PepsiCo and its Frito-Lay subsidiary are facing legal action from two California-based convenience stores, which accuse the company of price discrimination. The stores—Alqosh Enterprises (operating as Whiskey Well) and NMRM (operating as Sunset Market & Liquor)—filed a proposed class-action lawsuit in the federal court in Los Angeles. They claim that PepsiCo provides more favorable sales deals to major retailers like Walmart and Albertsons while denying similar discounts to smaller, independent businesses.
The lawsuit alleges that these pricing practices have forced convenience stores to pay higher prices for PepsiCo and Frito-Lay products, placing them at a competitive disadvantage. The plaintiffs contend that this conduct violates the Robinson-Patman Act, a federal law designed to prevent price discrimination, as well as California’s state competition laws.
Legal Basis: Robinson-Patman Act
The Robinson-Patman Act, enacted in 1936, aims to prevent large corporations from giving preferential pricing to certain buyers unless justified by legitimate cost savings. Under this law, sellers cannot offer rebates, discounts, or other pricing benefits to some purchasers while denying them to others without a valid economic reason.
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The lawsuit filed by the California convenience stores is not an isolated case. It follows a similar legal action by the U.S. Federal Trade Commission (FTC) against PepsiCo in New York, accusing the company of granting Walmart unfair pricing advantages in violation of the same law.
For decades, federal authorities largely ignored the Robinson-Patman Act, but the Biden administration’s FTC has recently revived its enforcement. The FTC’s case against PepsiCo and a separate lawsuit against Southern Glazer’s Wine and Spirits LLC indicate increased scrutiny of large corporations’ pricing strategies.
Impact on Small Businesses and Consumers
According to the complaint, PepsiCo’s alleged pricing policies have affected hundreds of convenience stores across California, forcing them to charge higher prices to consumers. Mark Poe, a lawyer representing the plaintiffs, stated that Frito-Lay’s discriminatory pricing strategy has resulted in millions of consumers paying more for snack foods and beverages. The convenience stores are seeking unspecified monetary damages as well as a court order to prevent PepsiCo and Frito-Lay from continuing their alleged price discrimination.
Wider Implications for the Retail Industry
PepsiCo and Frito-Lay, which supply well-known snack brands such as Lay’s, Doritos, Cheetos, and Funyuns, are among the largest players in the food and beverage industry. If the lawsuit succeeds, it could set a precedent that impacts how large corporations structure their pricing models for different types of retailers.
Notably, Walmart is not named as a defendant in either the FTC lawsuit or the convenience stores’ case. The retail giant has not commented on the allegations. Meanwhile, the lawyers representing the California convenience stores are also pursuing a 2018 lawsuit against Living Essentials, the maker of 5-Hour Energy drinks, under the Robinson-Patman Act for an alleged illegal pricing scheme.
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PepsiCo has not yet responded to the latest lawsuit, but it previously “strongly disputed” the FTC’s allegations regarding price discrimination. The outcome of this legal battle could influence future enforcement of the Robinson-Patman Act and shape the competitive landscape between major retailers and small businesses.