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Democratic Senate Hopeful's Company Resists FTC Investigation

Maryland's David Trone's liquor store chain enmeshed in antitrust
case

Americans are drinking themselves to death at the highest rate in
decades. During the pandemic, alcohol-related deaths spiked
<[link removed]>30
percent, killing more than 49,000 people in 2020. The trend has since
subsided but still remains at higher levels than before COVID. Even as
restaurants and gyms were deemed nonessential and subject to closing,
the liquor lobby convinced state governments to keep its stores open,
and even relax previous regulations on direct-to-consumer deliveries.
The business made a killing as sales numbers shot up to increase the
deaths of despair that the pandemic wrought.

America's drinking problem has lined the pockets of the liquor giants
that rolled up the industry over the past two decades from production to
distribution, making alcohol cheaper and more readily available for its
most loyal addicted customers. No company better embodies the
liquor-pushing practices by these monopolies than the largest chain
liquor store retailer, Total Wine, which is co-owned by Democratic
Congressman David Trone (D-MD), who's now running for Senate in
Maryland to replace Sen. Ben Cardin, who'll retire at the end of the
current term.

One of the wealthiest members of Congress, Trone is proudly self-funding
his Senate bid, as he did with his previous congressional races, through
the vast fortune he amassed from his discount retail chain. "The Walmart
of liquor," as it's known, hauled in its highest revenue numbers
during the pandemic. Swearing off corporate PAC money, Trone recently
put $10 million of "show me money" (his own) into his campaign, sending
a warning shot to other Democrats in the state who have been hesitant
about entering the race. Rep. Jamie Raskin (D-MD), a prominent liberal
with a national following, recently announced he wouldn't run for the
seat.

That effectively leaves the Democratic primary wide open for Trone's
taking. His main challenger thus far is the executive of Prince
George's County, Angela Alsobrooks, widely seen as a rising star in
the party though with less name recognition and a much smaller campaign
treasury than the wine mogul. A member of the House Problem Solvers
Caucus, Trone has declared himself a unifier
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in the race.

Even as Trone runs for senator, however, Total Wine is actively trying
to impede an investigation by the Biden administration that could expose
Trone's empire for business practices that amount to modern-day
bootlegging-or, at least, violations of federal and state laws.

The trouble for Total Wine began earlier this year. The Federal Trade
Commission opened an investigation into price discrimination and
exclusive dealing arrangements in alcohol markets as part of a broader
crackdown that's also charging Pepsi and Coke for similar
anti-competitive conduct. The FTC's probe specifically targets the
largest alcohol distributor, Southern Glazer's, but that ties Total
Wine into the case as the largest chain retailer for wine and spirits
that Southern Glazer's sells to.

Because of consolidation over recent decades, each line of supply in the
alcohol market from production to distribution to retail is controlled
by a few dominant players that cut deals with each other that choke off
access to the market for smaller companies.

Total Wine can effectively offer low prices and discount deals at its
stores because it strikes agreements with Southern Glazer's and other
large distributors to purchase in bulk for lower costs. Both independent
liquor stores and small producers like craft brewers lack the scale to
be able to make these types of deals, so the wholesalers who act as
middlemen cut them out entirely. It's the same playbook that big-box
retailers like Walmart have used to sell discounted goods.
Both Southern Glazer's and Total Wine have faced numerous lawsuits for
these practices, including a recent class action suit brought by liquor
stores in California that allege a two-tiered pricing system leveraged
against them.

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Both companies have built their business models by disregarding the
Robinson-Patman Act, a piece of antitrust legislation that explicitly
prohibits unfair and anti-competitive price discrimination. The FTC has
made it a priority to revive this long-dormant law, which has gone
unenforced for decades. The current investigation into Southern
Glazer's is predicated on violations of both Robinson-Patman as well
as the unfair methods of competition under Section 5 of the FTC Act.
In February, as part of its investigation, the FTC issued information
requests to Total Wine about its business practices and communications
with Southern Glazer's. In April, after delaying its response for
several months, Total Wine submitted a formal petition to block the
agency's requests entirely, arguing the information was "sensitive and
confidential" and that the FTC lacked authority to demand it of the
company.

In May, the FTC denied Total Wine's petition and is moving forward
with the investigation by resubmitting new information requests. The
company has not announced any subsequent appeals and will be forced to
comply with the investigation, though it's succeeded in delaying it.

Total Wine's recent efforts to cut off the investigation fall into a
pattern for the company, which has routinely trampled over state
regulations and asked for forgiveness later. Since the end of
Prohibition, states have wielded far greater power to impose
restrictions on the sale of alcohol than on other products. Many even
set minimum prices to dissuade alcoholism and protect independent
stores.

Under Trone's watch, Total Wine has fought against state laws that
block chain retailers from selling below cost. It temporarily had its
license revoked in Massachusetts for refusing to comply with state
pricing laws. In a notorious incident, Total Wine protested
Connecticut's laws by taking out a front-page ad bragging that it
would sell liquor for less than state-mandated minimums. It eventually
paid $37,500 to regulators to settle for the violations.

In 2019, Total Wine brought a case all the way to the Supreme Court
against state residency laws that limit how quickly newly arrived liquor
chains can expand into a state. The court sided with Total Wine in a
ruling so expansive that it could limit states' authority to impose
other regulations on liquor.

As the FTC continues its investigation into Southern Glazer's and
revives enforcement of Robinson-Patman, Trone's Total Wine could be
caught in the crosshairs. Along with the FTC's crackdown, the Alcohol
and Tobacco Tax and Trade Bureau is in the midst of setting new rules to
enforce competitive standards as part of President Biden's executive
order on competition.

Rep. Trone is still registered as a co-owner of the company and has
involved himself in the company's dealings during his time in
Congress. In 2021, for example, Rep. Trone personally threatened to
"execute" a delivery worker at one of his store locations in Tempe,
Arizona, according to a police report obtained by
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**The**

**Spectator**.

If his bid for Senate proves successful, Trone would hold substantial
political power to potentially sway these impending regulatory actions
against his company. The race should be followed closely for that reason
alone.

~ LUKE GOLDSTEIN, WRITING FELLOW

Follow Luke Goldstein on Twitter <[link removed]>

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