The opinions expressed here are those of the author, a columnist for Reuters.
By Jenna Greene
Dec 17 (Reuters) - Need a bottle of wine to bring to a holiday party or some rum for spiking the eggnog?
If you buy it at a mom-and-pop liquor store or corner market, the price is likely to be higher, maybe a lot higher, than what you’d pay at a big chain store.
A lawsuit last week by the U.S. Federal Trade Commission against wholesale liquor giant Southern Glazer’s — which follows a little-noticed proposed class action against the distributor by a litigation boutique with a track record of winning similar cases — points to one reason why.
According to the complaints, Southern Glazer’s, the largest distributor of wine and spirits in the U.S., charges small retailers “drastically” higher wholesale prices than large national or regional chains for the same products, in violation of the Robinson-Patman Act. The price differences can’t be justified by economies of scale or the logistics of delivering the goods, the complaints allege.
The company, which distributes brands including Tanqueray, Grey Goose and Jim Beam, in a statement said it “strongly disputes” the allegations and called the litigation “misguided and legally flawed.”
If you’ve never heard of the Robinson-Patman Act, you’re not alone.
The FTC hasn’t brought a case under the Depression-era antitrust pricing law in nearly 25 years. It’s been closer to 40 since the agency took one to trial. The Wall Street Journal in an editorial earlier this year compared the statute, which generally bars sellers from discriminating in price between different purchasers of similar goods, to a dinosaur.
But while Robinson-Patman may be dusty, it’s not extinct.
Litigators at San Francisco-based law firm Gaw Poe, which was founded in 2018 by two Stanford Law School classmates, have carved out a practice bringing private suits under the statute. In addition to the firm’s case against Southern Glazer’s, which was filed in 2022 in California and is currently stayed pending resolution of arbitrability issues, they’ve racked up two significant wins this year in Robinson-Patman cases involving pricing of Clear Eyes drops and 5-hour Energy shots.
In both cases, they argued that manufacturers wrongly offered Costco (and in the case of Clear Eyes, also Sam’s Club) better terms than smaller rivals.
Co-founder Mark Poe told me his firm views itself as the "architects of a revival of Robinson-Patman Act litigation.” He said the actions are a way for independently owned businesses to compete on price against chain behemoths.
It’s common for plaintiffs lawyers to bring follow-on lawsuits in the wake of government enforcement actions. What’s more unusual here is that the FTC is trailing Gaw Poe in suing Southern Glazer’s.
FTC spokesperson Douglas Farrar said via email that “We applaud those private litigants who have been fighting for small businesses.” Farrar also dinged “previous political leadership” of the antitrust agencies for making the “misguided policy choice to not enforce the law Congress tasked them with enforcing.”
But FTC Commissioner Andrew Ferguson, who along with fellow Republican Melissa Holyoak voted against suing Southern Glazer’s, in a statement said that regulators are entitled to exercise discretion about which cases to bring.
When it comes to the Robinson-Patman Act, Ferguson said, there’s been a bipartisan consensus for decades that it “rests on bad economics and that enforcement would injure consumers by denying them the benefits of vigorous price competition.”
Moreover, he said, the FTC is “unlikely to prevail” against Southern Glazer’s in the litigation, which was filed in U.S. District Court for the Central District of California on Dec. 12 and is designated as related to the Gaw Poe action. Both cases in Santa Ana are before U.S. District Judge Fred Slaughter, a Biden appointee.
According to the FTC complaint, Southern Glazer’s – one of the top 10 largest privately held companies in the country, with revenue of $26 billion last year – charged independent retailers much more (exact amounts redacted) for identical bottles of wine and spirits than chain-store competitors, even though the outlets were often just a few blocks or miles apart.
The agency is seeking injunctive relief to ensure smaller retailers have access to the same deals as their larger competitors, unless (per the statute) the disparate offers are justified by actual cost differences, changed conditions or a good faith effort by the seller to match a competitor’s low price.
Southern Glazer’s, represented by Kirkland & Ellis, has responded with a multi-prong defense in the private litigation, which while geographically narrower in focus, makes similar claims.
The liquor distributor argues that Gaw Poe’s complaint doesn’t meet the statute’s stringent interstate commerce requirement. That is, while Southern Glazer’s may buy alcohol from out-of-state suppliers, once the products arrive in its warehouses, they exit the flow of commerce and subsequent sales are intra-state, defense counsel says.
Southern Glazer’s also argues that any price differences are lawful volume discounts. If the plaintiffs were to prevail, the company says, the result would not be lower prices for small retailers, but higher prices for everyone else, as “alleged discounts” are stamped out.
With a change in administration looming on the horizon, one question in my mind is whether the FTC will follow through on the case.
President-elect Donald Trump has tapped Ferguson to replace Lina Khan as the next FTC chair, and announced he intends to nominate Mark Meador, a partner at law firm Kressin Meador Powers and former antitrust counsel to Republican U.S. Senator Mike Lee, to fill Khan’s seat when she exits the commission.
Once Republicans are in the majority, will the new leaders view the litigation as an unwelcome carryover of Khan’s activist tenure?
Maybe not.
Like many retro-chic trends, the Robinson-Patman Act isn’t entirely predictable in its appeal.
Meador, who did not respond to a request for comment, wrote an article in July headlined "Not Enforcing the Robinson-Patman Act is Lawless and Likely Harms Consumers".
The belief that enforcing the law “leads to higher prices is oft-repeated but lacks empirical support,” he wrote, and “leaves helpless those consumers who are harmed.” To buttress his argument, Meador linked to another article -- by Mark Poe.
(Reporting by Jenna Greene)
((jenna.greene@thomsonreuters.com;))
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