The Federal Trade Commission (FTC) has initiated a lawsuit against PepsiCo, accusing the company of engaging in illegal price discrimination that primarily benefits a large retailer, which sources reveal to be Walmart. The lawsuit, filed in the (AP News), alleges that PepsiCo provided promotional payments and advertising support to Walmart but not to smaller and independent retailers, thereby disadvantaging them in the marketplace.

In its statement, the FTC emphasized that such practices tilt the playing field against small businesses and result in inflated prices for consumers who do not shop at Walmart. FTC Chair Lina Khan stated, “When firms like Pepsi give massive retailers a leg up, it tilts the playing field against small firms and ultimately inflates prices for American consumers.” This situation has led to increased scrutiny over Pepsi's pricing practices, as many consumers experience rising prices for familiar products offered by the company, which includes brands like Gatorade and Lay’s potato chips.

The FTC's actions fall under the Robinson-Patman Act of 1936, which prohibits discriminatory pricing practices among retailers. Although the FTC’s enforcement of this act has been rare since the late 1980s, it is reemerging as a tool to combat alleged anticompetitive behavior. The lawsuit has raised questions on how prominent retailers and suppliers manage promotional agreements and pricing strategies that could favor larger entities at the expense of small, independent businesses. PepsiCo has publicly refuted the claims, asserting their practices align with industry norms and expressing intentions to vigorously defend against the allegations in court.

The lawsuit has received mixed responses within the commission, with some members, including Commissioner Melissa Holyoak, dissenting. She described the case as “the worst case” she has encountered during her tenure at the FTC, arguing that it was rushed and lacked sufficient evidence. In contrast, the majority asserts that the law is necessary to ensure fair competition in the retail market, as cited in an article by (CNN).

As the legal proceedings unfold, the lawsuit sheds light on ongoing concerns regarding price-setting practices and how they impact both consumers and smaller retailers in an increasingly consolidated marketplace.