How a Depression-era law could be used to make booze cheaper

By Matt Egan | CNN

Federal regulators are planning to use a rarely enforced law from the Great Depression to allege America’s largest alcohol distributor is unfairly pricing wine and spirits, a person familiar with the matter told CNN.

A looming Federal Trade Commission lawsuit against Southern Glazer’s Wine and Spirits would be aimed at lowering costs for consumers — in this case on alcohol — and ensuring mom-and-pop shops have a level playing field against big chains, the source said.

The case, which could be risky, would represent the latest effort by Biden administration regulators to show they are taking action to lower costs and confront dominant companies. It would also be the latest aggressive step by FTC Chair Lina Khan, who recently led the agency to ban most employers from using noncompete clauses and is probing a Microsoft deal with an artificial intelligence startup.

The latest battleground in the antitrust fight could be booze. Southern Glazer’s, based in Miami and operating in 44 US states, is the largest wine and spirits distributor in the United States. The family-owned company distributes everything from Grey Goose vodka and Jim Beam bourbon to Yellow Tail wine.

Abandoned antitrust law from 1936

The FTC lawsuit, previously reported by Politico, could come in the next few weeks and would rely on the Robinson-Patman Act of 1936, the source said. That Depression-era law prohibits suppliers from providing deeper discounts to large chains than to smaller stores.

In other words, discounts to big-box chains must be available to mom-and-pop stores, too.

At the time, the antitrust law was aimed at helping smaller grocers survive when A&P and other chains dominated with lower prices.

However, an FTC lawsuit against Southern Glazer’s today would be controversial in part because the Robinson-Patman Act has rarely been enforced since the late 1980s. In fact, this would be the first time it’s been invoked since 2000, when the agency settled with spice company McCormick.

“It’s been a law since 1936. It’s still a law on the books. We enforce the law,” the source told CNN, adding that since the law hasn’t been enforced some smaller stores have struggled to survive. “If you can’t compete on price or come even close, you can’t stay in business.”

The thinking is that if a major alcohol distributor is offering deeper discounts to, say, Walmart or Target, that’s unfair to the smaller stores and their shoppers. And if those stores don’t exist, consumers are harmed from the lack of access and from the fact that the larger chains now face less competition on price.

Could enforcement backfire on shoppers?