After nearly 25 years of nonenforcement, the Federal Trade Commission (FTC) has sued both Southern Glazer’s Wine and Spirits and PepsiCo, Inc. under the Robinson-Patman Act (RPA). On December 12, 2024, the FTC filed its first lawsuit under the RPA in over 20 years, accusing Southern Glazer’s Wine and Spirits (Southern Glazer’s), the largest U.S. wine and spirits distributor, of engaging in discriminatory pricing practices. Then, on January 17, the FTC also sued PepsiCo, Inc. (PepsiCo) for price discrimination under the same theory. In both suits, the FTC alleges that Southern Glazer’s and PepsiCo sold products to big-box stores at lower prices than those offered to small, independent retailers. The FTC is seeking a permanent injunction to halt these practices, which it argues harm small, family-owned stores by depriving them of discounts and promotional allowances available to larger competitors.

The RPA, enacted in 1936, was designed to prevent price discrimination. Under the RPA, it is illegal for companies to charge disfavored customers a higher price than those charged to favored customers for similar products. The law also prohibits offering unequal promotional allowances, such as discounts, rebates or advertising support, to competing customers. To prove a price discrimination claim, a plaintiff must show that there was a difference in price in two or more sales, within the same time period, across state lines, of goods of like grade and quality. These sales must have been made by the same seller to two or more different purchasers and resulted in a competitive injury at the seller, purchaser, or customer level. Defendants have four fact-intensive and evidenced based defenses available to a price discrimination claim. These defenses include differences in the costs of manufacturing, sale or delivery, lowered prices to meet a competitor’s price, changed conditions in the marketplace, and whether the price difference was available to all purchasers, but the plaintiff did not take advantage of the lower price. For more detail on the elements and defenses to an RPA claim, please see our previously published article.

The lawsuit against Southern Glazer’s alleges that it charged “drastically higher” prices for wine and spirits to small “mom and pop” retailers than the prices offered to large, national chains in the same geographic regions. It’s reported that Southern Glazer’s sells one out of every three bottles of wine and spirits purchased in the United States, and it generated roughly $26 billion in revenue in 2023, making it the tenth largest privately held company in the country. By offering high-volume quality discounts, cumulative quantity discounts and scan rebates to large retail chains, Southern Glazer’s is alleged to have implemented a discriminatory pricing scheme that disadvantaged the smaller independent retailers to whom such discounts were not made available, even if it was feasible for the smaller retailer to participate in the deal. The FTC alleges that the discounts offered to the large chains were so substantial at times that the chains could charge retail prices below the wholesale price offered to the disfavored smaller retailers for the same bottle of wine or spirits. As mentioned above, the RPA provides defenses to claims of price discrimination, but at the outset the FTC argues that none of these defenses apply in Southern Glazer’s case. The FTC claims there is no legitimate reason for the price differences, particularly since there is no cost difference in distributing products to larger retailers compared to smaller retailers.

In the case against PepsiCo, the FTC accuses the second-largest food company in the world of offering unfair pricing advantages to a single unnamed, big-box retailer. In addition to the soft drink that bears its name, PepsiCo owns a variety of drink and snack brands such as Mountain Dew, Aquafina, Frito-Lay, Doritos and Cheetos. This case mirrors the Southern Glazer’s lawsuit, in that the FTC alleges that PepsiCo engaged in price discrimination that harmed smaller competitors and resulted in higher prices and fewer choices for consumers. The complaint argues that these practices violate Sections 2(d) and 2(e) of the RPA, which prohibit suppliers from using advertising and promotional allowances to give preferential treatment to large customers. Allegedly, PepsiCo offered the big-box retailer a plethora of in-store promotional displays that were not offered to other brick-and-mortar retailers. The effect of this preferential treatment is that disfavored retailers subsequently sold less PepsiCo products for a smaller profit margin than the favored retailer. 

Despite the renewed focus on the RPA, political uncertainty surrounds future enforcement as the FTC’s balance of power shifts. Republican commissioners, who dissented in both cases, may impact the trajectory of RPA enforcement under the newly appointed Republican-majority FTC. President Trump’s pick to lead the FTC, Commissioner Andrew Ferguson, has argued that the FTC’s approach to these cases could be an imprudent use of the agency’s limited resources, and that price discrimination cases should only be pursued when there is strong evidence of harm to competition. However, in his dissent in the Southern Glazer’s case, Commissioner Ferguson did agree that the RPA should be actively enforced when warranted. As the political landscape changes, the future of RPA enforcement remains uncertain.

Manufacturers, wholesalers, and other supply chain intermediaries should reassess their pricing practices, including discounts, rebates and promotional allowances, to ensure compliance with the RPA’s prohibitions against discriminatory pricing. The FTC’s actions, combined with private litigation successes, suggest that businesses should be vigilant in aligning their pricing strategies with the law to avoid potential enforcement or lawsuits, especially when selling to chain retail stores. 

For more information on the Robinson-Patman Act and its enforcement, or to learn how Godfrey & Kahn can help, contact a member of our Antitrust practice.