FTC Files Suit Against Liquor Giant Southern Glazer’s Over Discount Disparities

The U.S. Federal Trade Commission (FTC) filed a lawsuit on Thursday against Southern Glazer’s, the nation’s largest liquor distributor, accusing the company of granting exclusive discounts to large retailers, a practice alleged to harm smaller businesses. The case marks a rare enforcement of the Robinson-Patman Act, a law designed to protect independent retailers from competitive disadvantages, according to Reuters.

The move represents the FTC’s first case under the Robinson-Patman Act in over two decades and is being seen as a significant initiative by outgoing FTC Chair Lina Khan. Khan has championed using antitrust laws to address broader economic harms, including those faced by small businesses and workers, alongside consumer welfare.

Southern Glazer’s, whose portfolio includes major brands like Bacardi, Smirnoff, and Jim Beam, is accused of discriminatory pricing practices that benefit large clients such as Costco, Kroger, and Total Wine & More. The FTC alleges these discounts were not extended to smaller independent retailers, potentially undercutting their competitiveness since at least 2018.

“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,” Khan stated. The complaint, filed in California, seeks to prohibit Southern Glazer’s from engaging in these pricing practices.

A Divided Commission

The FTC’s decision to pursue the case was narrowly approved in a 3-2 vote. Republican Commissioners Andrew Ferguson and Melissa Holyoak opposed the move, arguing that the case lacks merit and risks misallocating resources. Holyoak described the targeted practices as “innocuous” and contended that the FTC had failed to demonstrate harm to competition.

Ferguson, who is expected to succeed Khan as FTC chair under the incoming administration, expressed skepticism about the case’s viability. “The Commission is unlikely to prevail even on its own theory of the act, and it would be an imprudent use of the Commission’s enforcement resources even if it were likely to prevail,” he remarked.

Reviving the Robinson-Patman Act

The Robinson-Patman Act, passed in 1936 during the Great Depression, prohibits sellers from offering varying prices for the same goods to different buyers, except under specific conditions such as differing shipping costs. Enforcement of the law dwindled in the latter half of the 20th century, but proponents argue that neglecting it has allowed retail giants to dominate the market, squeezing out smaller competitors.

The Institute for Local Self-Reliance, an antimonopoly think tank, noted that a lack of enforcement has contributed to the growth of massive corporations like Walmart and has pushed many local retailers out of business, exacerbating economic challenges in underserved areas.

The FTC has previously examined pricing practices in other industries, including investigations into Coca-Cola and PepsiCo. However, these companies have not faced formal accusations of wrongdoing.

Critics and Broader Implications

Critics of Robinson-Patman Act enforcement argue that it may lead to higher prices for consumers by discouraging wholesale discounts. Traditional antitrust approaches have focused on consumer pricing, but Khan and her allies advocate for addressing broader economic harms stemming from corporate consolidation.

Source: Reuters