Top U.S. liquor distributor favored Costco, Kroger, other chains over small businesses: FTC

The Federal Trade Commission in a new lawsuit accuses the largest U.S. distributor of wine and spirits of illegal price discrimination that gave large chains — among them Costco, Kroger and Total Wine & More — much better prices than those offered to small “mom and pop” businesses such as independent liquor stores.

The distributor, Southern Glazer’s Wine and Spirits, is the tenth largest privately held company in the United States, generating about $26 billion in revenues from sales to retail customers in 2023, the FTC said in announcing the suit Thursday.

“At present, Southern sells one out of every three bottles of wine and spirits purchased in the United States,” the suit filed in Los Angeles federal court notes.

The complaint says that since at least 2018, Southern Glazer’s deprived smaller businesses of access to discounts and rebates, harming their ability to compete with large national and regional chain stores.

The suit alleges the distributor violated the Robinson-Patman Act by providing “steep discounts” without any market justification to a certain set of retailers.

“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,” said FTC Chair Lina Khan in a statement.

“The law says that businesses of all sizes should be able to compete on a level playing field,” Khan said. “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.”

Khan voted with two FTC commissioners to authorize the suit. Two commissioners voted against the suit, among them Andrew Ferguson, whom President-elect Donald Trump on Tuesday picked to replace Khan as chair of the FTC in January.

Ferguson in a dissenting statement said the FTC has not lodged a claim under the Robinson-Patman Act in nearly a quarter-century. He also wrote that “Southern appears likely to succeed on a cost-justification defense,” and that he had not seen sufficient evidence that would show more than a very slight harm to competition.

In a statement responding to the suit, Southern Glazer’s said “Southern Glazer’s strongly disputes the FTC’s allegations and will defend itself vigorously in this litigation,” which the company called “both misguided and legally flawed.”

“The FTC’s lawsuit takes issue with the use of volume discounts that
Southern Glazer’s — and nearly every distributor of consumer products in the country — uses to lower customers’ costs and enable consumers to pay lower prices for the everyday goods they need,” the company said.

Southern Glazer’s said it offers different levels of discounts that reflect the costs it incurs to sell different quantities of wine and liquor to customers. Those discounts and pricing “do not violate the RPA,” the company said.

Southern distributes thousands of wine and spirit brands for many big suppliers, including Pernod Ricard, the supplier of Jameson Irish Whiskey and Absolut Vodka; Bacardi U.S.A., the supplier of Patron Silver Tequila, Grey Goose Vodka, and Bacardi Rum; Diageo, the supplier of Smirnoff Vodka; and Beam Suntory, the supplier of Jim Beam Bourbon and Makers Mark Whiskey, according to the FTC.

The agency has been investigating Southern for more than a year.

In October 2023, the FTC filed a petition in federal court asking for enforcement of its administrative subpoena to Total Wine demanding documents and other records as part of that investigation.