Southern and RNDC have Illegally Blocked Retailer Orders Communicated by Provi, Illegally Barred Retailers from Using Provi in Effort to Control the Market and Market Data
First Case of its Kind Since the White House, Treasury Department, Federal Trade Commission and Department of Justice Identified Abuses in the Alcohol Distribution Industry
March 30, 2022, Chicago, IL – Provi, the fastest-growing ecommerce marketplace for the beverage alcohol industry, yesterday filed a complaint in Federal Court in Illinois against Southern Glazer’s Wines and Spirits (Southern) and Republic National Distributing Company (RNDC), the two largest wine and spirits distributors in the United States.
Provi’s complaint, filed in the United States District Court for the Northern District of Illinois Eastern Division and accessible here, seeks treble damages and injunctive relief arising from Federal and State antitrust violations and tortious interference – unlawful efforts by Southern and RNDC designed to stifle competition from Provi and maintain or enhance their respective monopoly power in the relevant markets for Online Alcohol Marketplaces, Search and Display Advertising on Online Alcohol Marketplaces, and Data Analytics Services in certain states.
The complaint is the first of its kind after President Biden signed the Executive Order on Promoting Competition in the American Economy in July 2021, which included a directive for the Secretary of the Treasury – in coordination with the Federal Trade Commission and the Department of Justice – to produce a report assessing the “threats to competition and barriers to new entrants” in beer, wine and spirits. The Secretary’s report to the President, issued on February 9, 2022, identifies large distributors like Southern and RNDC as threats to fair competition, stating that “distributors with a larger national footprint may be able to leverage their size and enter exclusive agreements with producers that tend to push out smaller competitors.”
Southern’s and RNDC’s violations of the antitrust laws include:
- Blocking and rejecting orders for their wine and spirits products that retailers choose to communicate through Provi
- Boycotting Provi by forcing or coercing retailers not to use Provi
- And, in the case of Southern, forcing retailers to use Southern’s own ecommerce marketplace by requiring all online sales to come through their own online marketplace.
“Our goal is to empower the entire three-tier alcohol system, and ensure the independence of retailers, distributors and suppliers,” said Provi CEO and Founder Taylor Katzman. “We’re a tool to help the industry modernize and move forward. Unfortunately, Southern and RNDC are illegally stifling innovation by blocking retailers from using open market solutions like Provi, which promotes transparency and more efficient operations, particularly for small businesses. They have a tight grip on distribution physically – and now they want to control it and any related next generation businesses digitally through data. They are also using their scale to illegally box out competition – which significantly hurts retailers, smaller distributors and suppliers throughout the country. The federal government identified the abuses and competitive threats in the industry in its recent report, and our case further exposes the anticompetitive practices of these two legacy players who believe they can do whatever they want.”
Highlights from the Complaint:
- Southern sent letters to and left voicemails to retailers stating “[Southern] will no longer accept orders transmitted by third-party e-commerce platforms or services, such as Provi, SevenFifty, or others.”
- Alan Rosenberg, General Counsel of RNDC, conveyed to Provi that: “RNDC will continue to promote and steer our customers towards using our own e-commerce platform and away from Provi.”
- Tracy Araial, SVP eCommerce & Digital at RNDC, “RNDC will continue to block all incoming email traffic and/or orders sent to RNDC using Provi.”
- As one National Account put it calling RNDC’s position “confus[ing]” since “the only thing Provi is doing is submitting the order to the rep the same [as] has always been done . . . [while] giv[ing] us the ability to place all of our orders from one page rather than having to visit multiple places.”
- Nathan Mansperger, Southern’s Vice President of eCommerce, recently acknowledged that Southern’s “goal is to achieve a higher share online vs offline,” confirming its intention to extend its longstanding market dominance to online markets with even higher shares of those markets.
- A Southern sales representative admitted that Southern’s decision to reject orders that retailers communicated through third-party online alcohol marketplaces was “the pinnacle of stupidity” and motivated by “an effort to force our customers to use our poor excuse of [a] software,” Proof. That sales representative further characterized Proof as “amateurish and very difficult to navigate” and, more bluntly, “an abysmal failure of epic proportions.”
Provi is the fastest growing B2B ecommerce marketplace for the beverage alcohol industry. Active in 35 states, Provi’s robust, online marketplace improves communication and efficiency for retailers, distributors and suppliers. As of 2022, 10 percent of licensed retailers in the U.S. use the marketplace. Founded in 2016 and headquartered in Chicago, Provi has received a total of $125 million in funding and is valued at $750 million. The company received Built In Chicago’s Best Places to Work recognition in 2021