Feds Sue Largest US Booze Distributor for 'Secret Kickbacks' to Retailers

Feds Sue Largest U.S. Booze Distributor for 'Secret Kickbacks' to Retailers

The Federal Trade Commission is planning an antitrust action against the largest U.S. alcohol distributor, Southern Glazer’s Wine and Spirits.
(Photo : by Rob Kim/Getty Images for NYCWFF)

The Federal Trade Commission is planning an antitrust action against the largest U.S. alcohol distributor, Southern Glazer's Wine and Spirits. The complaint might be filed in a couple of weeks.

The FTC's lawsuit is not yet done. But the panel is expected to charge the Southern Glazer's for offering "secret kickbacks" to major retail clients and breaching the 1936 Robinson-Patman Act.

Florida-based Southern Glazer's Wine & Spirits distributes alcohol for over 7,000 brands in 44 states. Founded in 1968, the company operates as a middleman between alcohol manufacturers and the liquor stores that consumers buy from. According to Forbes, the business reported $26 billion in revenue in 2023.

The Robinson-Patman Act and Its Implications in Modern Antitrust Enforcement

The Robinson-Patman Act is an obscure 1936 antitrust statute that prevents corporations from giving greater rates to one buyer over another for the same goods. A case has not been brought under the legislation since 2000.

Under the FTC's view, the Robinson-Patman Act is not a wholesale ban on price discrimination and might enable volume discounts. The legislation only applies when pricing discriminatory practices interfere with competition - an allegation the FTC's website notes is legally "complex" to establish.

Critics claim the Robinson-Patman Act has been known to accidentally limit discounts that might help drive down consumer prices - a problematic proposition for President Joe Biden, who has centered his economic program on making costs cheaper for voters.

Some have contended that since smaller buyers could not manage such huge volumes, the regulation essentially makes it unlawful to give discounts on bulk purchases.

The fragmented regulatory framework about the alcohol business further complicates the FTC's argument. State-specific legislation usually governs the distribution of alcohol, as opposed to a single federal policy. This may make it difficult for the FTC to prosecute a lawsuit against Southern Glazer's.

Apart from an FTC action, previous legal complaints have accused Southern Glazer's of engaging in anticompetitive business activities.

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Not a First Complaint Against Southern Glazer's

Provi, a startup in alcohol distribution originally known as Tiz Inc., filed lawsuits against Republic National Distributing Company, a major alcohol distributor, and Southern Glazer's in 2022.

According to the complaint, Provi claimed that the giants in the alcohol sector had committed to boycotting the startup and urging other merchants to steer clear of it to prevent it from competing in the market.

A judge denied Republic National's and Southern Glazer's attempts to dismiss Provi's complaint on May 30.

An FTC complaint against Southern Glazer's would be the latest in a string of court cases the agency has filed under Biden that have come to symbolize aggressive antitrust enforcement.

An annual report states that the FTC filed 24 challenges to halt potential mergers during the 2022 fiscal year. The FTC has brought antitrust cases against several corporations in the last three years, including Amazon, Microsoft, Kroger, and Meta.

Related article:Hidden Fees Alert! Restaurants Charging Up to $100 Just to Hold Your Table

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