Robinson-Patman Act

  

Categories: Regulations

As companies get bigger, they get more powerful. For instance, they can buy in bulk, Costco style, getting each unit of good for cheaper than your neighborhood Mom 'n' Pop store.

Congress saw this exact thing happening, and they didn’t like it. They liked their Mom 'n' Pop shops, and saw what suppliers were doing as price discrimination, and anti-competitive practice. Supplying goods to some firms at a discount would make the other firms go out of business, which means less market competition. American likes competition; that’s what market mechanisms are all about. Low prices, innovation to boot, the works.

The Robinson-Patman Act (no relation to vampire Robert Pattinson) was passed by Congress in 1936 as federal law. The law zeroed in on anti-competitive price discrimination practices by producers who supply things to firms. This act was meant to help out the little guys against the big box stores that dominate the market today.

For instance, Morton Salt got in trouble with the Supreme Court in 1948 for offering discounted salt to stores that bought an amount that only a handful of national chains could reasonably buy. All thanks to the Robinson-Patman Act. Still, it’s clear that big box chain stores are winning in the long run.

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Finance allah shmoop our monopolies Evil Should they be regulated

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Should they be illegal Alright well big question Here are

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monopolies evil And as bill gates used to say well

00:15

not a few own one Well okay bill was just

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a little bit evil or maybe a lot depending on

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whether or not you came from silicon valley So the

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common wisdom among most voting public kind of people is

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can charge anything they want for whatever their product is

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They have no competition Keep him honest Well microsoft via

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their windows operating system was the greatest monopoly in history

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Sorry they're rockefeller And for a long time that company

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had massive profit margins until the internet more or less

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became the operating system along with all the tools needed

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for it And it was all more or less free

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ish Wealthy interviewee it took to maintain the windows monopoly

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along with regulatory friction eventually killed microsoft's monopoly and well

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that was that But for a while microsoft had someth

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fifty percent net profit margins about five times the margins

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of even the best s and p five hundred companies

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Worth noting coca cola and pepsi have what is called

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a duopoly The two of them together would be essentially

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a monopoly of soda but well they more or less

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collude on pricing and terms and elbow out any would

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be third editor so their margins are high about twenty

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five percent or about half of what monopoly profit margins

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give so that's the quote bad stuff unquote a monopoly

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brands unfair advantage But if you were a shareholder of

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microsoft in the eighties and the first half of the

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nineties well you'd be just tickled Have you owned one

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hundred shares of that awesome monopoly in nineteen eighty four

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and held them fifteen years Well your original investment of

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one hundred dollars would have turned into thousands like six

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seven eight thousand dollars So what's so bad about making

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hundreds of times your money Oh and here's another thing

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to think about it and t the big t on

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the big board Well t was the big monopoly before

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microsoft and it owned local and long distance carriage of

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phone calls for half a century Give or take it

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had obscene profits in large part by virtue of the

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us government granting them federal licenses to operate in various

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areas in whatever form they needed Teo you know wire

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our country But a number of good things came from

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this monopoly one thing being that a teen t never

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cut its dividend like most of the other companies did

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during the great depression A lot of families lived on

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that and not cutting that dividend literally saved the lives

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of those families like hundreds of thousands of americans who

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lived on it for luxuries like eat food and rent

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so on Additionally is part of the monopoly handshake Att

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and t was required to wire rural america These guys

03:01

remote farmers like if even one home existed forty miles

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from pretty much nowhere a teen t had to spring

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wires on poles all the way down to dead ends

03:12

ville and get that home wired and that served the

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country well when farms became factories and well a whole

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country could talk to each other without monopoly level profits

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gained from more dense population areas Well att and t

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never would've had the money or desire to spend a

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few hundred thousand dollars it cost to connect that loan

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Farmhouse in the boonies to the grid Why was that

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so important Well eventually that loan farmhouse made it with

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another farmhouse and there were two of them and then

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five and then twenty and then three hundred and yes

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having ubiquitous connectivity of every living human being in the

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country said something about the u s of a that

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we took care of all of our people whether city

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slicker a redneck and allowed everyone to share in the

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telephone So our monopolies good bad lukewarm Well hard to

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say so Uh maybe monopolies are like pineapples sometimes good

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like in a fruity tropical drink and sometimes terrible like

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on a pizza Yeah we're just saying you have to

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peel off the skin maybe it's better if you do

04:15

that and don't bother sending in an angry pineapple pizza

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related letter we've got a special place for those in 00:04:21.049 --> [endTime] a shmoop h q huh

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