As Lina Khan is in the mood for excessive regulatory creep, I have a solution. We should embolden her with titles that are befit for royalty. Being Chair of the FTC does not seem like enough for her, and she has shown an empirical thirst for other titles, I say we acquiesce and make her the Queen of Liquor.

According to the latest media reports, the FTC is preparing an antitrust lawsuit against Southern Glazer’s Wine and Spirits (Southern).  Media sources indicated that “Southern Glazer’s has been providing “secret kickbacks” to large retail customers and violating the 1936 Robinson-Patman Act.”[1]

Before I discuss these allegations, I want to level set a bit. One, I am not a fan of Southern, but this case is more about the integrity of the process than about Southern. Two, I think it is great that media sources, which maybe cover for government bureaucrats leaking information, can leak information to the press about allegations and the accused without seeing the complaint, does not really have a fair opportunity to answer these allegations, and must wait until the complaint is issued. By that time perception has become part of reality.

What struck my fancy was the accusation that Southern was violating the Robinson-Patman Act by providing secret kickbacks. In the liquor regulatory world I live in the Alcohol and Tobacco Tax and Trade Bureau (TTB) governs issues of whether a wholesaler like Southern engages in illegal practices to secure market share.

I have worked with the TTB in a government and private industry capacity, they are honest, fully competent, and understand the issues well, and that is why they govern these issues.

Armed with this knowledge, Ms. Khan and the FTC decided they would go over the top of the TTB and start making their own determinations of what constitutes legal or illegal practices in the liquor world. Having a system with the less competent people judging serious offenses seems like a scary proposition to me.

Further, price discrimination is allowed under many state laws. Channel pricing is very commonplace in state regulatory systems. When I drafted the “Of Value” regulations for Illinois, the standard to judge on how items or discounts were offered was whether the two entities were “similarly situated”. In this analysis Walmart was treated differently than Bob’s independent store, whereas it may be similarly situated with Target. Michigan and Indiana may look at this issue differently than Illinois.

The states are allowed to treat this issue differently as the 21st Amendment allows states great discretion on how to treat these matters.

Ignoring the 21st Amendment, Ms. Khan wants a one size fits all approach to regulating the liquor world. And uses a law that was essentially abandoned for four decades because a 1977 Justice Department Report  “documented how Robinson-Patman resulted in higher prices and price-fixing among competitors.”[2]

The regulatory mess is about to come and we will need to see what the report says as opposed to what was unethically leaked, but one thing is certain, Lina Khan wants to dictate the U.S. liquor regulatory scheme to meet her thirst for making the Robinson-Patman Act chic again.