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FTC sues Southern Glazer’s for price discrimination
The lawsuit alleges US distribution giant Southern Glazer’s Wine and Spirits violated the Robinson-Patman Act, harming small, independent retailers.
A new Federal Trade Commission (FTC) complaint alleges that Southern Glazer’s, the largest distributor of wine and spirits in the US, engaged in price discrimination, depriving small, independent retailers of the same access to discounts and rebates offered to larger chain stores.
The claim alleges that since 2018, Southern Glazer’s illegally provided steep discounts to big-box stores like Total Wine & More, Costco, and Kroger without any market justification. This practice disfavoured grocery stores, convenience stores, and other independently owned wine and spirits shops.
The lawsuit was prepared in June.
“When local businesses get squeezed because of unfair pricing practices that favour large chains, Americans see fewer choices and pay higher prices – and communities suffer,” said FTC chair Lina M Khan. “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’s action today will help protect fair competition, lower prices, and restore the rule of law.”
Southern Glazer’s distributes spirits for Pernod Ricard, Bacardi, Diageo, and Suntory Global Spirits. In 2023, it generated US$26 billion in revenue, making it the 10th largest privately held company in the country.
Shortly after the complaint was published, Southern Glazer’s released a statement disputing the allegations. It reads, in part: “Operating 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 that provide similar or even lower prices on a per-case basis compared to large quantity deals we also offer.”
The FTC lawsuit claims Southern Glazer’s offers quantity discounts and rebates to large buyers that small retailers, sometimes a few miles away, aren’t made aware of, even if it was logistically feasible to participate. This has resulted in the loss of sales and less choice for the consumer.
Margie AS Lehrman, CEO of the American Craft Spirits Association, said the organisation welcomes the FTC’s efforts to prohibit anti-competitive pricing that hurts the small retailers that are important to craft distillers. The ACSA has been advocating for greater market access for craft brands.
“This action by the FTC is an important step to protect small businesses but also should serve as a clarion call to all legislators and regulators to enact policies that enable craft spirits manufacturers to compete in this complex and consolidated marketplace,” she said.
Congress enacted the Robinson-Patman Act in 1936. Under it, volume discounts are permitted when a seller can demonstrate cost efficiencies of selling goods at different quantities to purchasers. The complaint alleges that Southern Glazer’s pricing exceeds any such cost savings.
Earlier this year, Southern Glazer’s agreed to a US$5.5 million settlement to resolve a class action lawsuit over alleged illegal late fees.
It also faced a lawsuit from online alcohol marketplace Provi, which alleged the distributor had violated antitrust laws and ‘stifled competition’.
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