FTC Lawsuit Alleges Costco and Kroger Received Illegal Price Breaks

FTC Alleges Costco and Kroger Benefited from Illegal Price Breaks in Southern Glazer’s Deal

The Federal Trade Commission (FTC) has filed a lawsuit accusing Southern Glazer’s Wine and Spirits, the largest wine and spirits distributor in the U.S., of engaging in illegal pricing practices that allegedly favored retail giants like Costco and Kroger. The lawsuit, filed in the U.S. District Court for the Central District of California, alleges violations of the Robinson-Patman Act, which regulates price discrimination and requires volume discounts to be tied to actual cost efficiencies.

Allegations of Price Discrimination

FTC Lawsuit Alleges Costco and Kroger Received Illegal Price Breaks which represents over 5,600 wine and spirit brands and reported revenues exceeding $26 billion in 2023, is accused of providing significant discounts to large chains such as Costco and Kroger while charging higher prices to smaller, independent retailers for identical products. According to the FTC, these pricing practices have been ongoing for at least six years.

The lawsuit claims that some independent retailers, located just blocks away from large chains, paid more for the same bottles of wine and spirits. These practices, the FTC argues, have harmed small businesses, reduced consumer choice, and led to higher prices in communities.

“For many years, Southern has harmed, and continues to harm, smaller grocery stores, convenience stores, and other independent retailers by charging them higher prices compared to large national and regional chains,” the lawsuit states.

FTC’s Renewed Enforcement of the Robinson-Patman Act

The Robinson-Patman Act has seen little enforcement in recent decades, but FTC Chair Lina Khan emphasized the importance of addressing unfair pricing practices to protect competition.

“When local businesses are squeezed by unfair pricing practices that favor large chains, Americans see fewer choices, pay higher prices, and communities suffer,” Khan said.

Future of the Case Uncertain

The lawsuit’s future remains uncertain due to shifting leadership at the FTC. President-elect Donald Trump has selected Andrew Ferguson to lead the commission. Ferguson, who was one of two commissioners opposing the lawsuit, has expressed skepticism about its merits, suggesting that only substantial price discrimination would constitute a violation under the Robinson-Patman Act. He further argued that the lawsuit identifies only isolated cases of pricing discrepancies.

As the case unfolds, it could mark a turning point in the enforcement of laws designed to prevent anti-competitive pricing practices, potentially reshaping the dynamics between distributors, large retailers, and small businesses.