FTC v. Southern Glazer's Wine & Spirits: A Sobering Reminder That the Robinson-Patman Act Remains on the Books

In a 3-2 party-line vote (Democratic majority), the Federal Trade Commission (FTC) for the first time in decades filed an action alleging secondary line price discrimination under the Robinson-Patman Act (RPA). The FTC's complaint alleges that the country's largest alcohol distributor, Southern Glazer's Wine & Spirits (Southern), violated the RPA by providing volume discounts that only large retailers could practically employ, thereby discriminating between large and small retailers of alcohol. Given the blistering dissents issued by the two Republican commissioners, it remains an open question whether this litigation will continue once the FTC flips to a 3-2 Republican majority. Nevertheless, this complaint serves as a reminder that the RPA remains a tool in the antitrust enforcement arsenal.

The Robinson-Patman Act

In 1936, Congress enacted the RPA, also known as the Anti-Price Discrimination Act, to deprive large buyers of competitive advantages solely derived from their size, or their quantity purchasing ability. Congress intended that the act would level the playing field and reduce competition among retailers in an era when large retail stores were opening. The RPA is recognized to have many defenses, including allowing quantity discounts where a seller can demonstrate real cost efficiencies achieved from selling goods at different quantities—such as diminished costs due to quantity manufacture, delivery, or sale. Other defenses include the distributor's good faith effort to meet a competitor's price.

The FTC's Suit Against Southern Glazer's Wine & Spirits

The FTC's complaint alleges that Southern's price discrimination exceeds these allowable cost justifications and harms small, independent businesses by depriving them of discounts and rebates even though they were offered generally. The complaint asserts that even if Southern made its discount programs available to all competing retailers, the discounts were not functionally accessible to small retailers who could not purchase the same quantities as larger retailers. The FTC further alleges that the price discrimination was so significant that larger retailers in the same geographical regions were able to profitably resell Southern products at retail prices lower than that which their smaller competitors were paying wholesale. These advantages amount to unlawful price discrimination and unfair methods of competition in violation of the RPA, according to the FTC.

Commissioners' Dissents

But two Republican commissioners—Commissioner Andrew N. Ferguson and Commissioner Melissa Holyoak—issued blistering dissents.

Commissioner Ferguson, who has been tapped by President-elect Donald Trump as the next chair of the FTC, argues the FTC exercised poor discretion in bringing suit in the waning days of the Biden administration and is unlikely to prevail on the merits. Commissioner Ferguson highlighted the government's long-standing refusal to enforce the RPA because of underlying policy disagreements. He further argued that the complaint failed to assert a cognizable violation of the RPA because (1) Southern's price differences fall squarely within the realm of allowable cost justification; and (2) the FTC has not established sufficient evidence of diversion to demonstrate a substantial injury to competition.

Commissioner Holyoak argued that the complaint is misguided because the focus of antitrust laws should be on protecting competition as a whole, not individual competitors. She buttressed her argument by citing long-standing criticism of the RPA as illogical because it penalizes price discounting and is therefore at odds with broader antitrust principles that encourage price competition. Commissioner Holyoak warned that the remedies sought by the FTC will only harm competition and result in price increases.

What Comes Next

Given the imminent change in executive administration and the commissioners' critical dissents, it is questionable whether this suit will move forward once the FTC is controlled by a 3-2 Republican majority. However, we note that the notoriety of the suit may inspire private actors to bring suit under the RPA.

What You Need To Prepare

As we enter the new year, it is an appropriate time for companies to (1) review their pricing policies to ensure RPA compliance, (2) ensure their teams are up to date on RPA developments, and (3) speak to counsel on the topic.

For help in navigating this evolving area, don't hesitate to reach out to your DWT attorney.