On December 12, 2024, the U.S. Federal Trade Commission (FTC) authorized its staff to file a complaint against alcohol distributor Southern Glazer’s Wine and Spirits, LLC (“Southern Glazer’s”). The complaint alleges that the company engaged in price discrimination—charging higher prices to independent businesses and lower prices to large national and regional chains—in violation of Section 2(a) of the Robinson-Patman Act (“RPA”). The Commission voted 3-2 along party lines to file the lawsuit in federal district court, with the two Republican-appointed Commissioners—Commissioners Melissa Holyoak and Andrew Ferguson—issuing strongly worded dissenting statements (see here and here, respectively). Prior to this case, the federal antitrust agencies—the FTC and the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”)—had not brought an enforcement action under the RPA in more than two decades.

The Robinson-Patman Act:

According to the Supreme Court in Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc.,546 U.S. 164, 175 (2006), Congress enactedthe RPA in 1936 to “target the perceived harm to competition occasioned by powerful buyers” in response to the advent of large chain stores. At the time, Congress was worried that large firms could extract lower prices from manufacturers or suppliers than smaller businesses. Id.

The RPA covers several categories of conduct. Most relevant here, Section 2(a) makes it unlawful for any person “engaged in commerce” to “discriminate in price between purchasers of commodities of like grade and quality” where the effect of such discrimination may be to lessen competition, tend to create a monopoly, or injure competition with any person who receives the benefit of such discrimination or their customers. There are several potential legal defenses to this provision, including that the price difference was justified by costs incurred by the seller, that the lower price was available to all customers, that the price differential did not cause the customer that paid a higher price to lose sales, and that the price difference was the result of meeting a competitor’s price.

The RPA has been heavily criticized—including by the agencies themselves—because its enforcement could increase prices to consumers. For example, in 1977, the Antitrust Division announced that it would stop enforcing the RPA in part because the RPA potentially punishes legitimate volume discounts by sellers, which risks chilling upstream price competition and which could lead to higher prices to end consumers. The federal antitrust agencies brought very few RPA-related enforcement actions after that statement, and they had effectively ceased enforcement of the RPA since 2000—until this case.

The Complaint:

The FTC’s complaint alleged that since 2018 Southern Glazer’s, the largest U.S. wholesaler of wine and spirits, “charged significantly higher prices for identical bottles of wine and spirits to disfavored independent retailers than to favored large chain retailers.” Southern Glazer’s allegedly entered into exclusive distribution agreements with many of the largest suppliers, and offered scan rebates (i.e., price reductions given to a retailer’s customers at the point of sale for certain brands or products) to large retailers but not small ones. The FTC also alleged that Southern Glazer’s offered large and/or cumulative discounts at quantity purchase levels that only specific chain customers could attain and that the discounts were not justified. For example, large chain retailers could qualify for cumulative volume threshold discounts by combining purchases across many stores or utilizing warehouses that small independent retailers could not.

The FTC claimed that Southern Glazer’s conduct injured firms that compete against the buyers that benefited from the discounts they received from Southern Glazer’s. As a result of this conduct, independent retailers allegedly lost sales and customers to favored large chain retailers, which were able to charge lower prices to consumers. This, the FTC alleged, harmed competition in the market for the retail sale of wine and spirits. The FTC asked for preliminary and permanent injunctive relief in the U.S. District Court for the Central District of California.

Commissioner Statements:

Commissioner Alvaro Bedoya, joined by Chair Lina Khan and Commissioner Rebecca Slaughter, issued the Majority Statement, with Commissioners Melissa Holyoak and Andrew Ferguson each issuing a dissenting statement. All three statements focused largely on the history and purpose of the RPA.

The Majority Statement emphasized the importance of enforcing the RPA as Congress intended, stating that the RPA is a pro-consumer law that seeks to prevent oligopoly prices and to ensure that large companies do not abuse their greater bargaining power. The Majority argued that there is no empirical research to support the critique that enforcement of the RPA raises consumer prices.

Commissioner Holyoak’s Dissenting Statement asserted that the Complaint did not comport with Congress’s mandate to construe the RPA in a manner consistent “with broader policies of the antitrust laws” because it focused on harm to competitors, without identifying harm to competition or consumers, and condemned conduct that is potentially procompetitive. She also argued that mere price discounting is not dispositive proof of harm to competition, and, in fact, the proposed relief might substantially lessen competition by chilling legitimate pricing and discounting. Notably, she also claimed that the Complaint failed to satisfy the threshold jurisdictional interstate commerce requirement of the RPA because Southern Glazer’s is subject to state-specific regulations that affect its pricing.

Commissioner Ferguson’s Dissenting Statement largely paralleled Commissioner Holyoak’s statement, but he also argued that the Complaint does not allege any evidence that the alleged diversion of sales from the disfavored purchasers to the favored purchasers was substantially or primarily caused by the challenged price discrimination, as required by the RPA.

The RPA Going Forward:

The FTC under the Biden Administration publicly signaled its renewed interest in enforcing the RPA, including in Chair Khan’s June 2022 policy statement on rebates and fees and Commissioner Bedoya’s remarks at the March 2023 ABA Antitrust Law Spring Meeting. This case is the federal antitrust agencies’ first enforcement action following those statements. However, the Republican Commissioners’ dissenting statements indicate significant reservations in continuing to emphasize RPA enforcement in the next administration. The incoming Trump administration will have the opportunity to decide whether and, if so, how to continue to litigate this case. President-elect Trump has indicated that he will nominate Mark Meador to fill the seat currently occupied by Chair Khan, whose term has expired. If Mr. Meador is confirmed and agrees with the two dissenting Republican Commissioners regarding the lack of merit in this case, the three Republican Commissioners could seek to settle or even to withdraw the complaint. Even if the FTC were to withdraw the complaint, which would be a highly unusual if not unprecedented action, it would not necessarily signal that the Republican-appointed Commissioners will decline to support other RPA-based enforcement actions. Both Commissioner Ferguson and Mr. Meador have indicated a willingness to enforce the RPA under an appropriate set of facts. In fact, Meador has stated that not enforcing the RPA at all “offends the rule of law.”