It seems the long, ongoing battle between the Federal Trade Commission (FTC) and Southern Glazer’s has come to a head. The government agency hinted for over a year that it was preparing to sue Southern Glazer’s for unfair pricing structures that favor large chains like Total Wine, Costco, and Kroger, citing “secret kickbacks” in deals with big retailers.
On Thursday, the FTC finally announced the lawsuit against Southern Glazer’s — the largest distributor of wine and spirits in the U.S. — for illegal price discrimination, a violation of the Robinson-Patman Act of 1936, which is intended to protect fair competition.
The complaint alleges that the distribution company has harmed small, independent retailers by withholding access to discounts and rebates while selling products to large chains with significant price cuts. The drastic price discrepancies between large and small retailers have made it near-impossible for independent retailers to keep up, according to the FTC.
In the suit, the FTC seeks to ensure that businesses both big and small are able to compete on an even playing field when it comes to pricing, with distributors offering equal access to all discounts and rebates. The agency’s recent statement suggests that Southern Glazer’s has been actively engaging in price discrimination since at least 2018, and is pervasive in their company’s business model.
“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,” FTC chair Lina M. Khan said in the release. “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.”
UPDATE – Southern Glazer’s Wines & Spirits has issued the following statement in response to the lawsuit:
“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.
“At Southern Glazer’s, we are proud to provide our customers and suppliers with the best-in-the-industry service for which we are known. Operating in the highly competitive alcohol distribution business, we offer different levels of discounts based on the cost we incur to sell different quantities to customers and make all discount levels available to all eligible retailers, including chain stores and small businesses alike. We have thousands of employees focused on selling to small retailers, and for the benefit of those customers, we create small quantity discounts that provide similar or even lower prices on a per-case basis compared to large quantity deals we also offer. Our pricing and discounting structure does not violate the RPA.”
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