In its latest lawsuit, the Federal Trade Commission seeks to find out.
Last month, the FTC revived the long-dormant antitrust law to crack down on the nation’s largest wine and spirits distributor. The lawsuit accuses Southern Glazer’s Wine and Spirits, the wholesale liquor giant, of cutting sweetheart deals for big chain stores while small grocers, corner stores and independent liquor stores get hammered by higher prices.
At first glance, the case could restore much-needed competition to the retail liquor industry. But it’s also about something much bigger: the FTC’s attempt to restore a fundamental principle of fairness to our economy. For decades, large retailers have been allowed to dominate simply because of their size, using their power to strong-arm suppliers and crush smaller competitors. By reinstating the Robinson-Patman Act, the FTC signals a bold step to undo the damage—to level the playing field, protect small businesses, and ensure that economic power is not concentrated in the hands of a few dominant players.
Few have heard of the Robinson-Patman Act, a New Deal-era law that outlawed price discrimination that occurs when manufacturers sell the same product to retailers at different prices—often under pressure from retail giants. But the FTC’s decision to end its enforcement decades ago caused a seismic shift in America. This has given huge chains like Walmart the freedom to squeeze suppliers for unfair discounts. Walmart’s expansion has not been held back; manufacturers of consolidated and closed factories; jobs disappeared; and thousands of small businesses folded, leaving behind hollowed-out high streets and food deserts. Aside from the collapse of US industry, few economic forces have done so much damage to the American landscape in the past 50 years.
The initial recovery of Robinson-Patman’s fulfillment will mean not only survival, but opportunity and growth for independent stores everywhere. More competition will mean lower prices, more shelf space for cool new products and new wealth in towns and cities. Fairness as a normative benchmark will mean a better deal for everyone.
The FTC’s attack on this kind of corporate wrongdoing seems like a novelty because, in the context of recent history, it is. The Robinson-Patman Act was passed in 1936—just as Kroger and the Great Atlantic & Pacific Tea Company chain of grocery stores, known as A&P, were rapidly expanding across the country and using their new size and power to force growers and farmers sell them at unsustainable low prices. The law, Congress explained when it passed, would ensure economic democracy and fairness by giving small businesses the same deals and opportunities as the chains.
The FTC diligently enforced the law for decades until the Reagan administration clamped down on it along with most other antitrust measures. The law helped develop an open, diverse retail economy; even in the early 1980s, small, independent grocers did more than half of all grocery sales and thrived alongside large chain stores in communities across the country.
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But at the dawn of the Reagan era, the law became a punching bag for a wave of politicians who replaced fairness with an economic philosophy that championed corporate size and shareholder wealth and rejected most attempts to impose limits.
As a result of these policy decisions, Walmart has grown up, which can run amok with impunity, triggering a chain reaction of food retail consolidation. Walmart’s rise has sparked a wave of supermarket mega-mergers; today the industry is almost 500 percent more concentrated than it was in 1990. Tired of being bullied by Walmart and mega-chains, consumer goods companies began to buy each other too. Just five of the largest consumer goods companies—Unilever, Procter & Gamble, Nestlé, ConAgra, and PepsiCo—have acquired more than 150 other consumer goods firms since the 1990s, creating huge conglomerates with diverse products that dominate the shelves of major retailers. . Every major retailer and mega-store has also realized they can get away with corporate bullying, including what the FTC now claims is the nation’s largest liquor supplier.
The case against Southern details what corporate injustice looks like in practice. Southern is currently the largest distributor of wine and spirits in the country. It sells spirits from coast to coast, accounting for one in three bottles of wine or spirits sold in America. It holds exclusive rights to must-have brands like Patron, Jim Beam, Jameson, Josh Cellars and others in many states, giving stores no choice but to deal with Southern.
Southern has done deals nationally with some of the industry’s biggest retail chains, from huge specialty stores like Total Wine and Binny’s to mega-supermarket chains Kroger and Albertsons to big box retailers Walmart and Costco. The FTC alleges that Southern sells cases of wine and spirits to large chains at a much lower price per bottle than to smaller independent stores, putting small stores at a severe disadvantage. According to the FTC’s lawsuit, “Southern’s pricing practices are a paradigmatic violation” of the Fair Pricing Act.
The heavily redacted lawsuit is sparse on public details. But the experience of smaller liquor stores backs up the agency’s claims about Southern.
James Dempsey spends many thousands of dollars each week stocking the shelves of Wagon Wheel Liquor in Durango, Colorado. Dempsey couldn’t acquire brands like Captain Morgan, Bacardi, Josh Cellars and other must-have brands without buying from Southern, their exclusive distributor in Colorado and most of the country.
But when he buys liquor and wine at Southern, he can’t get the same prices as the big box stores around him — stores like the Kroger-owned City Market supermarket chain — no matter how much he buys. In some cases, Dempsey would have to buy dozens of cases to get the same price that larger chains pay for just one.
All Dempsey wants is a fair shot.
“I just want it to be fair, okay?” Dempsey says. “I want the same price for the same thing. I didn’t have to buy 65 cases to get the same price.”
Small stores like Wagon Wheel would benefit from an enforced ban on price discrimination. Buyers would too. In states with alcohol price discrimination laws, prices at both chain and independent stores were low and about the same, with little difference between chains and mom-and-pop stores, a recent research found. Independent shops charge people less when they aren’t bullied by suppliers and driven out of business by rampant price discrimination, and prices are generally lower. Justice, it turns out, benefits everyone.
The call for economic justice is getting louder, and politicians are paying attention. In early 2022, 43 members of Congress — both Republicans and Democrats —called upon The FTC would revive Robinson-Patman and make clear that the corporate bullying faced by small retailers was “as a result of concentration throughout the supply chain.” Then, in September of that year, FTC Commissioner Alvaro Bedoya told the audience at an event in Minneapolis that the execution of Robinson-Patman was the key to restoring fairness as an antitrust goal.
The benefits of equity-driven antitrust enforcement have been widespread. Enforcement of these laws meant that neighborhood centers were filled with shops established and accountable to their communities. Farmers made a decent living and passed their business down from one generation to the next. Workers earned livable wages, and competition between chains and smaller stores kept prices low.
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Bedoya urged his agency to renew its pursuit of justice everywhere. “Some laws that have been expressly enacted under what you might call the fairness mandate — laws like Robinson-Patman — expressly spell out specific legal prohibitions,” he said. “The intent of Congress in these laws is clear. We must fulfill them.”
By suing Southern Glazer’s under Robinson-Patman, the agency did just that. While this case may be FTC Chairwoman Lina Hahn’s final act as head of the agency, the odds are more than decent that the new administration won’t change course. While FTC member and soon-to-be chairman Andrew Ferguson and fellow Republican Melissa Holyoke disagree with the case, future FTC nominee Mark Meador has expressed has long been supported enforcement of the price discrimination law. His support, along with that of Bedoya and Democrat Rebecca Kelly Slaughter, means South’s case could have the three (of five) votes it needs to go forward and go to court.
Even Ferguson, he has sharp disagreementsuggests that he would support such cases if the company being sued was larger and more powerful. The Walmarts and Amazons of the world should beware—the economic recovery may be long overdue.
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