Robinson-Patman Act

by Colin Berkshire

The reason that Comcast is notoriously crooked in doing business with has to do with the Robinson-Patman Act. And, it’s the same reason that Verizon and AT&T are sneaky and tricky while Apple is not.

US Anti-trust law has three main parts: (1) Sherman Antitrust, (2) Robinson-Patman, and (3) Clayon Act. #2 is the interesting one.

It is illegal in the United States to have discriminatory pricing on products. Apple cannot legally sell its iPhones to one distributor at one price and to another distributor at another price. Apple cannot discount iPhones for governmental agencies, nor can they charge a premium to users that don’t own other Apple products. All products sold in the United States must be sold at the exact same price. This is to ensure that a marketplace is “fair.”

This may seem odd, but what was happening int he 1930s was monopolistic companies would sell products at steep monopolistic prices except where there was competition. Then, the monopolies would sell products for ruinously low prices to kill upstart competitors.

But there is the oddest of oversights in the law that protects us: Products are protected, but services are not.

Comcast can charge anybody whatever they want for their service, as can Verizon. Comcast can legally charge your neighbor more, simply because your address is odd and theirs is even. Comcast can charge you less because you are a new customer. Verizon can charge you more because you are a new customer. There are no rules. Pricing can be blatantly discriminatory. They can charge you and any other person whatever they feel you will pay.

You see this happening in Comcast’s bizarre and discriminatory pricing. Nobody seems to pay the same price for service. Where they have competition they charge lower rates. Where they are a monopoly they charge higher rates. Go to a cell phone company’s website and they will quickly ask for your zip code to provide local prices. That is, they are out to swindle you based on where you life.

But have you noticed the box prices never change? A modem from Comcast is $10. it is always $10. It never changes. It is never bundled into a package. This is because the modem is a physical product, and as such, they cannot engage in unlawful and discriminatory pricing.

Apple sells physical goods and they cannot discriminate. Verizon sells the same phone to anybody for the same price.

Your small neighborhood grocery store pays the same price for a case of Coca-Cola as does Walmart or Costco. Coca-Cola cannot price discriminate.

Services are not subject to Robinson-Patman Act anti-trust regulations so they can be priced in a predatory and discriminatory way.

This is one reason that Apple holds so steadfastly firm on their pricing structure. if Apple were to begin to offer “deals” to certain groups they would be violating anti-trust laws. All manufacturers of products MUST sell their products to all customers at the very same price. This is US law.

Now, there are some small exceptions worth noting in the US law that product prices must be fixed:

  1. Prices can vary over time. On one day you can see for ne price and on another day you can charge another price. But ALL customers purchasing on the same day (“contemporaneous sales”) must be at the same price to everybody.
  2. The products must be nearly identical. Comcast could choose to offer a modem in a black case and a white case at different prices because those are not nearly identical products. You see appliance companies playing this game by offering essentially identical models with different part numbers and some inconsequential change in a knob or trim plate.
  3. The products must be physical products. Services, software, licenses, etc are not subject to the law.

More details are here.

An interesting case was in 1976 against Texaco. Texaco sold products at wholesale to dealer/stores. They sold at a greater discount to distributors who would distribute to retailers. All was fine until one of the distributors got the bright idea of vertically integrating and opened up some gas stations. Suddenly, Texaco found themselves selling to a retailer (who was also a distributor) at distributor pricing but other retailers had to pay a higher price. They got slapped with a fine under anti-trust law.

Today, the Robinson-Patman Act is only selectively enforced. While we are all subject to it, the law has turned more into one where your political favor is more important than the law itself.

So, if you plan on se;ling products for discriminatory prices like Comcast does, be sure that you have been making appropriate political contributions like Comcast does. There is no better way to comply with the law than to simply arrange that it not be enforced.