Costco, Kroger may have been given illegal price breaks, according to FTC suitCostco, Kroger may have been given illegal price breaks, according to FTC suit

The largest distributor of wine and spirits is accused of engaging in acts of illegal pricing that may have favored large chains like Costco and Kroger, according to a lawsuit filed last week in the U.S. District Court for the Central District of California by the Federal Trade Commission.

Southern Glazer’s Wine and Spirits, the tenth-largest privately held company in the U.S., distributes about 5,600 wine and spirit brands and generated over $26 billion in revenues in 2023. Costco and Kroger are customers of Southern Glazer’s.

The FTC lawsuit, filed on Dec. 12, accuses Southern Glazer’s of violating the Robinson-Patman Act, which permits volume discounts only if a seller can demonstrate they achieve real cost efficiencies. The lawsuit claims that the distributor has been offering substantial discounts to large chains over the last six years while not offering the same deals to smaller retailers.

In some cases, according to the lawsuit, Southern has charged higher prices for identical bottles of wine and spirits sold to independent retailers just a few blocks away from large chains.

“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.

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The Robinson-Patman Act has largely gone unenforced for decades, the FTC claims, adding that it’s now time to protect fair competition. 

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

The lawsuit, however, may not survive after the Trump administration takes over.

According to the Associated Press, President-elect Donald Trump has chosen Andrew Ferguson to lead the FTC. Ferguson was one of two FTC commissioners who did not authorize the lawsuit against Southern Glazer’s.

Ferguson stated that only substantial price discrimination violates the Robinson-Patman Act and believes the FTC’s lawsuit cites only isolated instances, according to the AP.