How the FTC Lawsuit Against Southern Glazer’s Will Impact the Wine & Spirits Industry
On December 12, 2024, the Federal Trade Commission (FTC) filed an anti-competitive lawsuit against Southern Glazer’s, the Florida-based alcohol distributor, alleging their pricing policies with large retail partners violate the 1936 Robinson-Patman Act. While we will certainly know more in the coming weeks and months as the case unfolds, in this piece, we break down what the FTC lawsuit against Southern Glazer’s could mean for wine and spirits distributors and consumers.
What is the Robinson-Patman Act?
Originally passed in 1936, the Robinson-Patman Act is an antitrust law that takes aim at anticompetitive pricing discrimination. The Act was passed in an attempt to provide equal opportunity to smaller companies. Over the years, the Supreme Court has provided several legal tests to the Robinson-Patman Act:
- The Act applies only to goods, but not services, and to purchases, but not leases.
- The goods supplied must be of “like grade and quality.”
- There must be demonstrated harm to competitors.
- Sales must be across state lines.
While the FTC has launched investigations into Robinson-Patman Act violations recently, such as the 2023 investigation into PepsiCo and Coca-Cola, the Agency has not filed a lawsuit using the Act since 2000.
What the Lawsuit Could Mean for Other Wine & Spirit Distributors
The lawsuit against Southern Glazer’s will likely face many hurdles in the legal system, mainly how the law applies to the complicated web of state and federal regulations that govern the distribution of alcohol in the United States and the burden of proof to demonstrate harm to their competitors. This lawsuit should cause distributors to audit the pricing practices and policies, because as we’ve seen in recent years, the FTC and Department of Justice have been aggressively pursuing antitrust and competition enforcement, such as high-profile lawsuits against giants Microsoft and Amazon.
What the Lawsuit Could Mean for Consumers
There are two schools of thought when it comes to enforcement of the Robinson-Patman Act, and for consumers, the debate comes down to volume discounts. Critics believe that enforcing the law effectively outlaws volume discounts that retailers receive for bulk purchases, resulting in the cost difference being passed on to the consumer as a higher price.
On the other hand, proponents state that volume discounts are protected under the law because price differences that are a result of cost savings to the supplier/seller are not in violation of the law, therefore, there should be no net-effect on pricing to the consumer because of volume discounts. Proponents also believe that the competition created by ensuring a level playing field between small and larger retailers ultimately delivers long-term benefits to consumers.
What Next?
As the case progresses, we will begin to learn more about the FTC’s lawsuit and what it could mean for the industry and consumers. However, what we can certainly take away now is that the government will continue to look into companies that are the giants of their industry in an effort to snuff out any anti-competitive behaviors.
