FTC Sues PepsiCo, Alleges Illegal Price Discrimination In Favor Of Big Box Retailer

PepsiCo, Inc. PEP shares are trading slightly higher on Friday.

Today, the snacks and beverages behemoth landed in hot water after facing legal action from the Federal Trade Commission (FTC), which alleges that the company has engaged in illegal price discrimination.

According to the FTC’s complaint, Pepsi has been providing unfair pricing advantages to one of its largest customers—a major big box retailer—while raising prices for competing retailers and customers.

Reuters reports that the retailer is none other than Walmart Inc. WMT, citing a source familiar with the discussions.

“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,” said 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.”

The FTC claims that Pepsi has consistently given preferential treatment to this large retailer by offering promotional payments, advertising allowances, and other key benefits.

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These advantages, however, have not been extended to competing grocery chains or independent stores, which include small, local businesses.

The FTC argues that this has created an uneven playing field and inflated prices for consumers.

Pepsi’s conduct is being scrutinized under the Robinson-Patman Act (RPA), which prohibits price discrimination that disadvantages small businesses and raises consumer prices. The act specifically forbids manufacturers from using promotional allowances to favor one retailer over others. The FTC believes that Pepsi’s actions violate the RPA and are detrimental to fair competition.

The Commission vote to allow staff to file for a permanent injunction in the U.S. District Court for the Southern District of New York was 3-2, with Commissioners Melissa Holyoak and Andrew N. Ferguson dissenting. 

This case marks the FTC’s latest action against price discrimination, following its December 2024 case against Southern Glazer’s, a major distributor of wine and spirits.

The court will ultimately decide whether Pepsi’s pricing practices have violated the law, and if so, what steps will be taken to remedy the situation.

According to Benzinga Pro, PEP stock has lost over 11% in the past year. Investors can gain exposure to the stock via iShares U.S. Consumer Staples ETF IYK.

Barclays analyst maintained PepsiCo with an Overweight and lowered the price forecast from $183 to $158.

Price Action: PEP shares are trading higher by 0.86% to $147.80 at last check Friday.

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