It’s alive! – A divided FTC acts under the Robinson-Patman Act

On December 12, 2024, the Federal Trade Commission (“FTC”) voted 3-2 to file a complaint under Section 2(a) of the Robinson-Patman Act against Southern Glazer’s Wine and Spirits, LLC (“Southern Glazer’s”).[1] Several weeks later, a complaint against PepsiCo, Inc. under Section 2(d) and 2(e) of the Robinson-Patman Act was filed, with the same commissioners voting for and against the complaint.[2] These complaints became the first government enforcement of the Robinson-Patman Act in nearly a quarter-century.[3]

The Robinson-Patman Act

The Robinson-Patman Act prohibits a number of practices, with a primary focus on price discrimination. Such discrimination is outlawed when its result “may be substantially to lessen competition . . . or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them . . .”[4] Specifically, the Act provides:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof . . . , Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered. . .[5]

Beyond Section 2(a)’s prohibition of price discrimination, the Robinson-Patman Act also prohibits means by which parties could otherwise evade Section 2(a)’s prohibition. To that end, Section 2(d) prohibits payment to customers for services or facilities “in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers . . .”[6] Section 2(e), in turn, prohibits “discriminat[ion] in favor of one purchaser . . . by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.”[7]

The Southern Glazer’s complaint

The FTC’s complaint alleges that Southern Glazer’s, the largest U.S. wholesaler of wine and spirits, harmed small, independent retailers by charging them “as much as 12% to 67% more for the same bottles of certain wine and spirits than national and regional chains in the exact same geographic area.”[8]

The complaint asserts that the national and regional chains purchasing from Southern Glazers “purchase products through their own proprietary systems or third-party applications … [that] allow large chain retailers to view secret prices, promotions, and discounts, and place direct orders with Southern.”[9] In contrast, the complaint alleges that even when smaller retailers join purchasing cooperatives, they “often do not receive the same favorable prices offered to large, favored retailers…”[10]

The complaint alleges that Southern Glazers effectuated its price discrimination through:

• quantity discounts at levels “that only a few specific large chain customers can attain and that are not justified by cost savings achieved by Southern,”[11]
• cumulative quantity discounts over a period of time,[12]
• scan rebates that reduce prices for each bottle of a certain products that are sold,
• “channel pricing” that would award preferred pricing to a retailer regardless of quantity purchased,[13] and
• permitting large chain retailers to purchase at a lower price even after Southern Glazers imposed price increases for the market.[14]

The complaint alleges that many of the price differences observed cannot be explained by bona fide attempts to compete nor differences in the costs of manufacture, sale or delivery resulting from the larger purchases by large chains.[15]

The complaint is particularly noteworthy in one respect – although the Robinson-Patman Act only applies to interstate commerce, this is a case where the commerce might actually be intrastate. Because the 21^st Amendment provided individual states control of alcohol policy, Southern Glazer’s must, at least in many instances, operate through localized subsidiaries that may not conduct any interstate operations.[16] As such, it is a rare case because it is not immediately apparent that interstate commerce is a given.[17]

Two commissioners issue lengthy dissents

Two commissioners filed dissents from the issuance, including new FTC Chair Andrew Ferguson.[18] Then-Commissioner Ferguson first addressed his concerns as to the Robinson-Patman Act generally, contending that the Supreme Court’s differing thresholds for injury in “primary-line” cases and “secondary-line” [19] cases appeared to be inconsistent with the consumer-welfare standard that had come to govern antitrust cases in recent years.[20]

In reference to the Southern Glazer’s case, Commissioner Ferguson critiqued the action, noting that it appeared Southern Glazer’s was “likely to succeed on a cost-justification defense”,[21] that he had not seen “evidence of diversion to demonstrate more than a de minimis injury to competition,”[22] and that the Commission would likely fail to demonstrate that the discriminatory sales occur in interstate commerce.[23] Lastly, his dissent notes disagreement with the decision to seek enforcement when the buyers allegedly benefiting from the price discrimination lack market power.[24]

Commissioner Holyoak issued a dissent of more than 80 pages. Throughout the dissent, she highlights defenses that Southern Glazer’s had presented to the Commission and even renders apparent verdicts as to them. For instance, in discussing whether Southern Glazer’s pricing practices were made in good faith to meet the price of a competitor, Commissioner Holyoak stated, “[t]he evidence presented to the Commission convinces me that our approach in this case inadequately accounts for the evidence Southern Glazer’s has presented and may present with respect to the meeting-competition defense.”.[25] Similarly, In summarizing the complaint, Holyoak asserted,

I have seen no evidence demonstrating that Southern Glazer’s pricing practices reduce output, raise prices, or otherwise harm consumers or competition generally, much less in any relevant market, consistent with what is required to demonstrate competitive injury. That there is no evidence of competitive injury is not surprising. Half of Southern Glazer’s business is made up of independent retailers. The Complaint makes no effort to explain why Southern Glazer’s is motivated to either injure half of its customers (i.e., independent) or facilitate an increase in the market power of its already large customers (i.e., chains)—market power that could be used against Southern Glazer’s. Without evidence of harm to competition, the Commission should not proceed with the Complaint.[26]

Commissioner Bedoya, who voted to issue the complaint, in a statement joined by Chair Lina Khan and Commissioner Rebecca Kelly Slaughter, responded specifically to Holyoak’s dissent with similar fervor, “Commissioner Holyoak’s dissent could be copied and pasted into a defense brief. This effort will fail; the directions lead to roads that do not exist. But the consequences of this action cannot be ignored.”[27]

FTC files a Second Robinson-Patman complaint against Pepsi Co, Inc.

On January 17, 2025, the last business day before the inauguration of Donald Trump, the FTC voted 3-2 to issue a second Robinson-Patman Act complaint against PepsiCo, Inc., asserting violations of Sections 2(d) and (e) of the Robinson-Patman Act.[28] Specifically, the Complaint alleges that Pepsi “provid[ed] discriminatory promotional payments, allowances, and services to [a retailer customer][29] while failing to make those benefits available to . . . competitors . . . on proportionally equal terms.”[30]

By alleging claims under 2(d) and 2(e), the Complaint asserts claims under a per se theory;[31] this is in contrast with the Southern Glazer’s complaint under 2(a) price discrimination, which requires a showing of injury.

Virtually all the substance that would substantiate the PepsiCo Complaint has been redacted in the public version, so it is unclear what payments, allowances, and services PepsiCo has allegedly provided to its customer.

The public information available about the complaint comes largely from the dissents offered again by Commissioners Ferguson and Holyoak. Each issued sharp critiques of the action.

Commissioner Ferguson denounced the complaint, asserting that the FTC has “no evidence of disparate treatment. None.”[32] He continued, “I have seen no evidence on which firms compete with the big-box retailer or where such competition takes place, much less any evidence suggesting that every brick-and-mortar store in America competes with it.”[33] Indeed, he asserted that the FTC had “no evidence on any of the most critical elements of a Robinson-Patman Act case.”[34]

Commissioner Holyoak criticized the legal theory upon which the complaint was based, stating: “the Majority brazenly attempt to disguise a theory of harm that should be evaluated under Section 2(a) of the Act as unlawful allowances and services under Sections 2(d) and 2(e). Even a superficial reading of the Complaint reveals that the price concessions in question are all properly understood as price discounts—quintessential Section 2(a) conduct.”[35]

Conclusion

The existence of any Robinson-Patman Act enforcement marks a potentially seismic shift. With more than a generation passed since the last Robinson-Patman enforcement by the FTC and nearly a half-century since the Department of Justice ceased to enforce the Act, even failed efforts at enforcement could have an outsized impact.

While the push to bring Robinson-Patman cases began under former chair Lina Khan, her departure does not necessarily signal its end. Although Commissioner Ferguson replaced her as chair, her vote was effectively replaced by that of Mark Meador. Commissioner Meador has previously written that not enforcing the Robinson-Patman Act is “lawless” and specifically highlighted the relevance of the Robinson-Patman Act with respect to groceries and “other industries with similar cost and pricing dynamics”.[36] Moreover, even in his dissent in Southern Glazer’s, Chair Ferguson expressed support for Robinson-Patman Act enforcement.[37]

So, for the first time in more than a generation, a consensus exists that the Act should be enforced – though when, where, and how the Act should be enforced remains hotly disputed. As such, particularly amid the turmoil surrounding efforts to remove Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, the Robinson-Patman Act’s renaissance may be short-lived. Nonetheless, even the barest threat of sporadic enforcement could both require substantial increases in corporate compliance and could spark greater interest in private enforcement.

* Timothy Kearns is a Partner in Washington, D.C. and the Managing Editor of the Competition Bulletin.

Footnotes

[1] FTC v. Southern Glazer’s Wine & Spirits, LLC, Case No. 8:24-cv-02684-FWS-AD, Dkt. 57 (C.D. Cal. Feb. 10, 2025). (hereinafter “SG Compl.”).
[2] FTC v. PepsiCo, Inc., Case No. 25-cv-00664-JMF, Dkt. 1 (S.D.N.Y. Jan. 23, 2025) (hereinafter “PepsiCo Compl.”).
[3] The last Robinson-Patman Act enforcement was resolved through settlement in May 2000. See In re McCormick & Co., Inc., Dkt. No. C-3939, FTC (May 8, 2000).
[4] 15 U.S.C. § 13(a).
[5] Id.
[6] 15 U.S.C. § 13(d).
[7] 15 U.S.C. § 13(e).
[8] SG Compl. ¶3.
[9] Id. ¶30.
[10] Id. ¶31.
[11] Id. ¶38.
[12] Id. ¶42.
[13] Id. ¶50.
[14] Id. ¶54.
[15] Id. ¶¶ 5, 33.
[16] In Delaware, for instance, Southern Glazer’s is licensed as “Southern Glazer’s Wine & Spirits of Delaware, LLC”. See Office of the Delaware Alcoholic Beverage Control Commissioner, Wholesaler’s List, at: https://oabcc.delaware.gov/wholesalers-list/. In Maryland, the licensed wholesaler is “Southern Glazer’s Wine and Spirits of MD LLC”, while the Delaware entity holds a public transportation permit. See Alcohol, Tobacco, and Cannabis Commission, License & Permit Database, at: https://atcc.maryland.gov/resources/tools/license-permit-database/?lpaname=southern+glazer&lplocaddress=&lpnumber=&lptype=&lpstatus=.
[17] From the allegations that are public, the complaint does not make evident whether Southern Glazers’ pricing is operated from a central entity, a series of regional hubs, or something entirely different.
[18] Dissenting Statement of Andrew N. Ferguson, In re S.Glazer’s Wine and Spirits, LLC, FTC Matter Number 211-0155, available at: https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-southernglazers-statement.pdf (hereinafter, “Ferguson SG Dissent”).
[19] Primary line cases are aimed at discrimination that injures competitors of the seller. See Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 220 (1993); secondary line cases are aimed at discrimination that injures competitors of the purchaser. See FTC v. Sun Oil Co., 371 U.S. 505, 527, 83 S. Ct. 358, 371 (1963).
[20] See Ferguson SG Dissent, supra n. 18, at 18.
[21] Id. at 24.
[22] Id. at 25.
[23] Id. at 26.
[24] Id. at 30.
[25] Dissenting Statement of Comm’r Melissa Holyoak, In re S. Glazer’s Wine & Spirits, LLC, FTC Matter No. 211-0155, at 35 (Dec. 12, 2024), available at: https://www.ftc.gov/system/files/ftc_gov/pdf/holyoak-statement_southern-glazers.pdf.
[26] Id. at 58.
[27] Statement of Comm’r Alvaro M. Bedoya, Joined by Chair Lina M. Khan &Commissioner Rebecca Kelly Slaughter, In re S. Glazer’s Wine and Spirits, LLC, at 13, FTC (Dec. 12, 2024) available at: https://www.ftc.gov/system/files/ftc_gov/pdf/statement-bedoya-joined-by-khan-slaughter-southern-glazers.pdf.
[28] Shortly after the PepsiCo action was filed, a putative class of California retailers filed an action against PepsiCo, Inc. and Frito-Lay North America, Inc. alleging that the companies violated the Robinson-Patman Act by charging “independent convenience stores far higher net prices for those brands of snack chips than it charges to chain grocery stores…” Alqosh Enter., Inc. v. PepsiCo, Inc., C.A. No. 2:25-cv-1327, ECF No.1 (C.D. Cal. Feb. 17, 2025).
[29] The New York Post reported that “a source familiar with the matter confirmed” that the recipient of the preferential pricing was Walmart, but no such allegation has been made public by the FTC. https://nypost.com/2025/01/17/business/pepsi-sued-by-ftc-over-exclusive-discounts-to-walmart/
[30] PepsiCo Compl. ¶ 72.
[31] Id.
[32] Dissenting Statement of Comm’r Andrew N. Ferguson, In re non-Alcoholic Beverages Price Discrimination Investigation, FTC Matter No. 2210158, at 3 (Jan. 17, 2025), available at: https://www.ftc.gov/system/files/ftc_gov/pdf/dissenting-statement-commissioner-ferguson-regarding-non-alcoholic-beverages-price-discrimination-investigation.pdf.
[33] Id. at 3.
[34] Id. at 5.
[35] Dissenting Statement of Comm’r Melissa Holyoak, In re PepsiCo, Inc., FTC Matter No. 221-0158, at 2 (2025), available at: https://www.ftc.gov/system/files/ftc_gov/pdf/pepsi-holyoak-dissenting-statement.pdf.
[36] https://fedsoc.org/commentary/fedsoc-blog/not-enforcing-the-robinson-patman-act-is-lawless-and-likely-harms-consumers
[37] See Ferguson SG Dissent, supra n. 18, at 23 (“We must of course prioritize our enforcement resources consistently with the public interest. But the power to prioritize does not carry with it the power to suspend. We have a constitutional obligation to treat the Robinson-Patman Act as valid law, and to make enforcement decisions accordingly.”).