price discrimination
Price discrimination generally occurs when a seller charges different purchasers different prices for commodities of equal grade and quality. The term is used more broadly in economics, and many price differences are often lawful. Under federal antitrust law, the principal statute regulating price discrimination is Section 2 of the Clayton Act, as amended by the Robinson-Patman Act, codified at 15 U.S.C. § 13. The Act does not prohibit every price difference.
Section 13(a) generally applies when a seller completes sales of commodities of like grade and quality to at least two different purchasers within approximately the same time period, at least one relevant sale is in interstate commerce (normally, across a state line), and the goods are sold for use, consumption, or resale within the United States. The price difference must also create the statutorily required threat of injury to competition. The Act generally applies to sales of commodities, not services or leases.
Price discrimination can affect competition at several levels. Primary-line injury concerns competition between the seller and the seller's direct competitors and often resembles predatory pricing. Secondary-line injury concerns competition among the seller's customers, such as competing retailers. Tertiary-line injury concerns competition among the customers of those purchasers. In secondary-line cases, the favored and disfavored purchasers must actually compete. In Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164 (2006), the Supreme Court rejected a claim based on comparisons between dealers that were not competing for the same customer-specific sales in the competitive-bidding setting before the Court.
The statute also regulates discriminatory advertising allowances, promotional payments, and services furnished to competing customers. Those benefits generally must be made available on proportionally equal terms. Section 13(f) separately prohibits a buyer from knowingly inducing or receiving a price discrimination that the Act forbids.
There are several important defenses and limitations. A seller may justify a price difference by showing cost savings in manufacturing, selling, or delivery, or that the lower price was offered in good faith to meet a competitor's price. The statute also permits price changes responding to changing market conditions, including actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under judicial procedure, or a good faith discontinuance of business or the goods. Because the Robinson-Patman Act requires both a qualifying transaction and competitive injury, a price difference by itself is not sufficient to determine price discrimination.
[Last reviewed in August of 2026 by the Wex Definitions Team]
Wex