FTC’s proposed Southern settlement offers insights into its RPA enforcement approach

In December 2024, the then-bipartisan Federal Trade Commission (FTC) sued alcohol distributor Southern Glazer’s Wine and Spirits LLC (Southern), alleging that Southern had violated the Robinson-Patman Act (RPA) by “selling wine and spirits to small, independent ‘mom and pop’ businesses at prices that are drastically higher than the prices Southern charges large national and regional chains.” The FTC’s suit alleged competitive damage to those smaller retailers based on the higher prices they were charged.

The litigation was highly controversial at the time, with then-Commissioner Andrew Ferguson (now chairman of the FTC) and other Republican Commissioners (including Melissa Holyoak) dissenting from the issuance of the complaint. Ferguson and Holyoak argued that the FTC would face difficulties overcoming Southern’s affirmative defenses to the RPA (including cost justification based on alcohol suppliers’ pricing to Southern), and that the highly regulated, state-by-state structure of the industry would make it difficult to prove that discriminatory pricing had affected interstate commerce.

The beginning of the Trump administration, and the subsequent firing of the Democratic FTC Commissioners cast the litigation into significant uncertainty, but the action continued under new FTC leadership. In April 2025, the FTC defeated a motion to dismiss by Southern. Chairman Ferguson then “concluded that dismissal without any effort to investigate whether the evidence sustained the Commission’s claim would undermine the Commission’s credibility in other cases,” and directed staff to undertake discovery in the case. Months of discovery followed, involving extensive disclosures by Southern and efforts by FTC staff to seek discovery from a large number of third-party witnesses, including alcohol manufacturers and others.

A year and a half later, the FTC and Southern have proposed a settlement. It is complex and offers a number of lessons to any party covered by the RPA, but will be of special interest to distributors and manufacturers in industries selling to consumer retail customers. The proposed order is instructive on the aspects of price discrimination the FTC now considers worthy of potential investigation and enforcement, particularly with regard to:

• The kinds and nature of “paired transactions” to favored and disfavored retailers that the FTC considers close enough to be competitively meaningful (including their geographic and temporal proximity);
• How significant/large a discrimination must be to merit attention, and which discriminations should be viewed as de minimis or unlikely to significantly harm competition;
• Some elements of the cost justification defense; and
• Additional clues from the sitting Commissioners’ statements regarding future FTC RPA enforcement priorities.

The proposed order

On October 2, 2026, the FTC and Southern filed a proposed consent decree to resolve the FTC’s RPA case against Southern (C.D. Cal. No. 8:24-cv-02684). The order is not yet entered, and Southern denies the allegations and admits no liability. For six years, it bars Southern from charging smaller independent retailers (75 or fewer stores, not involved in subdistribution) net prices that exceed those charged to one of its top-five chain customers in the same state by more than a cost-based allowance. The comparison covers transactions to nearby stores (1.5 – 12.0 miles, depending on the area) and purchases within 45 – 75 days of each other. The proposed order does not prohibit price differences that do not exceed a combined figure that includes 1) state-specific operating cost differences (set out in a sealed appendix), 2) 2.5% of the chain’s price, plus 3) any difference in supplier-funded support. It also does not prohibit price differences covered by any other affirmative defense to the RPA, including the “functional availability,” “meeting competition,” and “changing conditions” defenses. Southern would violate the proposed order if it overcharged a single independent retailer by more than $5,000 in a 12-month period.

An independent monitor, jointly selected by the FTC and Southern and paid for by Southern, would review Southern’s semiannual transaction data and identify violations. The proposed order requires Southern to keep records to support its defenses, get monitor approval for material changes to supplier support practices, avoid “changes to its Supplier Support practices that seek to evade, defeat, or frustrate” the order’s requirements, and run an RPA compliance and training program.

When the monitor identifies a violation, Southern has 60 days to cure by paying the affected retailer 1.5 times the full excess. If it does not cure, the FTC may bring an enforcement action seeking two times the excess plus other relief. Southern preserves defenses for functional availability, meeting competition, and changing market conditions. The FTC gets several procedural advantages: Crossing the threshold is deemed a prima facie showing of competitive injury, sales to top-five customers are deemed “in commerce,” violations need only be proven by a preponderance of the evidence, and the FTC can enforce for two years after the order expires. The order binds only Southern and cannot be used as evidence in other litigation, but it provides important insights into how the FTC is applying the RPA in wine and spirits distribution.

What it means

The proposed order does not bind anyone other than Southern, and its terms reflect a negotiated resolution rather than a legal ruling. Still, companies selling products to consumer-facing retailers should consider what it may imply regarding possible future FTC enforcement priorities:

• Sales to competing retailers. The proposed order covers only transactions to two different retailers within the same state and within prescribed distances of one another: 1.5 miles in Chicago, New York City, San Francisco, and Seattle; 2.5 miles in “urban areas,” 6.0 miles in suburban areas, and 12.0 miles in rural areas (limited to covered states). A given area’s designation will depend on existing government categorizations administered by the National Center for Education Statistics. While these limits are based on dynamics observed in the alcohol industry, they suggest the FTC is focused on extremely tight geographic limitations, and may credit arguments that two customers do not compete if they are not located in relatively close physical proximity.
• Size of discrimination. As outlined above, the proposed order excludes smaller price discriminations. Southern would not be liable for discriminations that do not exceed the sum of:
  • A “Safe Harbor” including both a set, state-specific “operating expense differential” and 2.5% of Southern’s net price; and
  • A “Supplier Support Differential” consisting of “case support, discount support, and chargeback support” paid by alcohol suppliers, along with any other consideration paid by a supplier that reduces Southern’s cost of sale.

These allowances, while again specific to the alcohol industry, suggest that the FTC is willing to consider actual costs to serve different retailers, and to disregard de minimis differences below a certain threshold. However, the proposed order explicitly covers only one kind of retailer-specific cost difference – a cost-of-goods difference explicitly offered by Southern’s suppliers to cover different retailers – leaving open the question of how the FTC might view more-general cost justifications based on a manufacturer’s or distributor’s costs to serve a given retailer (perhaps based on the volume of the retailer’s orders, or other retailer attributes that might change a seller’s cost to serve a given retailer).

• Considerations specific to the alcohol industry.
  • Distributors and wholesalers. The order is a concrete example of how the FTC would measure discrimination: matched transactions, tight geographic and temporal windows, a net-price view that captures off-invoice items, and a modest cost allowance. Distributors with comparable chain and independent pricing may wish to assess their own exposure using similar metrics, and to review how well their deal, rebate, and supplier-support records would withstand that kind of analysis.
  • Suppliers. Supplier support is central to whether a price gap is allowed. Under the order, support counts only if it is supplier-funded, documented, and conditioned in a way that can be shown, and new forms need monitor approval. Suppliers may see more document requests and more scrutiny of how programs are structured, allocated, and communicated to distributors and their customers.
  • Chain retailers. Retailers that are among a distributor’s top five in a state become the benchmark for price comparisons. Distributor pricing and promotional terms offered to them may change as a result, and chain buyers should expect questions about terms they receive from Southern.
  • Independent retailers. Retailers with 75 or fewer stores that do not engage in subdistribution may become entitled to payments from Southern. They are the intended beneficiaries, and the order contemplates that the monitor will watch for opportunistic behavior.
• Other takeaways. In addition to the specific provisions included in the proposed order, the statements issued by the two sitting FTC Commissioners offer other lessons for companies focused on RPA compliance:
  • Chairman Ferguson’s statement congratulates FTC staff for reaching a “milestone in the history of Robinson-Patman Act enforcement,” and calls the settlement “a major victory for the Trump FTC and for small, independent businesses.” It asserts that “the Act remains good law, and where the Commission sees evidence of unlawful price discrimination that injures disfavored retailers and consumers, it will act to protect competition in our markets.” Taken together, these comments suggest that the FTC in its current configuration might be willing to investigate and pursue price discrimination claims under similar circumstances in the future.
  • Commissioner Mark Meador’s statement is more limited and specific. It strongly suggests that the Commissioner would not support further RPA enforcement in the alcohol industry, because the three-tier distribution system and “state regulatory choices” make alcohol “an unusually poor setting in which to have restarted Robinson-Patman Act enforcement.” However, Commissioner Meador believes that “the Commission should consider developing guidance explaining its current views on the Robinson-Patman Act’s requirements and circumstances under which it would pursue an enforcement action.” He specifically says that, with such guidance in place, he would “support a targeted inquiry into price discrimination issues in a sector that more directly impacts the cost of living for American families, such as food and groceries, focusing on instances where there is clear consumer harm.”
• What to watch in the future:
  • Approval of the proposed order. The order is likely to be approved by the district court; although unlikely, any changes should be reviewed to see if they change material provisions.
  • Initial compliance reports. Compliance reports must be filed with the court at 60 days, then on February 15 and August 15, 2027. We will monitor these to determine whether publicly available material offers additional insights.
  • Effects on the alcohol industry. Commentators – as well as some of the Commissioners involved – have suggested that the litigation (like any enforcement of price discrimination laws) might disincentivize discounting in the industry. Other commentary has focused on the relatively limited nature of the relief agreed to in the proposed order, suggesting there may be pressure on smaller retailers to consolidate to improve their terms of supply. Industry participants will be watching closely for signs of either trend.
  • Potential new RPA guidance. The FTC typically uses a public notice/commentary process when issuing new antitrust guidance. Companies covered by the RPA should watch for notice that the FTC is considering new price discrimination guidelines and consider taking part in any such process.
• Considerations for companies affected by the RPA. Companies concerned about whether their pricing practices could be subject to the RPA (and, particularly, companies in the grocery and consumer packaged goods industries, based on Commissioner Meador’s statement) should review their current pricing and trade practices to determine whether the proposed order gives new insight into those practices’ susceptibility to FTC investigation or enforcement activity. They should revisit their current approach to RPA compliance, looking for situations in which:
  • Customers in close proximity to one another and serving the same retail customers are paying different prices, or receiving different trade or other promotional consideration, on identical goods and stock-keeping units;
  • Differences in pricing and trade may appear larger than the difference in costs to serve these customers, and larger than a small percentage of the total price of the goods involved;
  • Differences in pricing and trade could reasonably be expected to result in competitive harm to retailers via lost sales and profits; and
  • Differences in pricing and trade are not justified by other RPA affirmative defenses, such as the “functional availability,” “meeting competition,” and “changing conditions” defenses.