The Federal Trade Commission (FTC) has filed a lawsuit against PepsiCo, accusing the company of engaging in illegal practices related to price discrimination. According to the FTC, PepsiCo has provided preferential pricing to a significant retailer, which has negatively affected other vendors and consumers. While the FTC did not disclose the retailer’s name in its statement, an anonymous source familiar with the case revealed that it is Walmart.
PepsiCo has strongly rejected the allegations presented in the lawsuit, asserting that the claims are incorrect both factually and legally. The company contends that the FTC has misinterpreted how consumer product businesses support retailers in delivering lower prices to customers. In an official statement, PepsiCo declared its intent to robustly defend itself in court against the charges raised by the FTC.
The FTC has claimed that PepsiCo’s actions involved providing promotional payments to Walmart, while failing to extend similar offers to major grocery chains and independent convenience stores. This practice is said to enable Walmart to offer lower prices on PepsiCo products while forcing consumers outside of Walmart to pay elevated prices.
FTC Chair Lina Khan emphasized the issue, stating, “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 added that the FTC’s lawsuit aims to foster a fair competitive environment for all businesses, regardless of their size, allowing them to compete based on their efficiency and skills.
Walmart has refrained from making further comments regarding the lawsuit, while PepsiCo maintains that its business practices conform to industry standards. The company emphasized that it does not discriminate among customers by offering preferential discounts or promotional support.
The lawsuit against PepsiCo invokes the seldom-used Robinson-Patman Act of 1936, which prohibits companies from providing promotional incentives that favor larger customers over smaller ones. This filing marks the second instance in recent weeks that the FTC has utilized the Robinson-Patman Act in its legal actions; the first was against Southern Glazer’s Wine and Spirits for similar discriminatory practices.
As the Biden administration’s tenure approaches its end, the FTC has been actively involved in issuing consumer refunds and taking enforcement actions against businesses accused of deceptive practices, while also establishing rules to enhance market fairness. A vote by the FTC resulted in a 3-2 decision to authorize a lawsuit for a permanent injunction against PepsiCo in the U.S. District Court for the Southern District of New York. Among the dissenters were Commissioner Andrew Ferguson, a nominee by President-elect Donald Trump, and Commissioner Melissa Holyoak, who criticized the lawsuit as poorly supported by evidence, labeling it “the worst case I have seen in my time at the commission.”
PepsiCo, headquartered in Purchase, New York, is a global leader in the food industry, producing popular beverages like Pepsi, Mountain Dew, and Gatorade, as well as snack items such as Lay’s chips, Doritos, and Fritos. The company also offers Quaker Oats, breakfast cereals, and granola bars.
In light of recent scrutiny around its pricing practices since the pandemic, PepsiCo has faced criticism for actions like reducing its Gatorade bottle sizes from 32 ounces to 28 ounces without a clear explanation for the price increase. Additionally, in October, Senator Elizabeth Warren and Representative Madeleine Dean reached out to PepsiCo, Coca-Cola, and General Mills, accusing them of price gouging through downsizing product packaging.
PepsiCo has justified its price hikes by citing increased costs for ingredients, shipping, packaging, and labor. Nonetheless, the company reported that many consumers are opting for either less snack and drink purchases or shifting to more affordable store brands. In response to these trends, PepsiCo has initiated efforts to make its Lay’s products more affordable through various promotional strategies, increasing the number of chips per bag, and introducing value packs, with similar measures expected for other brands like Doritos and Tostitos.
