COMING SOON!

How much data from competing distribs is Southern Glazer's Wine & Spirits entitled to in its defense against the FTC's claims of the distrib's alleged widespread price discrimination? A ton, the distrib asserts, going tit for tat with the fed agency that extracted a huge amount of data as part of its landmark antitrust case against the distrib, filed just over a yr ago. To properly combat the FTC's "sweeping" claims, Southern (or SGWS) argues that a comparably large swath of data and strategy docs from competitors is fair game. Last August, Southern subpoenaed 11 different competing distribs, including major players in 5 states where the FTC focused its initial claims: Arizona, California, Illinois, Texas and Washington. Each subpoena requested essentially all data on wine & spirits transactions with both retailers and suppliers, plus a wide array of internal docs on costs and pricing strategy. At least 1 distrib, Hensley in AZ, refused. So last mo, SGWS took it to fed ct to compel its cooperation, claiming that its request's "breadth" merely "mirrors the wide scope of the FTC's allegations." Like the FTC's suit, beer is excluded from this dispute. Status of interactions with other 10 distribs unclear at presstime.Requested Data "Amounts to a Detailed Blueprint" of Distrib Biz, in Hensley's View Southern sent the same subpoena to 11 distribs, some "large national players" like itself and other sizable houses in 5 key states, the co explained in its early Dec motion to fed ct in AZ. They "seek transaction data for other distributors' purchases of wine and spirits," plus supporting docs like those "that show how the distributor determines its pricing, manages its costs, and complies with state laws," SGWS lays out. The subpoenas make 14 specific requests, including data covering transactions with retailers and suppliers back to Jan 2020 (including prices, revs, margins, volume, supplier support and more); docs on COGS, discounting and the differences in costs of distributing to different types of retailers; and docs that compare competitor pricing or explain internal pricing strategy, plus agreements and communications about pricing with retailers and suppliers.As far as Hensley is concerned, that's "exactly the kind of information companies most closely guard." Taken together, it "amounts to a detailed blueprint of a regional competitor's business model," the co wrote. Complying with the requests "would require Hensley to turn over essentially all of its non-beer pricing, cost, and related strategy information for a five-year period (including current information), together with the tools needed to interpret that data," it continued (its emphasis).Blame FTC for "Relevant and Proportional" Request, Southern Sez But all of this is "necessary" for its case, SGWS insists. The "relevant" info it seeks from these distribs will help it show that its "pricing practices are justified," including to meet competitor prices, and that FTC's arguments falter. Info it seeks "will showcase legitimate, cost-based reasons for differences in prices to different retailers," the distrib explains, as it "seeks to prove" any price differentials are also "consistent with industry practice." Plus, SGWS welcomed a discussion "about ways to potentially narrow" the scope of its requests, but Hensley "declined," it shows, arguing that the requests are simply "proportional" to the huge scope of the case FTC is bringing. Recall, FTC alleges discrimination in at least 17 mil transactions. That includes over 82K in AZ, SGWS shared. "If Hensley believes SGWS's requests are overbroad, its complaint is with the FTC, not SGWS," it responded.Don't Need Our Data to Show Your Thinking, Hensley Argues But defending against the FTC's claims only requires Southern to show its "own costs, beliefs, and operations, not a competitor's business model," Hensley argued last mo. "SGWS did not have access to such information at the time of creating its own policies," Hensley emphasizes. In its view, "it is only SGWS' belief about its competitors' pricing that is relevant to this defense," not the actual detailed pricing data it seeks. So the large distrib "appears to hope that it can search voluminous data from Hensley to reconstruct an after-the-fact justification for its pricing differences."Not so, SGWS fired back, pointing to earlier cases that allowed discovery of competitor data. Again, the fault lies with the FTC, SGWS contends, including the agency's "failure to investigate, let alone consider, the broader alcohol market, including SGWS's competition with other distributors. The FTC's willful blindness to market conditions does not limit the discovery SGWS may seek," it argued.Privacy and Protections? How Far Does This Go? Naturally, Hensley also pushed back against the request for confidentiality reasons. It later acknowledged an initial error in its arguments, admitting that the protective order currently operating in the litigation would allow Hensley to mark documents with an "outside counsel only" distinction so that no Southern employee could see what it deems "classic trade secret" material. If it has to give any info up at all, it at least wants the request heavily narrowed and extra protections to be put in place. But this is the whole point of such protective orders, SGWS replied, arguing against limits on its requests."The stakes of this case are high," SGWS summarized, as the FTC wants to block "pricing practices that are common in the industry," in its view. But how much info does it need to defend itself against that effort? If what Hensley describes as "nearly all of [its] core transactional data and strategic documents" is truly necessary, then where does it end? How many other distribs can it seek similar info from? So far as we can tell, only the dispute with Hensley has ended up in court, but 10 other distribs also received identical subpoenas. If Southern is right and it's entitled to all this info from even these 11 competitors, let alone all of its competitors, the resulting dataset would pool together a vast array of wine & spirits distrib data on a scale that does not and could not exist under other circumstances. Truly mind boggling.

FTC Suit Spirals Wider as Southern Seeks Deep Data Dive into 11 Distribs; Hensley Pushes Back

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