The Federal Trade Commission (FTC) recently filed a complaint in federal court alleging Southern Glazer’s Wine and Spirits LLC (Southern Glazer) violated the Robinson-Patman Act (RPA), a price discrimination law.
The FTC alleges Southern Glazer engaged in price discrimination by offering discounts and rebates to large buyers that were not available to smaller buyers. The FTC further alleges Southern Glazer’s price disparities were “not justified by differences in costs.” This allegation aims to disarm a defense against price discrimination under the RPA.
Why is the case important?
The case is important for two reasons. First, the suit marks the renewed enforcement of a long disfavored law. The FTC has not enforced the RPA in nearly a quarter of a century. The RPA fell out of favor, in part, because antitrust enforcers, scholars, and lawyers argued enforcement of the law can lead to price increases. As Commissioner Ferguson wrote in his dissent, “opponents have argued that the Act rests on bad economics and that enforcement would injure consumers by denying them the benefits of vigorous price competition.”
Second, Commissioners Ferguson and Holyoak, both Republicans, issued detailed dissents. Given their pending rise to the majority and Commissioner Ferguson’s appointment to chair the FTC under President-elect Trump, the dissents call into question whether the suit will survive the next administration. It is, however, rare for an agency to withdraw a litigation because of a change of administration.
The Dissents
Commissioner Ferguson’s dissent is critical of those who suggest antitrust agencies should not enforce the RPA because it is antithetical to the other antitrust laws. Instead, the thrust of Commissioner Ferguson’s dissent is 1) the RPA is a law that the Executive Branch, and its agencies, should not categorically ignore; 2) the case law for secondary-line RPA cases, alleging price discrimination that injures competition among the customers of the discriminating seller, like the FTC’s case against Southern Glazer, is unsettled; 3) the FTC’s case is weak because it is questionable that Southern Glazer’s sales cross state lines, referred to as “in commerce,” due to state laws and regulations, “Southern [Glazer] appears likely to succeed on a cost-justification defense,” and diversion of sales from the independent, smaller purchasers to Southern Glazer are de minimis; and 4) the suit is a poor use of the FTC’s limited resources.
Commissioner Holyoak’s dissent provides a detailed discussion of the history of RPA, and, similar to Commissioner Ferguson’s dissent, analyzes the weakness of the FTC’s complaint including whether the complaint satisfies the “jurisdictional ‘in commerce’ requirement” and argues that the complaint contains no facts demonstrating that the favored retailers compete with the disfavored retailers or that the favored retailers knew Southern Glazer offered them favorable pricing. Commissioner Holyoak views the complaint’s weaknesses as fatal to the Commission’s case.
What to Watch
Reading between the lines, the dissents suggest that only the clearest violations of the RPA will reach the complaint stage under Commission Ferguson’s FTC. In the meantime, the FTC’s suit against Southern Glazer will likely proceed with a settlement agreement as the most likely outcome.
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