FTC Brings First Robinson-Patman Act Enforcement Action in Decades

On December 12, 2024, the Federal Trade Commission (FTC) sued the largest distributor of wine and spirits in the United States—Southern Glazer’s Wine and Spirits, LLC (Southern)—for violations of the Robinson-Patman Act (RPA) in the retail sale of wine and spirits. The RPA, enacted in 1936, addressed the concern at the time that large conglomerates were receiving more favorable pricing for the same products sold to small resellers, harming competition. Although there was a time when the FTC frequently challenged companies’ practices under the RPA, until this complaint the RPA was not federally prosecuted for nearly two decades. Indeed, as part of the work of the Antitrust Modernization Commission of 2002, many commentators predicted that the RPA would be withdrawn. A renewed interest in the RPA started in 2022 when the FTC issued a policy statement highlighting the RPA with the then immediate goal of addressing high pharmaceutical industry prices. But FTC then launched two investigations into potential price discrimination, one against two large soft drink producers and the other against Southern.  

Perhaps revealing how difficult it has been for the FTC to bring an RPA case is the unusual 88 page dissent of Commissioner Holyoak, which Commissioner Bedoya, joined by Chair Lina Khan and Commissioner Slaughter, called inappropriate—stating she is “acting as a prosecutor, counsel for the defendant, district court judge and Supreme Court majority personified” despite her role as Commissioner of the FTC bringing the action.¹ Commissioner Ferguson, the nominated future Chair of the FTC, issued his own 30-page dissent.²

Echoing the original impetus for the RPA, the FTC alleges that Southern’s discriminatory pricing is harming small, independent businesses and preventing them from competing with large, national and regional chains—ultimately harming consumers in price and choice. It alleges that Southern sold wine and spirits to small, independent “mom and pop” businesses, family-owned neighborhood grocery stores, local convenience stores and other independent retailers across the country, at prices that are “drastically higher” than Southern’s prices to large national and regional chains. 

The complaint, filed in the U.S. District Court for the Central District of California, seeks a preliminary and permanent injunction to stop Southern from discriminating in price within the meaning of Section 2(a) of the RPA, by selling its products to any purchaser “at a net price higher than that charged to any competing purchaser, where the discrimination may cause competitive harm. . . .”

In a press release, the FTC underscored that its intent in bringing the lawsuit is to ensure that smaller, community-based businesses have access to the same discounts, rebates and pricing as large chains that compete against them, unless the differences are justified by cognizable defenses found in the Act itself. The FTC seeks to enjoin Southern from further unlawful price discrimination.

RPA Overview

The Robinson-Patman Act prohibits discrimination, inter alia, in price between different purchasers of commodities, such that the differential may lessen competition.³ Section 2(a) prohibits a seller from “discriminat[ing] in price between different purchases of commodities of like grade and quality . . . where the effect of such discrimination may be to” adversely affect competition.⁴ The RPA also addresses manufacturer support for resale, e.g. promotional allowances and services between competing resellers, in order to prohibit indirect price discrimination in the form of advertising and other promotional allowances made available to purchasers on disproportionate terms.

There are numerous statutory defenses to an RPA violation, including good faith meeting competition, cost justification, changing conditions (e.g., deterioration or obsolescence affecting the marketability of the product), functional discounts and availability, with varying proof requirements. The meeting competition defense is the broadest and most common defense, potentially applicable when the seller acts "in good faith to meet an equally low price of a competitor”.⁵ Importantly, volume discounts are not a defense, although other defenses may come into play in volume-based discount situations. 

Private plaintiffs have been consistently using the RPA to try to address alleged discrimination in prices to smaller resellers that compete with larger resellers. The last several years have seen multiple rulings on RPA claims each year. While few are successful in recovering damages, enough have survived the motion to dismiss stage to be notable and should prompt companies to continue efforts to comply with the RPA.

Conclusion/Takeaways

Certainly the 2022 policy statement and investigations, and now this FTC court action against Southern, alerts companies that the RPA may make a comeback as an enforcement tool, prompting eager plaintiffs to follow suit. While successful private RPA claims have been few and far between given the highly technical nature and narrow interpretation of the RPA by the courts, invigorated RPA enforcement by the government will likely spur private plaintiffs as well.

Commissioner Ferguson has been tapped as the next FTC Chair, and while his dissent agrees that the FTC should enforce the RPA, it must exercise sound discretion in doing so. His dissent emphasizes that the “Commission exercises its discretion poorly by bringing this case,” and that the “Commission is unlikely to prevail even on its own theory of the [RPA], and it would be imprudent use of the Commission’s resources even if it were likely to prevail.”⁶ Thus, Commissioner Ferguson leaves open the possibility that the FTC could withdraw this case as the new administration enters and revised regulatory enforcement policies are prioritized and rolled out.