The Federal Trade Commission (FTC) initiated legal proceedings against the largest distributor of wine and spirits in the United States on Thursday, alleging that the company is engaging in unlawful discrimination against smaller and independent businesses.
According to the lawsuit filed in California, Southern Glazer’s Wine and Spirits is accused of providing discounts and rebates exclusively to larger retail chains, thereby putting small stores at a distinct disadvantage in the marketplace. FTC Chair Lina Khan expressed concern in a statement, noting that unfair pricing practices favoring major chains lead to reduced choices for consumers and increased prices, ultimately harming local communities.
In response, Southern Glazer’s, which operates out of Miami, rejected the lawsuit as misguided and legally unsound. The company emphasized that it adheres to numerous regulations governing how it competes and sets prices, asserting that it intends to mount a robust defense against the FTC’s claims.
Southern Glazer’s is recognized as one of the largest privately owned firms in the U.S., reaching $26 billion in revenues through wine and spirits sales to retailers in 2023. The company is responsible for distributing roughly one-third of all wine and spirits sold in the country, supplying major commercial clients including Total Wine, Costco, and Kroger.
The FTC’s case leans on the rarely enforced Robinson-Patman Act, enacted in 1936, which allows for volume discounts while ensuring that sellers prove these benefits stem from genuine cost efficiencies. The FTC contends that Southern Glazer’s has consistently provided substantial discounts and rebates to larger purchasers without sufficient justification related to distribution costs. There are instances where independent retailers nearby have been charged much higher prices for the same products compared to larger chains.
Moreover, the FTC claims that Southern Glazer’s fails to communicate the availability of quantity discounts and rebates to smaller retailers, even when these businesses could take advantage of similar promotions offered to larger stores.
The agency is seeking a legal injunction in the Central District of California to prevent further discriminatory pricing practices from occurring. The outcome of the lawsuit remains uncertain, especially in light of the political changes under the Trump administration. Two of the five commissioners at the FTC voted against moving forward with the case. Andrew Ferguson, one of the dissenting commissioners who has been nominated to lead the FTC, pointed out that the agency hasn’t pursued a case under the Robinson-Patman Act in over 25 years. He expressed skepticism regarding the likelihood of success for the FTC in this particular instance.
Ferguson noted that while isolated instances of pricing discrepancies could potentially exist, the act requires evidence of “substantial price discrimination” to be violated. He concluded that based on the evidence provided to him, there was insufficient proof of widespread, unjustified discrimination within Southern Glazer’s pricing practices.
