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In its final weeks under the current administration, the Federal Trade Commission isn\u2019t letting up on its fight against anticompetitive practices, which has ramped up significantly under the tenure of current FTC Chair Lina Khan. Despite a leadership change looming in the new year, the FTC has sued the largest alcohol distributor in the U.S., Southern Glazer\u2019s Wine and Spirits<\/strong>, for hurting competition by charging independent businesses \u201cdrastically higher\u201d prices for its wine and spirits<\/strong> than what it charges \u201cfavored large-chain purchasers,\u201d such as Total Wine & More<\/strong>, Costco<\/strong> and Kroger<\/strong>.<\/p>\n The FTC alleges that by depriving small, independent businesses of access to discounts and rebates, those businesses have lost sales and customers, which ultimately harms consumers by resulting in less competition and higher prices. Southern Glazer\u2019s immediately disputed the claims, calling the suit \u201cmisguided and legally flawed.\u201d<\/p>\n Southern Glazer\u2019s is the U.S. distributor for many of the largest wine and spirits suppliers in the U.S., including Pernod Ricard<\/strong> (Jameson Irish Whiskey, Absolut Vodka), Bacardi U.S.A<\/strong>. (Patron Silver Tequila, Grey Goose Vodka, Bacardi Rum), Diageo<\/strong> (Smirnoff Vodka, Aviation Gin) and Beam Suntory<\/strong> (Jim Beam Bourbon, Makers Mark Whiskey). In 2023, Southern generated approximately $26 billion<\/strong> in revenues from wine and spirits sales, making it the tenth largest privately held company in the country<\/strong>, according to the FTC\u2019s estimates.<\/p>\n The FTC lawsuit, which was filed in the U.S. District Court for the Central District of California, seeks a permanent injunction against such behavior by Southern Glazer\u2019s as well as \u201cother equitable relief.\u201d The lawsuit was approved by a 3-2<\/strong> vote of FTC Commissioners, with Melissa Holyoak and<\/strong> Andrew Ferguson dissenting<\/strong>. Ferguson has been appointed by President-elect Donald Trump to replace Khan as Chair of the FTC when he takes office in January 2025, casting some doubt as to how rigorously the case will be pursued in the new year.<\/strong><\/p>\n The FTC asserted its right to sue Southern Glazer\u2019s under the purview of the 1936 Robinson-Patman Act, which was enacted specifically to target discriminatory pricing that would undercut or eliminate competition. For its part, Southern Glazer\u2019s has attacked the lawsuit as being justified by an outdated law: \u201cThe RPA is a Depression-era federal antitrust law that has not been enforced in decades<\/strong> because of bipartisan concern that enforcement leads to higher prices for consumers,\u201d said the company in a statement. \u00a0\u00a0<\/p>\n Khan preemptively countered that argument in her statement on the lawsuit, saying that \u201cwhen local businesses get squeezed because of unfair pricing practices that favor large chains, Americans see fewer choices and pay higher prices \u2014 and communities suffer. 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\u2019s action today will help protect fair competition, lower prices and restore the rule of law.\u201d<\/p>\n Specifically, the FTC has charged Southern Glazer\u2019s with \u201cpervasive and deeply engrained\u201d discriminatory pricing practices, including offering quantity discounts and rebates to large buyers that are inaccessible to small competitors<\/strong> and are<\/strong> not justified by differences in the cost of distributing products to different retailers<\/strong>. As an example, the FTC said that \u201cdisfavored\u201d independent retailers frequently are not informed about large quantity discounts, rebates and other special deals made available to larger chain retailers, even when it would be possible for the independent retailer to participate in the deal.<\/p>\n The FTC alleges that Southern Glazer\u2019s has engaged in these practices since at least 2018 and that its investigation found that these pricing practices are not<\/em> derived from differences in Southern Glazer\u2019s cost of distributing products to larger retailers, which Southern Glazer\u2019s quickly and vehemently disputed.<\/p>\n \u201cNearly every distributor of consumer products in the country\u201d engages in similar volume discounting practices, according to Southern Glazer\u2019s, which also pointed out that the \u201cdissents filed by Commissioners Holyoak and Ferguson articulate reasons why this enforcement action is both misguided and legally flawed.<\/strong> Alcohol distributors face numerous regulations that dictate how they compete and can price and discount products, and Southern Glazer\u2019s complies with those legal requirements.<\/p>\n \u201cAt Southern Glazer\u2019s, we are proud to provide our customers and suppliers with the best-in-the-industry service for which we are known,\u201d the company statement continued. \u201cOperating 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 <\/strong>that provide similar or even lower prices on a per-case basis compared to large quantity deals we also offer.\u201d<\/p>\n This latest lawsuit may be Khan\u2019s last salvo before she leaves office in January. Under her tenure the FTC has undergone a marked ramp-up in the pursuit of antitrust and anticompetitive cases that has been lauded by the legal community and consumers, but lambasted by Wall Street for stifling business.<\/p>\n Just this week, the agency successfully squashed the proposed merger of America\u2019s two<\/strong> largest grocery conglomerates, Kroger<\/strong> and Albertsons<\/strong>. Other efforts under Khan\u2019s leadership have included: \u00a0<\/p>\nThe FTC Charge: Southern Glazer\u2019s Gives Large Chains Better Deals<\/strong><\/h2>\n
Southern Glazer\u2019s: FTC Suit Based on Outdated Law<\/strong><\/h2>\n
Southern Glazer\u2019s \u2018Vehemently\u2019 Disputes FTC\u2019s Claims<\/strong><\/h2>\n
Khan\u2019s Final Salvo at the FTC?<\/strong><\/h2>\n