Alcohol Industry Sees Broader FTC Probe Under Depression-Era Law

The Federal Trade Commission’s petition for a federal court to force Total Wine to comply with an agency investigation opens a window into its broader probe of the alcoholic beverage industry under a mothballed Great Depression-era law.

Retail Services & Systems Inc., which does business as Total Wine & More, fulfilled only some parts of the FTC’s civil investigative demand—effectively a civil subpoena—the agency said in a Friday filing in the US District Court for the Eastern District of Virginia. The demand is part of a broader probe into whether Southern Glazer’s Wine & Spirits LLC, a distributor that works with Total Wine, violated the 1936 Robinson-Patman Act and the FTC’s statute against unfair methods of competition.

Friday’s filing opens a clear window into the FTC’s broader market probe, illustrating how the agency may apply Robinson-Patman for the first time in decades.

“Specifically, the CID seeks documents and information from Total Wine relevant to determining whether Southern is violating Sections 2(a) and 2(e) of the Robinson-Patman Act by giving preferential pricing and services to certain favored, large chain retailers—such as Total Wine—that it does not provide to small independent retailers,” the FTC said in its motion.

The 1936 law, originally passed by Congress in an effort to protect mom-and-pop stores from the advent of big box retailers and their increased bargaining power, prohibits some forms of price discrimination, where sellers charge competing buyers different prices for the same product.

But Robinson-Patman has gone unenforced by both the FTC and the Justice Department’s antitrust division for decades, in part because enforcers and advocates worried its robust application could drive up prices for consumers. The FTC under Chair Lina Khan has looked to revive the law, floating its use in probes of pharmacy benefits managers and soft beverage makers Coca-Cola Co. and PepsiCo Inc.

Retail Services & Systems and Total Wine said in a statement that the FTC told them they aren’t directly under investigation for violations of the act. The company has made “substantial efforts” to cooperate with the investigation, it said.

“In August, we stated our willingness to continue our discussions toward an amicable resolution of this matter,” RSSI said. “We are disappointed that the FTC declined our offer to produce additional records and chose instead to pursue this matter in the courts. We intend to vigorously defend our legal rights on this matter.”

Southern didn’t immediately reply to a request for comment.

Investigation Revealed

The FTC began digging into the behavior of Southern after industry participants complained about discriminatory pricing practices, it said in the motion.

In addition to offering them preferential pricing, Southern may also be giving large chains illegal non-price benefits, like shelf stocking or “other forms of free labor and marketing support,” that aren’t extended to smaller competitors, the FTC said.

Politico first reported the agency’s probe in May. The FTC is conducting a similar investigation into the soft drink market, Bloomberg News reported.

The civil investigative demand served to Total Wine sought information on the company’s sales data, any agreements it may have forged with distributors and suppliers, its negotiation process for pricing and discounts, its retail and pricing strategies, and any services provided by Southern.

“This information will assist FTC staff to determine whether Southern is providing discriminatory prices, free labor, marketing support, or other advantages to Total Wine or other favored, large chain retailers that it does not make available to small independent retailers,” the FTC said.

The information will also be useful in determining whether any discriminatory pricing has a valid defense, “such as a good-faith attempt to meet competition or as cost-justified by documented cost differences in selling to favored and disfavored purchasers,” the FTC said.

The case is FTC v. Retail Services and Systems, E.D. Va., No. 1:23-mc-00028, filed 10/20/23.