FTC sues PepsiCo, alleging illegal price-fixing deal with 'a major retailer': NPR

The U.S. Federal Trade Commission sued PepsiCo, accusing it of "manipulating" the soft-drink market by giving special offers to one large retailer but not others. Michael M. Santiago/Getty Images hide title

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Michael M. Santiago/Getty Images

A new federal lawsuit accuses PepsiCo of manipulating competition by giving a big-box store an unfair deal at the expense of rival retailers, resulting in consumers paying higher prices.

The Federal Trade Commission is suing PepsiCo over a special agreement it made with a company whose name was changed. Industry experts point to Walmart, the largest U.S. retailer, as a possible company. These revisions may be reversed over time as part of the legal process.

The FTC claimed that because PepsiCo did not extend the same benefits to other stores selling its products, other retailers "from large grocery chains to independent local convenience stores" were disadvantaged. PepsiCo called the lawsuit "wrong as a matter of fact and law."

The case is part of the Federal Trade Commission's recent effort to revive a long-dormant law aimed at combating high grocery prices, which have been a top economic concern for Americans. The 1936 law prohibited manufacturers and wholesalers from providing preferential treatment to large retailers over small ones, with some caveats.

"When companies like PepsiCo provide an advantage to large retailers, it tilts the playing field in favor of small businesses, ultimately driving up prices for American consumers," FTC Chairman Lena Khan said in a statement.

PepsiCo said in a statement that its "practices are consistent with industry standards and we do not favor certain customers by providing discounts or promotional support to some customers over others." Walmart declined to comment.

The PepsiCo lawsuit brings new scrutiny to Walmart's ability to use its size to drive down prices. It also underscores PepsiCo's strength as the owner of numerous soft drink brands, including Gatorade, Mountain Dew, Lipton and Bubly.

It's unclear how the Trump administration will proceed with the case. Some Republican legal thinkers favor restoring the old law, known as the Robinson-Patman Act.

But the FTC's vote to sue PepsiCo was divided along partisan lines, with two Republican commissioners dissenting. Andrew Ferguson, a Trump appointee to the Federal Trade Commission, raised objections to PepsiCo's proceedings. Republican Commissioner Melissa Holyoke called Friday's lawsuit the "worst case" she has ever seen at the agency and said she believed Democrats "hastily dismissed the case."

The FTC last month similarly sued Southern Glazer Wine & Spirits, the largest U.S. alcohol distributor, accusing it of illegally denying small businesses discounts and rebates offered to large chains.