FTC Clears PepsiCo in Price Gouging Lawsuit

The U.S. Federal Trade Commission (FTC) has cleared beverage giant PepsiCo (PEP) in the ongoing price gouging lawsuit. The FTC dropped the case, which had alleged Pepsi of price discrimination, giving promotional deals to one big-box retailer and not offering similar discounts to others. The lawsuit was dismissed by a 3-0 vote, in which all three current Republican commissioners voted against the Biden-era complaint.  

FTC Chairman Andrew Ferguson said that the Biden administration had rushed to authorize the lawsuit during the final days of prior Chair Lina Khan’s tenure. Ferguson called the lawsuit a “nakedly political effort” based on “little more than a hunch that Pepsi had violated the law.” In March, President Donald Trump ousted the two Democratic commissioners from the FTC, despite the panel traditionally consisting of five commissioners, with no more than three belonging to the same party.

Retailers Face Mounting Tariff Pressure

The lawsuit was filed on January 17 in New York, alleging that PepsiCo engaged in unfair price discrimination to favor retailer Walmart (WMT), putting other grocery stores and retailers at a disadvantage. The case also accused Pepsi of driving inflationary conditions by undertaking such practices. Responding to the lawsuit’s dismissal, former FTC chair Khan said in an X post that it was “a gift to giant retailers as they gear up to hike prices.”

Meanwhile, PepsiCo has denied the allegations from the beginning, stating that it follows standard industry practices and does not favor certain customers over others. Notably, the current administration is also scrutinizing companies over their pricing practices. For instance, last week, Trump criticized Walmart for warning customers about anticipated price hikes meant to offset tariff impact.

Other retailers took notice and issued more measured statements. Target (TGT) said recently that increasing prices for customers would be its “last resort,” while Home Depot (HD) said that it would not raise prices of goods at all by undertaking tariff mitigation strategies.

Is PEP Stock a Good Buy Now?

On TipRanks, PEP stock has a Hold consensus rating based on three Buys and 10 Hold ratings. The average PepsiCo price target of $148.33 implies a nearly 14% upside potential from current levels. Year-to-date, PEP stock has lost 13.7%.

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