FTC Sues Southern Glazer’s Under FDR-Era Anti-Price-Bias Law (1)

The Federal Trade Commission is suing alcohol distributor Southern Glazer’s Wine and Spirits LLC for alleged practices that charge mom-and-pop grocers significantly higher prices for alcohol products than big retail chains.

Southern Glazer’s, the largest liquor distributor in the US, is accused of giving large chains quantity discounts and rebates that aren’t extended to smaller independent retailers, ultimately harming competition and consumer choice, according a complaint filed Thursday in the US District Court for the Central District of California.

The FTC alleges the practices are in violation of the Robinson-Patman Act, a law enacted in 1936 that prohibits certain forms of price discrimination, such as when distributors charge competing buyers different prices for the same product. The lawsuit, brought in the waning days of the Biden administration, represents the first time since 2000 that the FTC has brought an action under the law, according to an agency official.

Once a staple of antitrust enforcement, Robinson-Patman cases were largely abandoned by the FTC and Justice Department in the 1980s, as legal experts became concerned the law helped drive higher prices. But FTC Chair Lina Khan placed a fresh focus on the law, as part of an expansive agenda that pushed to more aggressively police corporate consolidation.

“When local businesses get squeezed because of unfair pricing practices that favor large chains, Americans see fewer choices and pay higher prices—and communities suffer,” Khan said in a statement. “The law says that businesses of all sizes should be able to compete on a level playing field. Enforcers have ignored this mandate from Congress for decades, but the FTC’s action today will help protect fair competition, lower prices, and restore the rule of law.”

New Chair

President-elect Donald Trump’s return to office could complicate the case’s future. The FTC initiated the Southern Glazer’s action in a 3-2 partisan vote, with GOP Commissioners Andrew Ferguson, who is set to become chair in January, and Melissa Holyoak dissenting.

Ferguson supported the FTC’s effort to revive enforcement of the law. But he claimed in a statement that the “mammoth case” would likely fail to clear legal hurdles and represent an unnecessary drain on resources. Holyoak said the case targets “innocuous” conduct and would increase prices.

Formed in 2016, Southern Glazer’s is a privately owned business based in Miami that acts as a go-between for alcohol suppliers and retailers in the US. In 2023, it generated about $26 billion in revenue from wine and spirits sales, according to the FTC.

In a statement, Southern Glazer’s called the FTC’s case “misguided” and vowed to fight it in court.

“The FTC’s lawsuit takes issue with the use of volume discounts that Southern Glazer’s—and nearly every distributor of consumer products in the country—uses to lower customers’ costs and enable consumers to pay lower prices for the everyday goods they need,” the company said.

The FTC claims Southern Glazer’s has since at least 2018 engaged in pricing practices that offer large chains such as Kroger Co. and Costco far more favorable price terms than their smaller competitors. The practices amount to illegal price discrimination because they lack any cost or market justifications, the FTC argues.

The case adds to the legal pressure on Southern Glazer’s. In May, a federal judge in Illinois allowed a private-plaintiff lawsuit claiming the company colluded with another distributor to monopolize online sales of alcohol to move to trial. The case was brought by Provi, an online distribution platform that also claims Southern Glazer’s tactics drove it out of business.

Enforcement Revival

The FTC’s heavily redacted complaint is focused on Southern Glazer’s conduct in states where regulatory regimes require a three-tiered system—supplier, distributor, and retailer—for alcohol sales.

In some states, the company’s footprint is so big that it “operates as the gatekeeper for the majority of wine and spirits sold,” the complaint says. The company illegally uses discounts for high-volume purchases, which only a few large-chain customers can meet and small independent retailers are often not informed of, according to the FTC.

Under the Robinson-Patman Act, price variations can be justified under changing market conditions or when they are associated with different costs for the seller in the manufacture, sale, or delivery of the product. But the FTC said none of those factors are at play here.

The action marks a reversal in a decades-long enforcement trend rooted in a belief that the Robinson-Patman Act would drive higher consumer prices.

In 1977, the Justice Department issued a report claiming the law conflicted with a goal of antitrust to preserve “vigorous and flexible price competition for new customers.”

Three decades later, a commission created by Congress to examine the antitrust laws advocated for the Robinson-Patman Act’s repeal.

Mark Meador, a lawyer in private practice whom Trump is set to nominate as the FTC’s third GOP member, has advocated for reinvigorating the statute for enforcement. A group of lawmakers led by Sen. Elizabeth Warren (D-Mass.) in March pressed the FTC use the law in policing the food retail market.

The Justice Department also recently distanced itself from the 1977 report, saying it “no longer reflects contemporary economics or market realities.”

The case is FTC v. S. Glazer’s Wine & Spirits, LLC, C.D. Cal., No. 8:24-cv-02684, complaint 12/12/24.