The Federal Trade Commission (FTC) sued the largest U.S. distributor of wine and spirits—Southern Glazer’s Wine and Spirits LLC (Southern)—Thursday, alleging the company violated the Robinson-Patman Act, “harming small, independent businesses by depriving them of access to discounts and rebates, and impeding their ability to compete against large national and regional chains,” according to a press release from the FTC.
The FTC’s complaint alleges that by selling wine and spirits to small, independent “mom and pop” businesses at prices that are drastically higher than what Southern charges large chains, "with dramatic price differences that provide insurmountable advantages that far exceed any real cost efficiencies for the same bottles of wine and spirits,” Southern engaged in anticompetitive and unlawful price discrimination.
Southern serves as the distributor for many of the largest wine and spirits suppliers. This could have broad implications for how suppliers price products to retailers across all industries.
The FTC said its case seeks to ensure that businesses of all sizes compete on a level playing field with equivalent access to discounts and rebates, which means increased consumer choice and the ability to pass on lower prices to consumers shopping across independent retailers.
“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,” said Chair Lina M. Khan. “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.”
“Since at least 2018 and continuing today, Southern has repeatedly discriminated in price between disfavored independent purchasers—which include neighborhood grocery stores, local convenience stores and independently owned wine and spirits shops—and favored large chain purchasers of wine and spirits, such as Total Wine & More, Costco and Kroger,” the FTC’s complaint states.
Southern’s “lower prices for large national chains are not derived from differences in Southern’s cost of distributing products to larger retailers, nor do they reflect legitimate attempts to meet prices offered to chain retailers by competing distributors,” according to the FTC’s complaint. Instead, the FTC alleges that Southern has squarely violated the Robinson-Patman Act by intentionally and illegally providing steep discounts without any market justification to a specific set of retailers.
The FTC’s lawsuit “seeks to obtain an injunction prohibiting further unlawful price discrimination by Southern against these small, independent businesses. When Southern’s unlawful conduct is remedied, large corporate chains will face increased competition, which will safeguard continued choice which can create markets that lower prices for American consumers.”