer at the expense of other vendors and
consumers.
The benefiting customer wasn't named in an FTC statement about the
lawsuit. But a source familiar with the case, who asked not to be named
because they were not authorized to discuss it, said the retailer was
Walmart.
PepsiCo said the lawsuit “is wrong on the facts and the law” and
misunderstands the way consumer product companies help retailers provide
lower prices.
“PepsiCo strongly disputes the FTC’s allegations and the partisan manner
in which the suit was filed. We will vigorously present our case in
court,” the company said in a statement.
The FTC said PepsiCo's practices included making promotional payments to
Walmart but not to large grocery chains or independent convenience
stores. The FTC said that lets Walmart lower its prices, but forces
Americans to pay inflated prices for PepsiCo products unless they shop
at Walmart.
“When firms like Pepsi give massive retailers a leg up, it tilts the
playing field against small firms and ultimately inflates prices for
American consumers,” FTC Chair Lina Khan said in the statement. “The
FTC’s action will help ensure all grocers and other businesses — no
matter the size — can get a fair shake and compete on the merits of
their skill, efficiency, and talent.”
Walmart said Friday it had “nothing to add at this time.” PepsiCo said
its practices “are in line with industry norms.”
“We do not favor certain customers by offering discounts or promotional
support to some customers and not others,” the company said.
The FTC sued PepsiCo under the rarely enforced 1936 Robinson-Patman Act.
The FTC said the act prohibits companies from using promotional
incentive payments to favor large customers over smaller ones.
It was the second time in a little more than a month that the FTC has
cited the Robinson-Patman Act in a lawsuit. In December, the commission
sued Southern Glazer's Wine and Spirits, a large U.S. distributor,
saying it illegally discriminated against small and independent
businesses by giving discounts and rebates to larger stores.
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Bottles of Diet Pepsi Wild Cherry are displayed at a market in
Pittsburgh, Jan. 26, 2023. (AP Photo/Gene J. Puskar, File)
In the waning days of the Biden
administration, the FTC has been busy issuing consumer refunds,
taking enforcement actions against companies the agency accuses of
deceptive practices and finalizing rules it says are needed to make
the marketplace more fair.
The FTC voted 3-2 to authorize staff to file a lawsuit for a
permanent injunction against PepsiCo in the U.S. District Court for
the Southern District of New York. Commissioner Andrew Ferguson, who
is President-elect Donald Trump's choice to replace Khan, was one of
the two dissenting votes.
The other commissioner voting against the lawsuit, Melissa Holyoak,
wrote in her dissent that the case against PepsiCo was “the worst
case I have seen in my time at the commission.” Holyoak said the
majority of commissioners rushed the case out the door before they
had enough evidence to support the allegations.
“Pepsi’s promotions to the retailer are not disguised discriminatory
discounts but rather ordinary price concessions,” Holyoak wrote.
PepsiCo, based in Purchase, New York, is one of the world's largest
food companies. It makes Pepsi, Mountain Dew and Gatorade as well as
snack foods like Lay's potato chips, Doritos and Fritos. It also
makes Quaker Oats, brekfast cereals and granola bars.
PepsiCo's prices have been the subject of some scrutiny since the
pandemic. In 2022, for example, the company acknowledged shrinking
its Gatorade bottles from 32 ounces to 28 ounces, but it didn't
respond when asked why it charged more for the 28-ounce bottles.
In October, Democratic Sen. Elizabeth Warren of Massachusetts and
U.S. Rep. Madeleine Dean of Pennsylvania sent letters to PepsiCo,
Coca-Cola and General Mills accusing them of price gouging through
shrinking package sizes.
PepsiCo has said its price increases were necessary because of the
rising cost of ingredients, shipping, packaging and labor. But over
the summer, the company said consumers were pulling back on snack
and drink purchases or shifting to cheaper store brands.
PepsiCo responded by trying to make Lay's more affordable through a
mix of product promotions, more chips per bag and value packs.
Similar promotions were planned for Doritos and Tostitos, the
company said.
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