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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe Federal Trade Commission sued the largest U.S. distributor of wine and spirits on Thursday, saying it is illegally discriminating against small and independent businesses.
Southern Glazer’s Wine and Spirits doesn’t give smaller stores access to discounts and rebates that larger chains receive, putting the smaller stores at a competitive disadvantage, the FTC alleged in the lawsuit it filed in California.
Southern Glazer’s is one of the largest privately held companies in the U.S., with $26 billion in revenue from wine and spirits sales to retail customers in 2023, according to the FTC. It distributes one out of every three bottles of wine and spirits in the U.S. and serves commercial customers such as Total Wine, Costco and Kroger.
The company does business in 45 states, including in Indiana, where it has an Indianapolis office and distribution operations.
“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 Khan said in a statement.
Miami-based Southern Glazer’s called the lawsuit “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,” the company said. “Southern Glazer’s strongly disputes the FTC’s allegations and will defend itself vigorously in this litigation.”
The FTC’s case is based on the rarely enforced 1936 Robinson-Patman Act, which permits volume discounts but only if a seller can demonstrate they achieve real cost efficiencies.
According to the FTC, Southern Glazer’s has repeatedly offered quantity discounts and rebates to large buyers that aren’t justified by the difference in the costs of distributing products. In some cases, Southern Glazer’s has charged significantly higher prices for sales of identical bottles of wine and spirits to independent retailers than to large chains that are only a few blocks away.
Southern Glazer’s also doesn’t inform smaller retailers about quantity discounts, rebates and other special offers available to larger chains even when smaller stores could participate in the deals, the FTC alleged.
The FTC is seeking an injunction in the U.S. District Court for California’s Central District to prohibit further price discrimination.
The fate of the lawsuit under the Trump administration is unclear. Two of the FTC’s five commissioners voted not to authorize the lawsuit against Southern Glazer’s. President-elect Donald Trump recently picked one of the objecting commissioners, Andrew Ferguson, to head the FTC.
In his dissent, Ferguson said the FTC had not brought a case under the Robinson-Patman Act in more than 25 years. While the act should be enforced, the FTC was unlikely to prevail in Southern Glazer’s case, he said.
Ferguson said that while it’s possible the FTC might discover some instances where Southern Glazer’s price differential could not be fully justified, only “substantial price discrimination”—not isolated situations—violate the act.
“The evidence presented to me does not lead me to the conclusion that such extensive, unjustified discrimination has taken place,” Ferguson wrote.
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I think you should hear more about the 1936 Robinson-Patman Act. It was passed during the depression to keep A&P from driving smaller stores out of business. What it says that if you offer discount to one vendor because there are real cost savings because they order by the truckload, then you have to offer the same discount to everyone. You can’t offer discounts just because they are your biggest customer.
This leads to the biggest retailer taking over the markets and muscling everyone else out because now nobody can compete. It hurts the distribution market as well. Additionally, if a customer is just too small, the distributor can just choose to not do business with the little guys. Once the competitors are all gone, then monopolistic pricing takes over and consumers loose.
The Regan Administration just stopped enforcing this law in the 1980’s. Since then it has caused a huge shift in retail, and I saw a recent story that this is the sole reason we have food deserts now.
Mr Regan, In many cases we need more government regulation because free markets don’t always work in the best interest of everyone.
The reason capitalism works is because the free market offers opportunities to become prosperous on your own terms. Sounds good, right? The problem with capitalism and free markets, however, is that as merchants become more prosperous, greed takes over. Left unchecked, that greed makes the entrepreneurs ridiculously rich while consumers get screwed. There is a reason for government regulations, the most important one being that they protect consumers and competitors from unfair practices. If Big Business was responsible and fair, there’d be no need for regulations. But, alas, greed is a powerful drug that cannot be ignored.