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Home News FTC Files Lawsuit Against Pepsico For Alleged Price Discrimination Favoring Walmart

FTC Files Lawsuit Against Pepsico For Alleged Price Discrimination Favoring Walmart

by Celia
CFTC

In a significant legal move, the Federal Trade Commission (FTC) filed a lawsuit against PepsiCo on Friday, accusing the company of engaging in illegal price discrimination that unfairly benefits one major retailer over smaller competitors. The FTC claims PepsiCo provided Walmart with preferential pricing advantages, causing harm to other vendors and ultimately inflating prices for consumers who shop outside Walmart.

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While the FTC did not name the specific retailer in its statement, sources familiar with the case have confirmed that Walmart is the primary beneficiary of PepsiCo’s alleged practices. The company reportedly made promotional payments to Walmart but not to large grocery chains or independent convenience stores, enabling Walmart to lower its prices on PepsiCo products while raising costs for other retailers and consumers.

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PepsiCo responded strongly, stating that the FTC’s lawsuit is “wrong on the facts and the law.” The company emphasized that its pricing practices are in line with industry norms and denied any wrongdoing. “We do not favor certain customers by offering discounts or promotional support to some and not others,” PepsiCo said in a statement, asserting that the FTC’s case is based on a misunderstanding of how consumer product companies support retailers.

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FTC Chair Lina Khan explained that such price advantages for massive retailers like Walmart undermine competition and lead to inflated prices for American consumers. “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,” Khan said. “This action will ensure all businesses — regardless of size — can compete fairly and on merit.”

Walmart declined to comment on the lawsuit. However, the legal battle sheds light on ongoing concerns regarding the balance of power between large and small businesses in the marketplace.

The FTC’s lawsuit, filed under the rarely used 1936 Robinson-Patman Act, accuses PepsiCo of providing promotional incentive payments that disproportionately favor larger retailers, thus violating antitrust laws designed to prevent price discrimination. This is the second time in recent weeks that the FTC has invoked the Robinson-Patman Act, having filed a similar suit against Southern Glazer’s Wine and Spirits in December for similar alleged practices.

The FTC is seeking a permanent injunction against PepsiCo, aiming to block what it considers to be unfair pricing strategies. The case will proceed in the U.S. District Court for the Southern District of New York. While the lawsuit was approved by a majority vote of 3-2 at the FTC, two commissioners dissented. Commissioner Melissa Holyoak criticized the case, stating that the evidence presented was insufficient and that the case against PepsiCo was “the worst case” she had seen during her tenure.

PepsiCo, known for products like Pepsi, Mountain Dew, Gatorade, and snack brands such as Lay’s and Doritos, has faced scrutiny in recent years for price hikes and package downsizing. The company has justified the price increases as necessary due to rising costs of ingredients, labor, and logistics. However, as inflation continues to impact consumer purchasing behavior, PepsiCo has also tried to address concerns by offering more affordable product options.

This lawsuit comes at a time when regulatory scrutiny over corporate pricing practices is intensifying, as lawmakers and regulators seek to ensure fair competition and protect consumers from potential price gouging.

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