The customer beneficiary was not named in an FTC statement about the lawsuit, but a source familiar with the matter, who asked not to be named because she was not authorized to speak about it, said that the retailer was Walmart.
PepsiCo said the lawsuit “is wrong on the facts and the law” and that it fails to understand how consumer product companies help retailers offer lower prices.
“PepsiCo strongly disputes the FTC’s allegations and the partisan manner in which the lawsuit was filed. We will vigorously present our case in court,” the company said in a statement.
The FTC argued that PepsiCo’s practices included making promotional payments to Walmart, but not to large grocery chains or independent convenience stores. The FTC pointed out that this allows Walmart to lower its prices, but forces Americans to pay inflated prices for PepsiCo products unless they buy from Walmart.
“When companies like Pepsi give a boost to big retailers, it tilts the scales against small businesses and ultimately inflates prices for American consumers,” the FTC chair said. Lina Khan, in the press release. The FTC’s action will help ensure that all grocers and other businesses, regardless of size, can get fair treatment and compete on the basis of skill, efficiency and talent.”
Walmart said Friday that it had “nothing to add at this time.” PepsiCo maintained that its practices “are consistent with industry standards.”
“We do not favor certain customers by providing discounts or promotional support to some customers and not others,” the company said.
The FTC sued PepsiCo under the rarely enforced Robinson-Patman Act of 1936. The FTC reiterated that the law prohibits companies from using promotional incentive payments to favor larger customers over smaller ones.
This is the second time in just over a month that the FTC has cited the Robinson-Patman Act in a lawsuit. In December, the commission sued Southern Glazer’s Wine and Spirits, a major U.S. distributor, claiming it illegally discriminated against small and independent businesses by giving discounts and rebates to larger stores.
In the final days of Joe Biden’s administration, the FTC has been working to issue refunds to consumers, take enforcement action against companies the agency accuses of deceptive practices, and finalize rules that she considers necessary to make the market fairer.
-The “worst deal”
The FTC voted 3-2 to allow staff to file suit for a permanent injunction against PepsiCo in the Southern District Court of New York. Commissioner Andrew Ferguson, who is President-elect Donald Trump’s choice to replace Lina Khan, was one of two dissenting votes.
The other commissioner voting against the suit, Melissa Holyoak, wrote in her dissenting opinion that the case against PepsiCo was “the worst case I have seen in my time on the commission.” According to her, the majority of commissioners rushed the end of the case before having enough evidence to support the allegations.
“Pepsi’s promotions at the retailer are not disguised discriminatory discounts, but rather ordinary price concessions,” Ms. Holyoak wrote.
PepsiCo, based in Purchase, New York, is one of the world’s largest food companies. It makes Pepsi, Mountain Dew and Gatorade as well as snacks, such as Lay’s potato chips, Doritos and Fritos. It also makes Quaker oatmeal, breakfast cereals and granola bars.
PepsiCo’s pricing has come under scrutiny since the pandemic. In 2022, for example, the company admitted to reducing the size of its Gatorade bottles from 32 ounces to 28 ounces, but it did not respond when asked why it was charging more for 28-ounce bottles.
In October, Democratic Sen. Elizabeth Warren of Massachusetts and U.S. Rep. Madeleine Dean of Pennsylvania sent letters to PepsiCo, Coca-Cola and General Mills accusing them of price gouging by reducing package sizes.
PepsiCo said its price increases were necessary because of the rising cost of ingredients, shipping, packaging and labor. Over the summer, however, the company said consumers were cutting back on purchases of snacks and drinks or switching to less expensive store brands.
The company responded by trying to make Lay’s more affordable through a mix of product promotions, more chips per bag and value sizes. Similar promotions were planned for Doritos and Tostitos, the company added.
