US lawsuit accuses PepsiCo of price discrimination that favored Walmart over smaller stores

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Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. at the expense of (someone/something) / æt ði ɪkˈspɛns ʌv / (idiom) – describing a situation in which one person or thing benefits by causing harm, loss, or disadvantage to someone or something else
    Example:

    He worked overtime to finish the project, but it was at the expense of his health.


  2. authorized / ˈɔ θəˌraɪzd / (adj.) – describing someone or something that has been given official permission or approval to do something
    Example:

    The security guard checked our company IDs to make sure we were authorized to enter the office building.


  3. give (someone/something) a leg up / gɪv ə lɛg ʌp / (idiom) – to help someone or something succeed or improve
    Example:

    The free training program is designed to give young people a leg up in finding better jobs.


  4. grocer / ˈgroʊ sər / (n.) – a store that sells food and other basic items
    Example:

    The local grocers sell fresh vegetables, fruit, and other everyday items you might need.


  5. scrutiny / ˈskrut n i / (n.) – the act of looking at something very carefully to check for details or mistakes
    Example:

    The company’s financial records are always under scrutiny to make sure everything is correct.


Article

Read the text below.

The Federal Trade Commission (FTC) sued PepsiCo in January, alleging that it has engaged in illegal price discrimination by giving unfair price advantages to one large retailer at the expense of other vendors and consumers.


The benefiting customer wasn’t named in an FTC statement about the lawsuit. But a source familiar with the case, who asked not to be named because they were not authorized to discuss it, said the retailer was Walmart.


The FTC said PepsiCo’s practices included making promotional payments to Walmart but not to large grocery chains or independent convenience stores. The FTC said that lets Walmart lower its prices, but forces Americans to pay inflated prices for PepsiCo products unless they shop at Walmart.


“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,” FTC Chair Lina Khan said in the statement. “The FTC’s action will help ensure all grocers and other businesses—no matter the size—can get a fair shake and compete on the merits of their skill, efficiency, and talent.”


Walmart said it had “nothing to add at this time.” PepsiCo said its practices “are in line with industry norms.”


“We do not favor certain customers by offering discounts or promotional support to some customers and not others,” the company said.


The FTC sued PepsiCo under the rarely enforced 1936 Robinson-Patman Act. The FTC said the act prohibits companies from using promotional incentive payments to favor large customers over smaller ones.


PepsiCo, based in Purchase, New York, is one of the world’s largest food companies. It makes Pepsi, Mountain Dew, and Gatorade as well as snack foods like Lay’s potato chips, Doritos and Fritos. It also makes Quaker Oats, breakfast cereals, and granola bars.


PepsiCo’s prices have been the subject of some scrutiny since the pandemic. In 2022, for example, the company acknowledged shrinking its Gatorade bottles from 32 ounces to 28 ounces, but it didn’t respond when asked why it charged more for the 28-ounce bottles.


This article was provided by The Associated Press.


Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

  • The FTC says PepsiCo’s actions unfairly benefited Walmart, hurt small businesses, and made products more expensive for most shoppers. Do you think large companies should be allowed to offer discounts only to specific retailers? Why or why not? In your opinion, should companies prioritize fairness over profits? Why do you say so? Discuss.
  • PepsiCo did not explain why smaller Gatorade bottles were more expensive. Do you think companies should always explain their pricing decisions? Why or why not? Do you believe large companies can both be ethical and successful? Why do you say so? Discuss.

Discussion B

  • Some consumers may shop at Walmart for lower prices, even if it hurts smaller stores. Do you think it’s better to shop at small stores or large retailers? Why? What major considerations do you think consumers in your country have when choosing where to shop (ex. price, location)? Discuss.
  • The FTC’s action ensures fair competition for all businesses. How important do you think small businesses are to a community? Why do you think it is important to give support and fair advantage to small businesses? Discuss.