FTC Drops Price Discrimination Lawsuit Against Pepsi

At a Glance

• On May 22, 2025, Republican FTC commissioners voted 3-0 to dismiss a pending enforcement action against Pepsi for alleged violations of the Robinson-Patman Act (RPA) to provide big-box stores more favorable pricing and promotional allowances than their smaller competitors.
• Notably, many antitrust scholars and practitioners have observed that the Robinson-Patman Act’s underlying objective — to support small businesses — is in tension with the consumer welfare standard that preferences low consumer prices, and there have been various calls over the years to repeal the Act. The FTC’s decision here does not call for the end of federal RPA enforcement.
• Given the litigation’s unique facts, as well as the populist strains within the second Trump administration, which in many cases include strong anti-big-business sentiments, companies should not yet assume the FTC’s decision to dismiss its case against Pepsi signals a return to its pre-Biden RPA enforcement posture.

On May 22, 2025, the Republican-controlled Federal Trade Commission (FTC) took the unusual step of voting to drop the agency’s complaint against PepsiCo, Inc. (Pepsi), in which the FTC had accused the manufacturer of giving big-box stores more favorable terms and promotional payments than smaller competitors. The lawsuit against Pepsi was one of two price discrimination lawsuits under the Robinson-Patman Act (RPA or the Act) approved 3-2 by Democratic commissioners at the close of the Biden administration over the vehement objections of their Republican colleagues. The other price discrimination lawsuit against Southern Glazer Wine and Spirits, LLC (Southern Glazer) remains pending for now.

Originally conceived as a way to support local mom-and-pop shops against the introduction of big-box retailers in the 1930s, the RPA generally prohibits manufacturers from selling the same products to their direct purchasers at different prices where those purchasers compete against one another for the same downstream customers. The RPA additionally prohibits manufacturers from paying discriminatory promotional allowances. While the RPA is subject to several significant exemptions and defenses — including for manufacturers that offer tiered discounting where the top discount is “functionally available” to nearly all purchasers — the Act, at its core, is intended to prevent manufacturers from granting volume discounts to their largest customers. Notably, many antitrust scholars and practitioners have observed that the RPA’s underlying objective — to support small businesses — is in tension with the consumer welfare standard that preferences low consumer prices, and there have been various calls over the years to repeal the Act.

Until recently, private parties had been the exclusive enforcers of the RPA. Although federal agencies regularly enforced the RPA following its 1936 enactment, they had all but abandoned their efforts for the last 45 years before deciding to sue Southern Glazer and Pepsi in December 2024 and January 2025, respectively. In 1977, the Department of Justice issued a report stating it would cease RPA enforcement; and the FTC previously had not brought an RPA case since 2000.

FTC’s interest in the RPA renewed under Lina Khan’s chairmanship during the Biden administration, when the agency issued a policy statement promising aggressive enforcement, particularly relating to prescription drug pricing. While former-Chair Khan resigned her position following President Trump’s inauguration, the remaining Democratic FTC commissioners, Alvaro Bedoya and Rebecca Kelly Slaughter, did not leave the FTC until they were removed from their positions by executive action in March 2025. They have since filed a lawsuit contesting their dismissals; but in the meantime, neither took part in last week’s decision to dismiss the case against Pepsi.

In their statements following the decision, the three Republican commissioners stressed that the RPA remains a “valid law that the Commission is constitutionally obliged to enforce,” but they expressed strong criticism for the underlying conduct investigation and the decision to file the lawsuit. Chair Andrew Ferguson, in a statement joined by Commissioner Melissa Holyoak (both of whom cast dissenting votes to initiate the lawsuit in January 2025), accused the Biden FTC of having “purely political” motives, and “march[ing] staff into court with no evidence to support the allegations in the Complaint.” Similarly, in his concurring statement, new Commissioner Mark Meader called the action against Pepsi “possibly the most reckless and irresponsible use of antitrust enforcement resources [he had] witnessed.”

Analysis

While the FTC’s decision marks a sharp redirection from Biden-era enforcement tactics, it is not yet clear whether and to what extent the Republican Commission will continue to prioritize price discrimination allegations going forward. In his January 2025 dissent of the decision to sue Pepsi, Chair Ferguson affirmed his commitment to RPA enforcement “under certain circumstances,” but accused the former Commission of using the RPA as a “political bludgeon” and catalogued what he saw as the complaint’s myriad legal and factual deficiencies.

Given the populist strains within the second Trump administration, which in many cases include strong anti-big-business sentiments, companies should not yet assume the FTC’s decision to dismiss its case against Pepsi signals a return to the FTC’s pre-Biden RPA enforcement posture.

More than perhaps any other antitrust statute, the RPA requires a nuanced evaluation of legal and factual questions. Businesses should consult with counsel about their current distribution and pricing practices and the best ways to minimize their RPA-related risks going forward.