FTC resuscitates long-abandoned price discrimination law in alcohol distributor suit

On December 12, 2024, following a vote of 3-2 among the commissioners, the FTC sued Southern Glazer’s Wine and Spirits, LLC for allegedly discriminating in the prices it charges its retail customers in violation of the RPA.² In the newly filed action, the FTC alleges that Southern Glazer’s charges small, independent retailers “drastically higher” prices than it charges large chains.  Specifically, the complaint accuses Southern Glazer’s of employing several methods to unfairly advantage large retailers in direct competition with small “mom and pop” stores, including significant high-volume quantity discounts, cumulative quantity discounts, and scan rebates not made available to the smaller retailers. 

The Robinson-Patman Act

The RPA is a Great Depression-era antitrust statute enacted in 1937 for the ostensible purpose of protecting smaller retailers. The statute prohibits the sale of goods to different buyers at different prices under certain circumstances.  The RPA also has provisions for discriminatory promotional allowances. 

The statute and judicial precedent consider a number of factors and exemptions relevant to establishing a violation of the RPA.  As a general matter, the RPA only purports to prohibit sellers from charging buyers disparate prices for products of the same “grade and quality,” except to meet competition or when justified by certain offsetting criteria such as differences in cost, manufacture, sale, or delivery.³

The RPA may be enforced by the federal government and private plaintiffs.  The RPA is, however, rarely prosecuted.  The last government prosecution was brought more than 20 years ago when spice and seasoning manufacturer McCormick and Company settled an FTC lawsuit alleging that McCormick employed a variety of discounting schemes, including slotting allowances, free goods, unofficial discounts, and cash rebates, to favor some retailers over others.⁴

Implications

While this specific case is at a very early stage, the fact that it was filed in the first place is notable.  The FTC had largely abandoned enforcement of the RPA due to the concern that enforcement could deter discounting, cause consumers to pay higher prices, and otherwise lessen competition—concerns that were echoed in a dissenting statement by Commissioner Holyoak.⁵ Nevertheless, the current Democratic commissioners have long promised to revive RPA enforcement and have apparently chosen to do so as the current administration is coming to an end.  The decision to file has drawn some public support, including from the National Grocers Association, which cheered the suit as an effort to “level the playing field” between large businesses and local, independent retailers.⁶

The outlook for this lawsuit, and the future of government-led RPA enforcement more generally, is murky given the impending administration change.  The robust dissents of both sitting Republican commissioners suggest the RPA may be an unlikely enforcement priority.  Indeed, Commissioner Andrew Ferguson, who President-elect Trump recently announced will serve as the next FTC Chair, called the suit “an imprudent use of the Commission’s enforcement resources even if it were likely to prevail.”⁷

Still, the filing of the case is a reminder of the risks associated with offers to sell on different terms without considering the antitrust implications.  Even if the incoming administration drops or settles the complaint, the filing may encourage private actions. So, businesses (especially those in the retail distribution chain) should stay aware of RPA developments. 

Regardless of the future this particular lawsuit faces, this move from the FTC on the heels of a change in administration illustrates the complex and uncertain regulatory environment businesses face as they prepare for the new year and the new administration. We invite you to reach out to your contact or the authors of this article to discuss any questions you may have about the RPA or other antitrust enforcement issues. 

Footnotes

1. Complaint, United States v. UnitedHealth Group Inc., No. 1:24-cv-03267-JKB (D. Md. 2024); FTC, FTC and DOJ Withdraw Guidelines for Collaboration Among Competitors (December 11, 2024).

2. Complaint, FTC v. Southern Glazer’s Wine and Spirits, LLC, No. 8:24-cv-02684 (C.D. Cal. 2024).

3. 15 U.S.C. § 13(a).

4. Agreement Containing Consent Order, In the Matter of McCormick and Company, Inc., FTC No. 961-0050.

5.  FTC, Dissenting Statement of Commissioner Melissa Holyoak In the Matter of Southern Glazer’s Wine and Spirits, LLC (December 12, 2024).

6. Press Release, National Grocers Association, NGA Commends FTC’s Enforcement of Robinson-Patman Act (December 12, 2024) (https://www.nationalgrocers.org/news/nga-commends-ftcs-enforcement-of-robinson-patman-act/).

7. FTC, Dissenting Statement of Commissioner Andrew N. Ferguson In the Matter of Southern Glazer’s Wine and Spirits, LLC (December 12, 2024).