The Federal Trade Commission (FTC) has begun an antitrust investigation into Southern Glazer’s Wine and Spirits, reviewing how the nation’s largest alcoholic beverage distributor may have favorably priced wine and liquor that advantaged larger retailers, according to Politico, citing three anonymous sources “with knowledge of the probe.”
The price discrimination investigation comes five months after regulators from Alcohol and Tobacco Tax and Trade Bureau (TTB) and the Internal Revenue Service (IRS) raided Southern Glazer’s Union City, California, offices.
Five California small wine retailers filed a lawsuit against Southern Glazer’s in June 2022 alleging that the multi-state distributor offers lower prices to larger retailers, according to Wine Industry Insights. The complaint was filed on behalf of Newport Beach-based Newport Wine & Spirits, Chula Vista-based Sunset Market & Liquor, Lakeside-based Times Market & Liquor, Oceanside-based Mike’s Liquor & Market and Santee-based Santee Market & Liquor and is set to go to trial in December 2023. The plaintiffs claim Albertsons was selling 750 mL bottles of Johnnie Walker Black for $19.99, while Southern Glazer’s sold them the same product at $22.25.
The FTC investigation revealed today centers on possible violations of the Robinson-Patman Act, which bars suppliers from offering favorable pricing to larger retailers at the expense of smaller stores, Politico reported. Additionally, Southern Glazer’s is being scrutinized for potential “unfair, deceptive or anti-competitive business practices” in violation of Section 5 of the FTC Act.
Sources told Politico that “the FTC is seeking detailed sales data on thousands of brands of alcohol and wine sold around the U.S. by both Southern Glazer and its competing distributors,” as the investigation raises “questions about pricing and benefits Southern Glazer offers to retailers including quantity-based discounts, rebates, promotions, as well as marketing, warehousing, merchandising and other services.”
The FTC is also reviewing “the competitive dynamics in the retail market for wine and alcohol and how Southern Glazer allocates wine and alcohol between different retailers, including whether and how it limits distribution to certain customers.”
Southern Glazer’s may not be alone in the probe, as the FTC is reportedly seeking broad information on the sale of wine and alcoholic beverages by wholesalers and retailers across the U.S., sources told Politico.
In January, the FTC opened an investigation into Coca-Cola and PepsiCo under the Robinson-Patman Act reviewing potential price discrimination within the soft drink market.
The FTC, TTB and Department of Justice have been taking a closer look at the beverage-alcohol industry since 2021, after President Joe Biden issued an executive order urging for an examination of the state of competition in the U.S. economy. Topics under consideration include tie-in sales, category management, and mergers and acquisitions.
Southern Glazer’s is the country’s largest wine and spirits distributor with more than 42 distribution centers that carry 7,000 brands and make 6.4 million deliveries to retailers annually. It operates in every state except for Connecticut, Georgia, Massachusetts, New Jersey, Rhode Island and Wisconsin, and also serves Washington, D.C., and Canada.
Southern Glazer’s did not return a request for comment.