A new federal lawsuit accuses Pepsi of rigging competition by offering unfair deals to a large big-box store at the expense of rival retailers, resulting in higher prices for shoppers.
The Federal Trade Commission is suing Pepsi for its special deals with a company whose name is redacted. Industry experts point to Walmart, the largest U.S. retailer, as the likely company, which is not accused of wrongdoing.
The FTC alleges that because Pepsi did not offer the same deals to others that sell its products, it put other retailers "ranging from large grocery chains to independent, local convenience stores" at a disadvantage. Pepsi described the lawsuit as "wrong on the facts and the law."
The case is part of the FTC's recent revival of a long-dormant law to try to crack down on high grocery prices, which have been topping Americans' economic concerns. The 1936 law prohibits suppliers from giving preferential treatment to big companies over smaller ones, though with caveats.
"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 statement.
Pepsi, in a statement, said its "practices are in line with industry norms and we do not favor certain customers by offering discounts or promotional support to some customers and not others." Walmart declined comment. The redactions in Friday's lawsuit might get lifted over time as part of the legal process.
It's unclear how the case will continue under the Trump administration. Some Republican legal thinkers have favored the revival of the old law, called the Robinson-Patman Act.
But the FTC's vote to sue Pepsi split along party lines, with the two Republican commissioners dissenting. Trump's pick to lead the FTC, Commissioner Andrew Ferguson, had taken issue with the Pepsi proceeding. Republican Commissioner Melissa Holyoak called Friday's lawsuit "the worst case" she'd seen at the agency, saying that she thought Democrats had "rushed the case out the door."
The Pepsi lawsuit brings new scrutiny to Walmart's power to use its scale to extract cheaper prices. It also shines a spotlight on PepsiCo's own power as the owner of numerous soft-drink brands, including Gatorade, Mountain Dew, Lipton and Bubly.
The National Grocers Association, which represents independent retailers and wholesalers, praised the FTC's lawsuit on Friday.
"Suppliers pay dearly for the privilege of doing business with these massive corporations, and the cost gets passed on to everyone else," said Chris Jones, the trade group's chief government relations officer. "The FTC's lawsuit focuses on the core of the problem, one dominant retailer abusing its market power to coerce suppliers into making unreasonable and costly concessions,"
Independent grocers in a coalition with pharmacy, farming and other groups have urged stepped-up enforcement of the Robinson-Patman Act. Prominent anti-monopoly advocate Stacy Mitchell has argued that the government pulling back on this law in the 1980s helped decimate America's grocery competition.
"By favoring a single large chain, Walmart, with discriminatory pricing, PepsiCo's actions have fueled the decline of local retailers, the proliferation of food deserts, and rising grocery prices," said Mitchell, co-executive director of the Institute for Local Self-Reliance. "By filing suit against PepsiCo, the FTC is sending a clear message: it is illegal for a large supplier to collaborate with a big retail chain to drive smaller retailers out of business and dominate the market."
The FTC last month similarly sued the largest U.S. alcohol distributor, Southern Glazer's Wine and Spirits, alleging it illegally denied smaller businesses the discounts and rebates that it offered to big chains.
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