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Americans in need of a stiff drink after a long 2024 may soon have less to toast about. In its dying days, the Biden administration’s Federal Trade Commission (FTC) has decided to sue [ [link removed] ] the country’s largest spirits and wine supplier, Southern Glazer’s, for selling its products to chain retailers at a lower price than it does to independent stores. According to the FTC, Southern Glazer’s has violated the Robinson-Patman Act (RPA), a 1930s-era antitrust law [ [link removed] ] that prohibits certain types of price discrimination.
The RPA had fallen out of favor among previous administrations, Democratic and Republican alike, for deterring businesses from using efficiency and scale to negotiate steeper discounts from suppliers than their competitors, instead of upholding competition or benefiting consumers. Americans are already weathering high “sin taxes” and the economy-wide impacts of inflation. The incoming Trump administration should abandon a lawsuit that could hit them with more expensive drinks in the name of shielding boutique stores from competition.
Antitrust and the RPA
The RPA originated at a time when mom-and-pop retailers were facing competition and closures because of the rapid expansion of large chains that could offer consumers lower prices and the convenience of many products under one roof. Driven by the promise of reliable high-volume bulk orders, manufacturers and other suppliers often offered the chains steep or even exclusive discounts, and these were passed on to their customers as low prices.
Congress sought to “create a level playing field” for small retailers and passed the RPA, which made it illegal to offer or negotiate these exclusive discounts unless they could be justified by the different costs incurred by suppliers in servicing different buyers, or unless they were offers to a buyer intended to match a competing supplier’s offer. When the RPA was passed, antitrust was seen as [ [link removed] ] being about protecting small businesses that had trouble competing with larger players.
By the 1970s [ [link removed] ], however, courts increasingly interpreted the nation’s antitrust laws as aimed at protecting consumers from higher prices or less innovation, rather than at protecting businesses from more efficient or effective competitors. Courts gradually narrowed the scope of RPA liability, making it harder [ [link removed] ] for enforcement agencies to win cases. Yet the RPA remained a stubborn exception to U.S. antitrust laws’ consumer-centric shift: Its language makes it illegal to “injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of [price] discrimination, or with customers of either of them.”
Thus, if two retailers who compete head-to-head for the same customers are offered different prices for the same good from the same supplier over a sustained period of time, then that seller may violate the RPA. As recently as 2006, [ [link removed] ] the Supreme Court found that the RPA protects businesses from the threat of competitors negotiating a better deal with the same supplier, even if doing so would force consumers across the market to pay more.
An extensive body of economic evidence [ [link removed] ] shows that enforcing the RPA does just that. More efficient firms cannot use their scale economies to demand lower prices from their suppliers and thus pass on the higher prices they have to pay to their customers. This also deters businesses from benefiting consumers by expanding scale and becoming more efficient, because they lose their ability to parlay this efficiency into negotiating lower prices than what their rivals receive. Ironically, suppliers could escape liability by simply refusing to sell to all but a single large buyer to avoid any “price discrimination,” which could harm the very businesses the RPA was intended to protect.
The 2007 bipartisan Antitrust Modernization Commission [ [link removed] ] found that businesses were attempting to avoid the possibility of an RPA lawsuit through tactics such as selling near-identical products to different buyers under different names or with minor differences, a form of wasteful “innovation” that doesn’t benefit consumers despite entailing resource expenditure. Because of this and other harms to consumers and competition, the commission recommended that the RPA be repealed. Since Congress never did, the agencies simply declined to enforce it until recently, though private civil lawsuits (permitted by the RPA) from aggrieved businesses targeting their competitors continued. With such lawsuits entitling successful plaintiffs to triple the “damages” [ [link removed] ] from diverted sales to competitors due to price discrimination, it’s a lucrative gig.
Ironically, even during the heyday of the RPA’s enforcement by the antitrust enforcement agencies, most of their targets were small and medium-sized firms. Between 1961 and 1974, [ [link removed] ] 60% of prosecuted firms had yearly sales under $5 million, and more than 93% had sales under $100 million. Notching up “wins” in court may make bureaucrats feel good about themselves, but it doesn’t necessarily mean that their agency’s mission of upholding competition and protecting consumers has been met. And though the RPA’s defenders may claim that it’s still relevant for discouraging predatory pricing, this argument also fails because predatory pricing is already illegal under the Sherman Act [ [link removed] ]. The RPA only adds to that act by discouraging firms from competing vigorously by offering the lowest prices possible, thereby harming competition and consumers.
The Southern Glazer’s Case
So what of the case against Southern Glazer’s? The FTC’s website claims that [ [link removed] ] independent alcohol retailers’ inability to negotiate the same discounts as their larger rivals ultimately hurts consumers on choice and price. And yet the agency’s complaint [ [link removed] ] filed in court does not allege that consumers are injured by suffering higher prices, lower product quality or less choice or innovation as a result. The complaint instead focuses solely on “injury” to boutique stores.
The case also faces major legal hurdles. For starters, the RPA applies solely to interstate commerce [ [link removed] ], and the grim patchwork of legal regimes governing alcohol sales and distribution in different states means that most sales between alcohol distributors and retail stores occur intrastate. It’s also hard to argue that independent alcohol stores compete “head-to-head” for the same consumer base as big retail and supermarket chains. The latter offer a different shopping experience, including access to many other products and a different (though partially overlapping) brand selection.
Indeed, in its recent case opposing [ [link removed] ] the proposed merger of supermarket chains Kroger and Albertsons, the FTC itself argued that the relevant market is limited to supermarkets and does not include superstores like Walmart or “specialty stores” like Trader Joe’s and Whole Foods, even though they sell many of the same or substitute products. It seems strange for the FTC to seemingly make the opposite argument in separate cases where it is convenient to do so.
Southern Glazer’s has also forwarded evidence [ [link removed] ] that the different prices they offer to chain retailers are justified by the differences in the costs of servicing these stores relative to their competitors and the need to meet competing distributors’ offers, both of which are defenses to RPA liability. The FTC contests both claims.
All this makes it tempting to argue that the FTC’s case won’t do much harm because it seems likely to fail, leaving the status quo untouched. However, this is far from the case. The FTC is already undertaking investigations into other industries, such as the soft drink sector, [ [link removed] ] seeking further opportunities to bring RPA claims. The threat of costly and uncertain RPA litigation and scrutiny alone is enough to deter businesses, including Southern Glazer’s competitors and suppliers in other industries, from competing effectively by offering different prices to attract different buyers—even where consumers and competition benefit.
Rather than being a bug in the system, current FTC leadership seems to see this deterrence as a feature. Chair Lina Khan has touted [ [link removed] ] a chilling of merger activity across the economy as a win for her agency, making threats of more aggressive merger enforcement even though many of the abandoned deals could have benefited consumers. The agency has also come under fire for misusing its limited resources by prioritizing high-profile but weak cases against tech firms under spurious claims of harm to competition, thereby leaving it with fewer resources for more traditional antitrust enforcement in areas where consumer harm is clearer, such as [ [link removed] ] blocking hospital mergers that are likely to increase costs and reduce quality of care for patients.
Looking Forward
So what might happen to the current FTC case under the incoming administration? Current Republican Commissioner Andrew Ferguson, who was recently nominated as future FTC chair by President-elect Trump, released a dissenting statement [ [link removed] ] against the agency’s decision to bring the case against Southern Glazer’s. He stated that even though he opposes the nonenforcement of the RPA as long as it is on the law books, he still believes that this particular case should never have been brought because it is a poor prioritization of the agency’s limited resources and because he believes that the FTC is unlikely to win.
Ferguson has also reportedly signaled [ [link removed] ] that he intends to take a more pragmatic approach to antitrust enforcement than his predecessors. His fellow Republican Commissioner Melissa Holyoak released her own dissenting statement [ [link removed] ] concurring that the case should never have been brought, and arguing that even in the unlikely event of an FTC victory, any workable remedy would likely harm consumers and competition.
There are several ways to stop this case from moving forward. As summed up by my Mercatus Center colleague and former FTC General Counsel Alden Abbott, [ [link removed] ] “[a] new Republican FTC majority could potentially vote to discontinue the prosecution of the Southern injunction action, if the matter is still in litigation. It could also choose to drop the other RPA investigations, or to discontinue prosecution of any new complaints that may be filed before January 20.”
Ideally, the Republican majorities in the House and Senate would consider revising or repealing the RPA entirely to avoid further threats of harm to consumers and competition. Where price discrimination by a supplier servicing multiple buyers does genuinely injure competition and consumers, it is already policed by other antitrust statutes. A redundant and counterproductive law such as the RPA also seems apt for scrutiny by Elon Musk and Vivek Ramaswamy’s new Department of Government Efficiency [ [link removed] ].
If the FTC is serious about protecting consumers and upholding competition in the market for wine and spirits, it should consider investigating the impacts of burdensome regulation that limits competition and leads to higher prices for drinkers without countervailing benefits. For instance, [ [link removed] ] state laws, as well as the U.S. Constitution’s 21st Amendment and the Federal Alcohol Administration Act of 1935, require that the supply, distribution and retail of alcohol all have to be done by different companies. This precludes efficient arrangements that could deliver lower prices for consumers while boosting competition.
The mandated “three-tier” structure necessitates the very existence of “middlemen” distributors like Southern Glazer’s since alcohol manufacturers cannot sell directly to big or small retail stores. This arrangement does not necessarily make alcohol products safer and does nothing to mitigate the social ill effects of drinking. And its biggest victims are smaller, independent brewers, distillers and other entrepreneurs who are forced to contract with distributors rather than sell directly to retailers.
The protection of small businesses from competition is often justified by the populist sentiment that big businesses are inherently bad and exploitative, even if they are popular with their customers. Yet there is nothing more elitist than forcing Americans to pay more for their food and drink to protect one kind of store against competition from another. Countless boutique and independent alcohol stores across America continue to thrive despite generally offering higher prices than the big chain retailers for similar products. They survive by differentiating themselves on the shopping experience and product selection. Americans should continue to decide for themselves where they’d like to shop and what businesses to reward, not bureaucrats with aesthetic preferences for what the market should look like.

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