Commissioner Alvaro Bedoya, on behalf of the majority, asserted that the FTC issued the complaint "so that small, family-run grocery and liquor stores can get the same prices as their billionaire competitors." The two Republican Commissioners, Commissioners Andrew Ferguson, President-elect Trump's nominee to Chair of the FTC, and Melissa Holyoak, wrote separate dissents criticizing the action as failing to meet the requirements of the RPA, noting that it's unlikely to succeed on the merits, and characterizing it as an "imprudent use of the Commission’s resources."2 Despite the disagreements, all three opinions did agree that the RPA should be actively enforced when warranted.
This case signals a possible revival of RPA enforcement, which could also trigger more RPA allegations in private actions. However, Commissioner Ferguson's dissent, while agreeing that the FTC should enforce the RPA, reflects a conservative interpretation of the statute and suggests a possibility that the FTC could withdraw this case as the new administration rolls out its enforcement priorities.
Key takeaways
- By bringing this action, the FTC followed through on several years of public statements from FTC leadership during the Biden Administration on the need to investigate price discrimination involving the sale of commodities and enforce the RPA.
- This lawsuit, alongside recent plaintiff successes (see our prior coverage here), is likely to embolden commodity purchasers to use the RPA as leverage in negotiations with suppliers and, potentially, bring private actions under the RPA.
- The lawsuit suggests that suppliers that sell consumer goods to chain stores may face heightened risk of RPA enforcement given the practical realities of negotiating prices with large buyers with broad distribution. This can be contrasted with other sales models that involve competitive bidding, special-order sales, or distribution that do not involve chain stores. This unique treatment of chain store suppliers has been a key focus in recent RPA litigation (see our prior coverage here).
- While the Commission split across party lines to authorize the suit, all five Commissioners agreed that the RPA should be actively enforced when warranted. The dissents, however, suggest that the RPA will be a lower enforcement priority under the new administration.
- The party-line split demonstrates meaningful disagreement between Commissioners on how to interpret the act's requirements—particularly with respect to the "harm to competition" requirement and the availability of certain defenses including the "cost justification" defense.
- Developments in the following months will help to clarify the FTC's approach to the RPA including the fate of this particular suit and what principles it will employ in evaluating RPA cases.
In more detail
The Robinson-Patman Act (1936)
Enacted in 1936, the Robinson-Patman Act prevents suppliers, wholesalers, and manufacturers from "discriminat[ing] in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy or prevent competition."3 This Depression-era antitrust law was enacted by Congress to address a perceived concern that large sellers were favoring large corporate chains due to their greater purchasing power and granting them special prices, exclusive discounts, and secret rebates that the sellers withheld from smaller rivals.
While both the FTC and U.S. Department of Justice Antitrust Division (DOJ) have jurisdiction to enforce the RPA, governmental enforcement decreased significantly beginning in the 1980s, in part, because enforcement was viewed as harmful to consumers and likely to result in inefficient business practices and higher prices.4 Indeed, the last RPA enforcement action brought by the FTC was in 2000, which was resolved with a settlement.5
However, over the past several years, statements from various members of FTC leadership, notably Chair Lina Khan and Commissioner Alvaro Bedoya, have called for revitalized RPA enforcement. For example, in June 2022, the FTC issued a policy statement on "Rebates and Fees in Exchange for Excluding Lower-Cost Drug Products" which identified the RPA as a mechanism to address alleged concerns with pricing by pharmacy benefit managers.6 Chair Khan issued separate remarks on this policy statement which stated that anticompetitive rebates could be addressed under the RPA's "commercial bribery" provisions. Later that same year, Commissioner Bedoya gave a speech titled "Returning to Fairness" in which he advocated for renewed FTC enforcement of the RPA to protect small businesses.7
The agency's enforcement intentions were clarified in March 2023 when Chair Khan announced that the FTC was preparing to bring an enforcement action under the Act "in short order."8 Public reports identified two RPA-related investigations into the beverage and alcohol industry. In March 2024, the FTC released a report on grocery supply chain disruptions concluding these disruptions had "disproportionate[]" impact on smaller firms while "large purchasers" were able to obtain more favorable terms from suppliers.9 This report followed a November 2021 study into supply chain disruptions which led to subpoenas being issued to several large retailers, wholesalers, and consumer good suppliers.10
Case Background
Southern's Wine and Spirits is the largest coast-to-coast distributor of wine and spirits in the United States. The FTC alleges that "Southern has violated the Robinson-Patman Act by selling wine and spirits to small, independent 'mom and pop' businesses at prices that are drastically higher than the prices Southern charges large national and regional chains."11
According to the complaint's characterization of the industry, wine and spirits are generally sold in the U.S. through a non-integrated distribution system regulated by each state and requiring three distinct tiers.12 Producers in the first tier—including distillers, vintners, and importers may sell their wine and spirits only to distributors in the second tier. Distributors then re-sell the wine and spirits to retailers in the third tier, which then sell the products to consumers.13 With limited exceptions, only retailers may sell to end consumers. Southern generally sells their products to retailers.14
The FTC alleges that from early 2018 to the present, Southern has repeatedly discriminated in price between disfavored independent purchasers and favored large chain purchasers of wine and spirits located in rural and urban areas throughout open and franchise states.15 More specifically, the complaint asserts that Southern charged disfavored independent retailers "significantly" higher prices for "identical" bottles of wine and spirits compared to favored large chain retailers in transactions that were reasonably contemporaneous. The complaint also alleges that the disfavored independent retailers are geographically proximate to and compete with favored retailers in the resale of wine and spirits to "the same pool of end consumers."16
The FTC contends that Southern's large, high-volume quantity discounts "forced" disfavored independent retailers to pay significantly higher prices than favored large chain retailers purchasing the same products and created significant retail pricing and margin advantages for large chain retailers in the resale of those products to end consumers.17 The complaint then argues that Southern often allows favored large chain retailers to combine purchases over a specified period to qualify for cumulative quantity discounts18 and awards favored large chain retailers scan rebates that are not made available to competing disfavored independent retailers.19 The FTC concludes that as a result of Southern’s practices, independent retailers have (i) lost sales and customers to favored large chain retailers, (ii) failed to remain price-competitive with favored large chain retailers, (iii) sold lower volumes of wine and spirits than they would have in the absence of price discrimination, and (iv) made less profits on the products they did sell.20
The Commission voted to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Central District of California on a 3-2 vote.
Dissenting Statements
Republican-appointed Commissioners Andrew Ferguson and Melissa Holyoak dissented. Both issued lengthy dissents underscoring pointed disfavor with the majority's position.
In her 88-page dissenting statement, Commissioner Holyoak criticized the lawsuit as condemning "conduct that is plainly innocuous or even procompetitive."21 Specifically, Commissioner Holyoak argued in her statement that (i) the Complaint fails to meet the "in-commerce" requirement of Section 2(a); (ii) the Complaint fails to satisfy the Act’s statutory requirement to identify "paired" retailers (i.e., allegations that demonstrate the favored and disfavored purchasers directly "compete"); (iii) Southern Glazer's receipt of supplier discounts are cognizable under the Act's cost-justification defense; and (iv) Southern Glazer's pricing practices were undertaken in a good-faith effort to meet competition.22
Commissioner Holyoak also argued that there was no evidence to suggest harm to competition and that mere harm to competitors does not satisfy the competitive effects proviso of the RPA. Commissioner Holyoak's position argues that the competitive effects language of Section 2(a) must be read consistently with other sections of the Clayton Act and the other provisions of the federal antitrust laws more generally.23
Commissioner Ferguson raised similar criticisms of the enforcement action in his dissent. The majority criticized both dissents for breaking with agency norms.24 The provided, other third-party commentators have also criticized the FTC's timing—coming after the results of the recent presidential election and just before an impending change of control of the FTC to Republican-appointed commissioners.
Significance of the Lawsuit
Companies were already on notice that there has been renewed interest at the FTC in enforcing the RPA. Despite the split on party lines, there does seem to be some consensus that the FTC should enforce the RPA, which is a departure from the general consensus that had existed for several decades. This governmental action is likely to embolden private litigants to bring more RPA claims, despite a number of losses in civil suits and a tendency of courts to adopt technical and narrow interpretations of RPA claims.
The incoming change in administration also raises doubts about how seriously the FTC will litigate this matter and maintain RPA enforcement as a priority. The issuance of this complaint suggests broad disagreement between the current Commissioners. Even the dissents diverge regarding the likely merits of the claim here—with Commissioner Ferguson seemingly leaving open the possibility that discovery could uncover a viable claim while Commissioner Holyoak suggests the opposite.
President-elect Donald J. Trump has selected Commissioner Andrew Ferguson as the Chair of the Federal Trade Commission and nominated Mark Meador to serve as a new commissioner at the FTC. Meador has recently been in private practice, served as an FTC lawyer, acted as the Deputy Chief Counsel for Antitrust and Competition Policy for Senator Mike Lee (R-UT) on the Senate Antitrust Subcommittee, and, relevant here, previously spoken favorably about RPA claims.25 These recent changes all suggest that the incoming commission may scale back or even withdraw this suit, but future RPA enforcement or guidance remains an uncertainty.
1 FTC Press Release "FTC Sues Southern Glazer’s for Illegal Price Discrimination," (Dec. 12, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/12/ftc-sues-southern-glazers-illegal-price-discrimination?utm_source=govdelivery; FTC v. Southern Glazer’s Wine and Spirits, LLC, No. 8:24-CV-02684, 1 (C.D. Cal. Dec. 12, 2024) (the "Complaint"), https://www.ftc.gov/system/files/ftc_gov/pdf/001-REDACTED-Complaint.pdf.
2 https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/dissenting-statement-commissioner-andrew-n-ferguson-matter-southern-glazers-wine-spirits-llc; https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/dissenting-statement-commissioner-melissa-holyoak-matter-southern-glazers-wine-spirits-llc.
3 15 U.S.C. § 13.
4 See DOJ, Report on the Robinson-Patman Act, at 99-100 (1977) (explaining negative impacts of Robinson-Patman Act enforcement on consumers); see also Antitrust Modernization Commission, Report and Recommendation (April 2007) (characterizing the RPA as "antithetical to core antitrust principles" and recommending repeal).
5 See FTC Press Release "World's Largest Manufacturer of Spice and Seasoning Products Agrees to Settle Price Discrimination Charges," (Mar. 8, 2000), https://www.ftc.gov/news-events/news/press-releases/2000/03/worlds-largest-manufacturer-spice-seasoning-products-agrees-settle-price-discrimination-charges.
6 Policy Statement of the Federal Trade Commission on Rebates and Fees in Exchange for Excluding Lower Cost Drug Products, FTC (June 16, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Policy%20Statement%20of%20the%20Federal%20Trade%20Commission%20on%20Rebates%20and%20Fees%20in%20Exchange%20for%20Excluding%20Lower-Cost%20Drug%20Products.near%20final.pdf.
7 Alvaro Bedoya, Returning to Fairness, Prepared remarks of Commissioner Alvaro M. Bedoya, FTC (Sept. 22, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/returning_to_fairness_prepared_remarks_commissioner_alvaro_bedoya.pdf
8 Chris May, US FTC's Robinson-Patman Act reactivation headed toward enforcement actions 'in short order,' Khan says, MLex (Mar. 27, 2022), https://mlexmarketinsight.com/news/insight/us-ftc-s-robinson-patman-act-reactivation-headed-toward-enforcement-actions-in-short-order-khan-says.
9 Policy Statement of the Federal Trade Commission on Grocery Supply Chain Disruptions, FTC (Mar. 21, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/03/ftc-releases-report-grocery-supply-chain-disruptions.
10 FTC Launches Inquiry into Supply Chain Disruptions (Nov. 29, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/11/ftc-launches-inquiry-supply-chain-disruptions.
11 Complaint at 2.
12 Complaint at ¶ 24.
13 Id.
14 Id. at ¶ 28.
15 Complaint at ¶ 32.
16 Id.
17 Id. at ¶ 41.
18 Id. at ¶ 42.
19 Id. at ¶ 49.
20 Complaint at ¶ 78.
21 Dissenting Statement of Commissioner Melissa Holyoak in the Matter of Southern Glazer's Wine & Spirits, LLC Commission File No. 2110155 (Dec. 12, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/holyoak-statement_southern-glazers.pdf.
22 Id. at pg. 3.
23 Id.
24 Statement of Commissioner Alvaro M. Bedoya Joined by Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter In the Matter of Southern Glazer's Wine and Spirits, LLC Dissenting Statement of Commissioner Melissa Holyoak in the Matter of Southern Glazer's Wine & Spirits, LLC Commission File No. 2110155 at 15 (Dec. 12, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/statement-bedoya-joined-by-khan-slaughter-southern-glazers.pdf.
25 Mark Ross Meador, Not Enforcing the Robinson-Patman Act is Lawless and Likely Harms Consumers, The Federalist Society (June 9, 2024), https://fedsoc.org/commentary/fedsoc-blog/not-enforcing-the-robinson-patman-act-is-lawless-and-likely-harms-consumers.