America’s Largest Wine & Spirits Distributor Slammed With Government Lawsuit Accusing It of Illegally Favoring Major Retailers

This Jan. 28, 2015 photo shows the Federal Trade Commission building in Washington, D.C. (AP Photo/Alex Brandon, File)

On Thursday, the Federal Trade Commission announced it has filed a complaint against Southern Glazer’s Wine and Spirits, the U.S.’s largest distributor of wine and spirits. The FTC is accusing the company of engaging in anticompetitive and unlawful price discrimination, showing favoritism to large national and regional chains — like Total Wine & More, Costco and Kroger — while discriminating against against small, independent businesses, such as grocery stores, convenience stores and independently owned wine and spirits shops.

The FTC alleges that Southern Glazer’s has been selling wine and spirits to “mom and pop” businesses at “drastically higher” prices than what big-box retailers have been paying — ultimately harming consumers.

“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,” FTC Chair Lina M. Khan said in a news release. “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.”

With its lawsuit, the FTC is seeking an injunction prohibiting further unlawful price discrimination by Southern Glazer’s against small, independent businesses.

The FTC claims Southern Glazer’s has violated the Robinson Patman Act, harming smaller businesses by “intentionally and illegally” depriving them of access to discounts and rebates and hurting their chances of competing against large national and regional chains. According to the government agency, these discriminations have been ongoing since at least 2018 and persist today.

Passed in 1936, the Robinson-Patman Act makes it generally illegal for sellers to offer discriminatory pricing that harms competition by charging higher prices to certain retailers for goods it sells to different retailers for lower prices.

“Southern’s unlawful practices have caused independent retailers to lose sales and customers,” The FTC wrote in the news release. “Small, independent retail businesses are a critical component of the American economy and  provide valuable alternatives to megastore chains—to the great benefit of consumers,  communities, and competition. For many years, Southern has harmed, and it continues to harm,  smaller grocery stores, convenience stores, and other independent retailers by charging them  higher prices as compared to large national and regional chains.”

The FTC’s complaint alleges that Southern Glazer’s has charged “significantly” higher prices for sales of identical bottles to independent retailers than competing large chains, regardless of location. Southern’s discriminatory pricing practices allegedly occur through multiple tactics, including quantity discounts and rebates to large buyers, while not making those same deals accessible to smaller competitors.

The FTC specified that these inequities “are not justified by differences in the cost of distributing products to different retailers” and added that “disfavored” retailers are often not informed about discounts, rebates and other deals that are made accessible to large retailers.

The FTC claims these discriminatory pricing practices are “pervasive and deeply engrained in Southern’s business strategy.”

Southern serves as the distributor for many of the largest wine and spirits suppliers in the world. Last year, the company generated about $26 billion revenue from wine and spirits sales, making it the 10th-largest privately held company in the U.S., per the FTC.