FTC vs Southern Glazer’s Lawsuit

Press Release

Federal Trade Commission Sues Southern Glazer’s for Illegal Price Discrimination
FTC vs Southern Glazer’s Lawsuit – Commission enforces Robinson-Patman Act to create a level playing field for small, independent retailers to compete fairly, benefiting consumers

The FTC’s Allegations Against Southern Glazer’s

Federal Trade Commission Office of Public Affairs – December 12, 2024 — The Federal Trade Commission sued the largest U.S. distributor of wine and spirits—Southern Glazer’s Wine and Spirits, LLC (Southern)—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. This loss of competition ultimately harms consumers on choice and price.

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.

Robinson-Patman Act – FTC vs Southern Glazer’s Lawsuit

Under the Robinson-Patman Act, it is generally illegal for sellers to engage in price discrimination that harms competition by charging higher prices to disfavored retailers that purchase similar goods. The FTC’s case filed today 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.

Fewer Choices, Higher Prices for Consumers

“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 Glazer’s is the Tenth Largest Privately Owned Company in the U.S. – FTC vs Southern Glazer’s Lawsuit

In 2023, Southern generated roughly $26 billion in revenues from wine and spirits sales to retail customers, making it the tenth largest privately held company in the country. Southern serves as the distributor for many of the largest wine and spirits suppliers, including Pernod Ricard (Jameson Irish Whiskey, Absolut Vodka), Bacardi U.S.A., Inc. (Patron Silver Tequila, Grey Goose Vodka, Bacardi Rum), Diageo (Smirnoff Vodka, Aviation Gin), and Beam Suntory (Jim Beam Bourbon, Makers Mark Whiskey).

Southern Glazer’s Business Strategy

Southern’s discriminatory pricing is pervasive and deeply engrained in Southern’s business strategy and is accomplished through a variety of pricing mechanisms, according to the FTC’s complaint.

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.

Volume Discounts Not Prohibited Under Robinson-Patman Act – FTC vs Southern Glazer’s Lawsuit

The FTC’s enforcement action via the Robinson-Patman Act does not prohibit quantity discounts, also known as volume discounts. Instead, under the Robinson-Patman Act, volume discounts are permitted so long as a seller can demonstrate real cost efficiencies achieved from selling goods at different quantities to purchasers. However, as the complaint alleges, in many instances, Southern’s price discrimination exceeds any such cost savings permitted under the Robinson-Patman Act.

Southern Glazer’s Responds to FTC Lawsuit

In their own press release, Southern Glazer’s stated: “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. Dissents filed by Commissioners Holyoak and Ferguson articulate reasons why this enforcement action—aimed at an industry that is already heavily regulated by the states pursuant to the 21st Amendment of the U.S. Constitution and by the U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau—is both misguided and legally flawed. Alcohol distributors face numerous regulations that dictate how they compete and can price and discount products, and Southern Glazer’s complies with those legal requirements. Southern Glazer’s strongly disputes the FTC’s allegations and will defend itself vigorously in this litigation.”

You can read more details about the FTC vs Southern Glazer’s Lawsuit in the full FTC Press Release. Read about Southern Glazer’s Wine & Spirits response in their own Press Release.

Sources:
1. FTC: https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-sues-southern-glazers-illegal-price-discrimination
2. Southern Glazer’s Response: https://newsroom.southernglazers.com/press-releases/press-release-details/2024/Southern-Glazers-Wine–Spirits-Responds-to-FTC-Lawsuit/default.aspx

Read about another recent spirits related lawsuit in the article: MGP Ingredients Class Action Lawsuit Filed.

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