FTC Sues Southern Glazer’s for Discriminatory Pricing that Favors Larger Chains

In its final weeks under the current administration, the Federal Trade Commission isn’t letting up on its fight against anticompetitive practices, which has ramped up significantly under the tenure of current FTC Chair Lina Khan. Despite a leadership change looming in the new year, the FTC has sued the largest alcohol distributor in the U.S., Southern Glazer’s Wine and Spirits, for hurting competition by charging independent businesses “drastically higher” prices for its wine and spirits than what it charges “favored large-chain purchasers,” such as Total Wine & More, Costco and Kroger.

The FTC alleges that by depriving small, independent businesses of access to discounts and rebates, those businesses have lost sales and customers, which ultimately harms consumers by resulting in less competition and higher prices. Southern Glazer’s immediately disputed the claims, calling the suit “misguided and legally flawed.”

The FTC Charge: Southern Glazer’s Gives Large Chains Better Deals

Southern Glazer’s is the U.S. distributor for many of the largest wine and spirits suppliers in the U.S., including Pernod Ricard (Jameson Irish Whiskey, Absolut Vodka), Bacardi U.S.A. (Patron Silver Tequila, Grey Goose Vodka, Bacardi Rum), Diageo (Smirnoff Vodka, Aviation Gin) and Beam Suntory (Jim Beam Bourbon, Makers Mark Whiskey). In 2023, Southern generated approximately $26 billion in revenues from wine and spirits sales, making it the tenth largest privately held company in the country, according to the FTC’s estimates.

The FTC lawsuit, which was filed in the U.S. District Court for the Central District of California, seeks a permanent injunction against such behavior by Southern Glazer’s as well as “other equitable relief.” The lawsuit was approved by a 3-2 vote of FTC Commissioners, with Melissa Holyoak and Andrew Ferguson dissenting. Ferguson has been appointed by President-elect Donald Trump to replace Khan as Chair of the FTC when he takes office in January 2025, casting some doubt as to how rigorously the case will be pursued in the new year.

Southern Glazer’s: FTC Suit Based on Outdated Law

The FTC asserted its right to sue Southern Glazer’s under the purview of the 1936 Robinson-Patman Act, which was enacted specifically to target discriminatory pricing that would undercut or eliminate competition. For its part, Southern Glazer’s has attacked the lawsuit as being justified by an outdated law: “The RPA is a Depression-era federal antitrust law that has not been enforced in decades because of bipartisan concern that enforcement leads to higher prices for consumers,” said the company in a statement.

Khan preemptively countered that argument in her statement on the lawsuit, saying that “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. The law says that businesses of all sizes should be able to compete on a level playing field. 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.”

Southern Glazer’s ‘Vehemently’ Disputes FTC’s Claims

Specifically, the FTC has charged Southern Glazer’s with “pervasive and deeply engrained” discriminatory pricing practices, including offering quantity discounts and rebates to large buyers that are inaccessible to small competitors and are not justified by differences in the cost of distributing products to different retailers. As an example, the FTC said that “disfavored” independent retailers frequently are not informed about large quantity discounts, rebates and other special deals made available to larger chain retailers, even when it would be possible for the independent retailer to participate in the deal.

The FTC alleges that Southern Glazer’s has engaged in these practices since at least 2018 and that its investigation found that these pricing practices are not derived from differences in Southern Glazer’s cost of distributing products to larger retailers, which Southern Glazer’s quickly and vehemently disputed.

“Nearly every distributor of consumer products in the country” engages in similar volume discounting practices, according to Southern Glazer’s, which also pointed out that the “dissents filed by Commissioners Holyoak and Ferguson articulate reasons why this enforcement action is both misguided and legally flawed. Alcohol distributors face numerous regulations that dictate how they compete and can price and discount products, and Southern Glazer’s complies with those legal requirements.

“At Southern Glazer’s, we are proud to provide our customers and suppliers with the best-in-the-industry service for which we are known,” the company statement continued. “Operating in the highly competitive alcohol distribution business, we offer different levels of discounts based on the cost we incur to sell different quantities to customers and make all discount levels available to all eligible retailers, including chain stores and small businesses alike. We have thousands of employees focused on selling to small retailers, and for the benefit of those customers, we create small quantity discounts that provide similar or even lower prices on a per-case basis compared to large quantity deals we also offer.”

Khan’s Final Salvo at the FTC?

This latest lawsuit may be Khan’s last salvo before she leaves office in January. Under her tenure the FTC has undergone a marked ramp-up in the pursuit of antitrust and anticompetitive cases that has been lauded by the legal community and consumers, but lambasted by Wall Street for stifling business.

Just this week, the agency successfully squashed the proposed merger of America’s two largest grocery conglomerates, Kroger and Albertsons. Other efforts under Khan’s leadership have included:

Contesting Tapestry’s acquisition of fellow high-end handbag brand Capri, which was cancelled by the companies earlier this year;
Contesting Tempur Sealy’s acquisition of Mattress Firm;
Continuing to pursue the agency’s antitrust case against Amazon, parts of which were dismissed by a federal judge in October 2024. The remaining parts of the case are expected to go to trial in October 2026;
Issuing a formal ban on fake online reviews and testimonials to “protect Americans from getting cheated”;
Releasing a report outlining social media platforms’ “vast” user surveillance practices and lack of privacy protections;
Issuing a rule banning non-compete clauses, which was, however, subsequently blocked in federal court;
Pursuing a rule to ban “junk fees” — unfair or deceptive charges that are added to products or services;
Targeting opaque or burdensome subscription practices with its “click-to-cancel” rule;
Winning a 2023 lawsuit against Mastercard, which claimed that the credit card company’s practices to block competition were elevating prices for businesses, and that those higher prices were then being passed on to consumers.