The FTC’s antitrust lawsuit against Southern Glazer is coming

Lina Khan, chairwoman of the Federal Trade Commission, speaks at the Wall Street Journal’s Future of Everything Festival in New York City, U.S., May 22, 2024.

Andrew Kelly | Reuters

The Federal Trade Commission preparing for antitrust lawsuit against the largest U.S. alcohol distributor, Southern Glazer’s Wine and Spirits, two sources familiar with the matter told CNBC. The lawsuit could be filed within weeks.

The FTC’s case is not yet finalized. But a source said the commission could allege that Southern Glazer’s provided “secret kickbacks” to major retail customers in violation of the 1936 clause. Robinson-Patman Act. The potential legal action was first reported by Politico.

The company distributes wine to more than 7,000 brands in 44 states and reported $26 billion in revenue in 2023, according to Florida-based Southern Glazer’s. Forbes. Founded in 1968, the company acts as a middleman between wine manufacturers and the wine stores from which consumers purchase. In 2023, the company reports revenue of $26 billion.

The Robinson-Patman Act is an obscure 1936 antitrust law that prohibits companies from offering one buyer a better price than another for the same good. A case has not been brought under the law since 2000.

Under FTC explanation, The Robinson-Patman Act is not a wholesale ban on price discrimination and may permit quantity discounts. The law only applies when price discrimination practices hinder competition – a charge that the FTC’s website says is legally “complicated” to prove.

A worker operates a forklift to move pallets of Yellow Tail brand wine in a warehouse at Southern Glazer’s Wine and Spirits LLC distribution center in Louisville, Kentucky.

Luke Sharrett | Bloomberg | beautiful images

Critic said the Robinson-Patman Act unintentionally banned rebates that would help lower consumer prices — a risky prospect for Biden, who has applied his economic platform to cheap jobs more for voters.

Some argue that the law effectively makes discounts on bulk goods illegal, sources said, because smaller buyers may not be able to handle large quantities. so.

The FTC’s case is also complicated by the alcohol industry’s piecemeal regulatory structure. Alcohol distribution laws are often state-specific rather than a uniform federal policy. One of the sources said this could make it difficult for the FTC to bring a case against Southern Glazer’s.

Spokespeople for the FTC and Southern Glazer declined to comment.

The FTC’s lawsuit would not be the first legal complaint accusing Southern Glazer of anticompetitive business practices.

In 2022, alcohol distribution startup Provi, formerly known as Tiz Inc., sued Southern Glazer’s and another major liquor distributor, Republic National Distributing Company.

According to the lawsuit, Provi alleges that the alcohol giants signed an agreement to boycott the startup and encourage other retailers not to do business with the company, preventing competition. in this company’s industry effectively.

Workers load wine bottles into boxes at Southern Glazer’s Wine and Spirits LLC distribution center in Louisville, Kentucky, on Monday, June 28, 2021.

Luke Sharrett | Bloomberg | beautiful images

Last Thursday, a judge discarded object requests from Southern Glazer’s and Republic National to dismiss Provi’s case.

An FTC lawsuit against Southern Glazer’s would join a wave of legal actions by the commission that has become a trademark of aggressive antitrust enforcement under President Joe Biden.

In fiscal 2022, the FTC issued 24 complaints aimed at blocking potential mergers, the second-highest number in the past decade, according to a report. annual report. Meta, Amazon, Microsoft And Kroger are among dozens of companies against which the FTC has filed antitrust lawsuits over the past three years.

FTC Chairman: “Previously we were living in a regime where it was illegal to have transactions coming out of the boardroom.” Lina Khan said Tuesday at the CNBC CEO Council Summit in Washington.

“That means we then have to use public resources to go to court,” Khan said.


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