PepsiCo, Frito-Lay Accused Of Price Discrimination
Salty snacks are in the hot seat. This week a pair of California convenience stores – Alqosh Enterprises Inc. and NMRM Inc., doing business as Whiskey Well and Sunset Market & Liquor, respectively – sued Frito-Lay and its parent PepsiCo in a U.S. District Court of the Central District of California for illegally favoring large retailers over the independent, family-owned shops when selling its salty snacks.
Frito-Lay charges independent operators “illegally high” net prices when compared to the rates it gives chain grocers like Albertsons, Safeway, Walmart and Target, the suit claims. For example, a bag of Ruffles potato chips (pre-priced at $5.99) sold to the c-stores for $4.41 per bag, while a nearby Albertsons got the same item for $2.49 per bag – a 43% discount, the suit outlines.
The plaintiffs allege they’ve lost “tens of millions of dollars in Frito-Lay chips sales” over the past four years as a result of these actions.
The company also offers more promotional payments in Customer Development Agreements and Customer Marketing Agreements with the larger retailers, including payments for “advantageous product placement and for stocking newly released snacks,” per a Law360 report.
In contrast, small stores are offered rebates relative to the amount of shelf space they dedicate to Frito-Lay products. Those payments max out at a 1.15% rebate for 70% of shelf space, the suit claims. Small retailers can receive an additional rebate of between 2% and 14% if they increase quarterly sales by between 102% and 108%, the complaint states.
Plaintiffs allege these practices violate the Robinson-Patman Act, the California Unfair Practices Act and the California Unfair Competition Law. The filing also seeks compensatory damages, injunctive relief, and reimbursement for attorney fees and litigation costs.
“The federal Robinson-Patman Act… makes it illegal for a manufacturer to charge higher prices to ‘disfavored’ customers, while charging lower prices to ‘favored’ customers,” the complaint states. “At the heart of both the Robinson-Patman Act and the Unfair Practices Act is the recognition that small businesses are a critical and necessary component of the American economy.”
However, this isn’t the only Robinson-Patman Act violation that PepsiCo is facing. The multinational conglomerate was also sued by the Federal Trade Commission (FTC) last month for providing more favorable terms to an unnamed “big box retailer.” The action followed a similar suit brought by the FTC against liquor distributor Southern Glazer’s Wine and Spirits, marking the first RPA enforcement actions in over twenty years.
