Price Discrimination Law and Economic Efficiency

Abstract

The Clayton Act, as amended by the Robinson-Patman Act (15 U.S.C. ? 13), undertakes to outlaw price upon proof of threatened injury to competition, and subject to specified defenses. Lawyers often bewail the fact that administration of this statute frequently fails to conform to an economist's notion of discrimination. For the most part, the complaints are addressed to the clear fact that, as drafted and interpreted, the statute wreaks unnecessary damage. In the name of protecting competition, competition and economic efficiency are often curtailed. To some uncertain extent, the economic losses encountered in the administration of a price discrimination law may be accepted in the pursuit of social or political goals. In the perennial ebb and flow of proposals to abolish or to amend the statute, however, arguments are continually made that it serves economic goals as well. Such arguments commonly fail to recognize the enormous difficulties that confront any statutory attempt to improve the pursuit of economic efficiency by regulating price discrimination. These difficulties are so great that a price discrimination statute is apt to serve economic efficiency only incidentally and accidentally, if at all. These difficulties do not arise from any supposed fact that price differences in real transactions must always rest upon foundations of economic efficiency. Often they do not. Instead, the difficulties arise from two quite different limitations on economic theory and our ability to apply economic theory in practice. The first limitation arises from the fact that price discrimination is not a single phenomenon, but a wide variety of often complex phenomena, some of which may prove more desirable than nondiscriminatory pricing. Unambiguous demonstration that a given set of pricing transactions involves price discrimination does not by itself answer the question whether it is desirable discrimination. The first