When Is Price Discrimination Illegal? Discounts and Business Compliance

Can a supplier charge different customers different prices for the same goods? Do volume discounts, new-customer offers, and advertising allowances follow the same rules?

The Robinson-Patman Act restricts certain commercial practices that harm competition, but does not require every customer to receive the same price. Drawing on Federal Trade Commission (FTC) guidance, this article explains the relevant conditions, common defenses, and why service fees require a separate analysis.

Which Transactions Does the Act Cover?

Section 13(a) addresses price discrimination between purchasers of comparable goods:

“discriminate in price between different purchasers of commodities of like grade and quality”

Section 13(a) does not prohibit every difference in the price of goods. Liability also requires the statutory transaction conditions and potential harm to competition.

The FTC explains that the Act concerns sales of goods, not services or leases. A typical analysis considers sales to at least two different buyers at roughly the same time, goods of like grade and quality, and a reasonable possibility of competitive injury. Normally, at least one relevant sale must itself cross a state line; a seller’s interstate business operations alone do not establish that condition. A consumer finding a cheaper offer and a retailer discovering preferential wholesale prices for a competitor therefore present different questions.

What Kind of Competitive Harm Matters?

Section 13(a) makes potential harm to competition a condition of liability:

“where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce”

The FTC distinguishes two common levels of injury. Primary-line injury concerns harm to a seller’s competitors. Secondary-line injury concerns an advantage given to a supplier’s favored buyer over competing buyers. A customer’s dissatisfaction with paying more does not itself establish the required competitive injury.

For example, a large chain’s retail price being below a small store’s wholesale cost does not alone establish a supplier violation. Comparable sales, actual price differences, competitive effects, and defenses still need review. Sustained below-cost selling with a plan to recoup losses can raise a different, complex competition issue; ordinary low-price promotions are not automatically unlawful.

Does Calling It a New-Customer Offer Resolve the Issue?

The label does not automatically protect the offer or make it unlawful. Consider a hypothetical supplier charging a new retailer $80 per case while charging an established retailer $100 for the same goods. If those retailers compete, the supplier should examine the sales dates, product quality, duration of the difference, supporting justification, and potential competitive effect. The two prices alone do not establish a violation.

Internet, telephone, and professional service fees generally fall outside this Act’s commodity-pricing rules. Whether an existing customer is entitled to a new rate requires a separate review of the agreement, offer terms, advertising representations, and other applicable law. The Act’s inapplicability does not establish that every pricing arrangement is lawful or that an existing customer must automatically receive the new rate.

Cost Differences and Competitive Offers

Section 13(a) permits qualifying price differences reflecting:

“differences in the cost of manufacture, sale, or delivery”

Consolidated shipments, for example, might reduce handling and delivery expenses. Businesses should retain the supporting calculations and evaluate whether the difference reflects actual savings. Calling a concession a volume discount does not demonstrate the necessary justification.

Section 13(b) also recognizes a defense where a lower price was:

“made in good faith to meet an equally low price of a competitor”

A general desire to win business does not establish that defense. Records of the actual competing offer, customer communications, and the approval decision can matter.

Promotional Benefits Need a Separate Review

The invoice price is only part of the picture. Advertising reimbursements, display support, and other promotional benefits may raise separate issues. Section 13(d) requires covered benefits to be:

“available on proportionally equal terms to all other customers competing in the distribution of such products or commodities”

Proportional equality does not necessarily require identical dollar payments, but competing customers must have a practical opportunity to participate in covered programs. The FTC cautions that the cost-justification defense for commodity price differences does not apply to discriminatory promotional allowances or services.

Section 13(e) prohibits discriminatory services or facilities for goods bought for resale:

“It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.”

Negotiating a lower purchase price is not itself unlawful, but buyers can also face liability. Section 13(f) prohibits knowingly inducing or receiving a price discrimination that the section forbids:

“knowingly to induce or receive a discrimination in price which is prohibited by this section.”

What Other Limits Should Businesses Consider?

The FTC also explains that a transfer of goods from a parent to its subsidiary generally is not a sale under the Act, so it cannot simply be treated as a second purchaser transaction for comparison. Eligible nonprofit institutions purchasing supplies for their own use may fall within a specific statutory exemption. Actual relationships, use, and transaction structure require review; an organization’s name or invoice label is insufficient.

Section 13c exempts qualifying nonprofit institutions’ purchases of supplies for their own use. The institution and purchase must meet the statutory conditions, including this limitation on use:

“purchases of their supplies for their own use”

What Should Businesses Document?

Before introducing customer discounts, define eligibility, covered products, timing, and approval procedures. Retain cost information and competing offers when they support the decision. If the purchasers compete, assess the transaction structure and potential market effects before implementation.

A business concerned about its supplier’s practices should preserve invoices, rebate records, promotional terms, and communications. A price screenshot rarely provides the full picture. Sales dates, quantities, delivery arrangements, net prices, and competitive relationships can change the analysis. An attorney should review unusual arrangements and specific disputes.

Reviewing a Pricing Policy or Business Dispute?

Blumsack & Canzano assists clients with business contract reviews and related disputes. Contact the firm to discuss a discount policy, supplier terms, or a pricing dispute, and provide the relevant agreements, offers, and payment records. Whether this Act or another law applies depends on the particular facts.

Contact Blumsack & Canzano to arrange a consultation.

Legal Disclaimer. Originally published: 10/18/2026. This article provides general information only and is not legal advice for any particular matter. Laws, policies, procedures, fees and agency practices may change; their application depends on the facts and jurisdiction. Consult a qualified attorney about your circumstances before acting on this information. Reading this article or contacting Blumsack & Canzano does not, by itself, create an attorney-client relationship. Past results do not guarantee future outcomes. This material may be considered attorney advertising in some jurisdictions.