Small businesses claim unfair snack pricing by Frito-Lay

A putative class of independent convenience stores accused Frito-Lay and PepsiCo. of unlawfully favoring larger grocery chains by overcharging smaller businesses to stock potato chips, according to a new lawsuit.

The action was filed on Monday by two Southern California convenience store plaintiffs that claimed Frito-Lay violated antitrust law with this alleged practice. In turn, they claimed, the alleged actions cause discrimination against an overlapping pool of consumers who are forced to pay higher prices for the same product at some stores but not others.

"When consumers see higher prices for identical items at independent stores, they naturally assume it's because the indie merchant is gouging them. In reality, it's normally because the manufacturer is gouging the independent business," Gaw | Poe LLP co-founder Mark W. Poe said in an email on Tuesday. Poe, and others at his firm, represent the plaintiffs in the case.

A spokesperson for Frito-Lay and its parent company did not respond by press deadline to an email sent to its media inbox.

Frito-Lay supplies brands of chips such as Doritos, Cheetos and Funyuns to stores nationwide. However, the plaintiffs claim Frito-Lay tries to gain an unfair competitive advantage in the market by offering discounts to larger chains because those bigger businesses can purchase a higher volume of products, in violation of the Robinson-Patman Act (RBA). Alqosh Enterprises Inc. et al. v. PepsiCo Inc. et al., 2:25-cv-01327 (C.D. Cal., filed Feb. 17, 2025).

The act bars companies from charging competitive buyers different prices for the same item.

"For years, Frito-Lay has continuously violated the RBA by charging independent convenience stores far higher net prices for those brands of snack chips than it charges to chain grocery stores such as Albertson's, Walmart, Target ... and others," the action stated. "Plaintiffs and the class of independently-owned California convenience stores who they seek to represent in this action have lost tens of millions of dollars in Frito- Lay chips sales over the preceding four years, as a result of Frito-Lay's illegal discrimination."

The individual plaintiffs - doing business as Whiskey Well and Sunset Market & Liquor - claimed this practice has affected their operations since, at least, 2021. For example, according to the action, Frito-Lay sold bags of Doritos chips to Sunset Market at $4.63 per bag. That same bag of Doritos was allegedly sold to a nearby Albertson's for a cost of $2.49 per bag.

According to the complaint, some of Sunset Market's customers recognized price differences of these products and requested the liquor store match the lower prices of its nearby competitors. However, the store's owner told them it could not do so because of the nearly doubled acquisition cost.

"While plaintiffs and the other members of the class all pay the same list price to Frito-Lay for a given item ... the chain groceries are allowed to negotiate prices that are a discount to the list prices that are offered to plaintiffs," the action stated.

Poe, for the plaintiffs, alleged this practice was not justified by any cost-savings strategy and was not allowed under California's Unfair Practices Act and Competition Law.

"Frito-Lay keeps the details of its pricing and promotions to the chain groceries secret from plaintiffs and members of the class. Indeed, even as this litigation progresses, plaintiffs anticipate that Frito-Lay will take aggressive steps (such as demanding an 'Attorneys' Eyes Only' protective order), to keep plaintiffs and members of the class from learning about the secret terms and deals it has given, and continues to give, to the chain groceries," the action stated.