Major Distributor Under Legal Scrutiny
The Federal Trade Commission (FTC) has filed a lawsuit against the largest U.S. distributor of wine and spirits, accusing the company of illegal price discrimination that favored large retail chains like Costco, Kroger, and Total Wine & More. According to the FTC, these chains received much better pricing compared to smaller, independent liquor stores, hindering the competitiveness of small businesses.
The distributor, Southern Glazer’s Wine and Spirits, ranks as the 10th-largest privately held company in the United States, generating $26 billion in revenue from sales to retail customers in 2023. The lawsuit, filed in a federal court in Los Angeles, highlights Southern Glazer’s significant influence in the alcohol industry, selling one out of every three bottles of wine and spirits purchased in the U.S.
Allegations of Unfair Practices
The FTC alleges that, since at least 2018, Southern Glazers denied smaller businesses access to discounts and rebates, making it harder for them to compete with large national and regional chain stores. The lawsuit claims that the distributor violated the Robinson-Patman Act by offering steep discounts to certain retailers without a valid market justification.
The Federal Trade Commission Chair, Lina Khan, stated that unfair pricing practices harm local businesses, reduce consumer choices, and lead to higher prices. She emphasized that the law mandates a level playing field for businesses of all sizes. By taking action against such practices, the FTC aims to promote fair competition, lower prices, and uphold the rule of law.
Khan voted with two other FTC commissioners to authorize the lawsuit, while two commissioners opposed it. Andrew Ferguson, one of the dissenting commissioners, argued that the FTC had not brought a case under the Robinson-Patman Act in nearly 25 years and questioned the evidence of significant harm to competition.
Distributor Denies Allegations
Southern Glazer has strongly denied the accusations, calling the lawsuit misguided and legally flawed. The company argues that its use of volume discounts reflects standard practices used across the consumer goods industry to reduce customer costs and lower prices for consumers.
The distributor further stated that its pricing strategies, including volume discounts, are cost-justified and comply with the Robinson-Patman Act. Southern Glazer maintains that its discounts account for the costs of selling different quantities of wine and spirits to its customers.
Industry Impact
Southern Glazer distributes thousands of wine and spirit brands, including major suppliers like Pernod Ricard, Bacardi U.S.A., Diageo, and Suntory Global Spirits. These brands supply popular products such as Jameson Irish Whiskey, Absolut Vodka, Grey Goose, Patron Tequila, Smirnoff Vodka, and Maker’s Mark Whiskey.
The FTC has been investigating Southern Glazer for over a year. As part of the investigation, the agency filed a petition in October 2023, requesting enforcement of an administrative subpoena to Total Wine for documents and records related to the case.
Legal and Market Implications
This lawsuit underscores growing regulatory scrutiny over large distributors and their pricing practices. While Southern Glazer argues that its pricing strategies benefit consumers by reducing costs, the Federal Trade Commission contends that these practices harm smaller businesses and stifle competition.
The case also highlights broader concerns about the power dynamics in the wine and spirits market, with large chains benefiting at the expense of local retailers. As the legal battle unfolds, it could set a significant precedent for how distributors manage pricing and discounts across different types of businesses.
