US FTC launches lawsuit against PepsiCo for “illegal price discrimination”

The US Federal Trade Commission (FTC) has issued a lawsuit against PepsiCo, alleging that the corporation has engaged in illegal price discrimination by providing one of its customers with pricing advantages while raising costs for competing retailers and customers. The suit comes shortly after the F&B giant completed the US$1.2 billion acquisition of US-based Siete Foods.

The FTC says that PepsiCo has disadvantaged retailers of all kinds for years — from large supermarket chains to independent convenience stores — by favoring a large big-box company, which has not been named, by giving it benefits like promotional payments while denying the same benefits to its competitors.

These practices have led to inflated prices for US families, the commission claims, while preventing fair competition for rival market retailers. This illegal conduct violates the Robinson-Patman Act (RPA), a federal law prohibiting anti-competitive practices, the FTC alleges.

“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,” says FTC Chair Lina M. Khan. 

“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.”

Under RPA, sellers are banned from engaging in price discrimination by using advertising and promotional allowances — defined as financial incentives given to retailers by manufacturers to promote a product or brand — to favor large customers over small businesses. 

A “substantial portion” of the allegations made in the FTC’s suit are redacted due to legal protections granted to PepsiCo and its big-box customer. The FTC says it will swiftly seek to lift the redactions “in order to show the ways in which PepsiCo violated the RPA on behalf of their preferred customer and how those violations raised prices for Pepsi products for competing retailers.”

“Until Pepsi’s conduct is remedied, Pepsi’s anti-competitive actions will continue to create an uneven playing field by denying competing retailers, which include family-owned neighborhood grocery stores, the chance to fairly compete against Pepsi’s favored large, big-box retailer customer,” the FTC states. 

We have contacted PepsiCo for comment. 

Siete Foods acquisition

Last week, PepsiCo announced it had completed the acquisition of US-based Siete Foods for US$1.2 billion, which it says will significantly expand its range of healthy food ingredients. 

The Siete brand is the latest in a series of PepsiCo acquisitions, which also include PopCorners, Bare, Stacy’s Pita Chips and Sabra. 

“We’re committed to transforming our portfolio to include more positive choices that meet consumer demand for convenient and delicious products,” says Steven Williams, CEO of PepsiCo North America. 

“We love the Siete brand for the same reason so many loyal consumers do and are dedicated to preserving its special attributes while making the brand more widely available and accessible on a broader scale.”

Siete started with a single almond flour tortilla sold in a Texas co-op. Today, the Siete Foods portfolio spans a variety of products for more than 40,000 retailers.