price discrimination

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Price discrimination refers to the practice of charging different customers different prices for the same good or service. Price discrimination can be direct, in that different prices are charged to different buyers, or indirect, when a seller offers other concessions related to price like rebates or favorable credit terms to some buyers and denies them to others. Price discrimination is not illegal per se, instead only being prohibited when it is implemented for improper reasons.

The Sherman Antitrust ActClayton Antitrust Act, and Robinson-Patman Act outlaw price discrimination when the intent of that discrimination is to harm competitors. The Robinson-Patman Act, codified at 15 USC §13, provides that it is “unlawful for any person engaged in commerce… either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality… where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce…”. Upon a finding of price discrimination for anti-competitive reasons, the Federal Trade Commission can issue an order to the violating seller that the price discrimination be stopped.

[Last updated in February of 2024 by the Wex Definitions Team]