Another indictment was handed down last week by a federal grand jury in the case involving Southern Glazer’s Wine & Spirits (Southern).

Five high-level employees were indicted for allegedly participating in a bribery scheme involving Albertsons and for falsifying records to conceal the conduct (According to the San Francisco Chronicle). Unlike the Watergate scandal—where the cover-up famously became worse than the underlying conduct—both offenses here constitute serious legal violations.

As we are frequently reminded of the purported benefits of the three-tier system, perhaps it is worth looking around the corner to see what is actually happening in practice. One of the central justifications for the system is that wholesalers promote product diversity and provide small producers access to the marketplace. The argument often goes that without the wholesale tier, small producers would struggle to survive.

Yet according to reports describing the indictment, the alleged bribery scheme involved one of the largest wineries in the United States.

If Southern orchestrated a concerted effort to indirectly pay slotting fees to benefit one of the country’s largest wineries, the inevitable result is that smaller wineries lost shelf space—and the revenue that comes with it.

This raises an obvious question: where do those small wineries go to recover the opportunities they lost?

For a tier of the industry that often opposes alternative routes to market—such as direct-to-consumer and direct-to-retailer sales—it seems strange to tolerate practices that make it even harder for small wineries to reach the marketplace.

What makes the case particularly troubling is that Southern does not need to engage in this behavior. Across the United States, it is estimated that Southern distributes roughly one-third of all wine and spirits sold. In other words, one out of every three bottles moves through Southern’s system. In California alone, the company’s annual revenue has been estimated at around $5 billion.[1]

Southern has effectively been granted a government-protected position in the distribution system, yet some employees allegedly chose to abuse that privilege. I emphasize the word some, because I know many good people at Southern who respect and follow the rules.

The allegations remind me of the Illinois contractor that held a monopoly on government construction projects and ultimately went to prison for overbilling on materials. Sometimes people simply cannot stand prosperity.

The remaining question is how far up the chain this conduct reached—and who conceived and approved the scheme. The allegations suggest planning and coordination; they do not appear to describe one or two rogue actors acting alone. Instead, they point to a system that developed and operated over time within part of the organization.

Once those questions are answered, another question will remain:

Where do the small wineries go to get their lost opportunities back?

 

[1] https://www.shankennewsdaily.com/2025/06/04/37627/southern-glazers-execs-on-trends-across-5b-california-business/