“Big chains buy at much lower prices, hurting smaller retailers”
Well no shit, it’s called a volume discount for a reason.
Buying 50 bottles of Jack is going to be more expensive per bottle than buying 500,000 bottles. Obviously. A mom and pop shop is not operating at the same level as a Costco.
While bulk pricing is legal, distributors are legally mandated to provide the same pricing models to all qualified customers. However, the US hasn’t enforced these laws in a long time. Theoretically Walmart and Mom and Pop’s Grocery should be able to place the same size order for the same price but many big box stores started bullying the distributors for special secret pricing and then forbade them from offering those prices to anyone else.
Yes, that’s the trick. If you order in bulk, everyone doing the same bulk order should get the same pricing.
Where it starts to get tricky is how you calculate “bulk”.
Back when I worked a manufacturing gig, there were two types of bulk orders.
Lets say you wanted 5 million envelopes, you got a bulk price on that, and everyone buying 5 million got the same bulk price.
BUT -
Clients were ranked based on overall spend and got additional discounts.
So a client buying 5 million envelopes would get a better deal if they also bought 5 million custom forms vs. just the envelopes alone. Or if this was their 3rd order of 5 million vs. their first.
Applying this to liquor distribution, I could see it working the same way. A mom and pop store buying 50 bottles of Jack is going to pay the same per bottle as anyone else buying 50 bottles of Jack.
But a bigger retailer, buying 50 bottles of Jack + 50 bottles of Captain Morgan + 50 bottles of Maker’s Mark + 50 bottles of Crown Royal + 50 bottles of Grand Marnier + 50 bottles of Absolut is going to get a better per bottle deal than the mom and pop store. (I dunno, those are all the liquor brands I could come up with off the top of my head. :)
"In the single product case, courts have consistently applied the ‘not easy to establish’ two part test for predatory pricing set out by the Supreme Court in its Brooke Group decision. As a result, the courts have generally ruled that above-cost volume discounts, including those that use market share discounts and near exclusive thresholds, are lawful and do not violate the antitrust laws. "
“Evidence of below-cost pricing is not alone sufficient to permit an inference of probable recoupment and injury to competition. The determination requires an estimate of the alleged predation’s cost and a close analysis of both the scheme alleged and the relevant market’s structure and conditions. Although not easy to establish, these prerequisites are essential components of real market injury.”
“Big chains buy at much lower prices, hurting smaller retailers”
Well no shit, it’s called a volume discount for a reason.
Buying 50 bottles of Jack is going to be more expensive per bottle than buying 500,000 bottles. Obviously. A mom and pop shop is not operating at the same level as a Costco.
While bulk pricing is legal, distributors are legally mandated to provide the same pricing models to all qualified customers. However, the US hasn’t enforced these laws in a long time. Theoretically Walmart and Mom and Pop’s Grocery should be able to place the same size order for the same price but many big box stores started bullying the distributors for special secret pricing and then forbade them from offering those prices to anyone else.
Yes, that’s the trick. If you order in bulk, everyone doing the same bulk order should get the same pricing.
Where it starts to get tricky is how you calculate “bulk”.
Back when I worked a manufacturing gig, there were two types of bulk orders.
Lets say you wanted 5 million envelopes, you got a bulk price on that, and everyone buying 5 million got the same bulk price.
BUT -
Clients were ranked based on overall spend and got additional discounts.
So a client buying 5 million envelopes would get a better deal if they also bought 5 million custom forms vs. just the envelopes alone. Or if this was their 3rd order of 5 million vs. their first.
Applying this to liquor distribution, I could see it working the same way. A mom and pop store buying 50 bottles of Jack is going to pay the same per bottle as anyone else buying 50 bottles of Jack.
But a bigger retailer, buying 50 bottles of Jack + 50 bottles of Captain Morgan + 50 bottles of Maker’s Mark + 50 bottles of Crown Royal + 50 bottles of Grand Marnier + 50 bottles of Absolut is going to get a better per bottle deal than the mom and pop store. (I dunno, those are all the liquor brands I could come up with off the top of my head. :)
It wasn’t always that way. It’s still technically illegal, but the laws haven’t been enforced for decades.
Biden decided that needed to change, and hired Lina Kahn to do it.
https://www.law.gmu.edu/pubs/papers/05_26
"In the single product case, courts have consistently applied the ‘not easy to establish’ two part test for predatory pricing set out by the Supreme Court in its Brooke Group decision. As a result, the courts have generally ruled that above-cost volume discounts, including those that use market share discounts and near exclusive thresholds, are lawful and do not violate the antitrust laws. "
https://supreme.justia.com/cases/federal/us/509/209/
“Evidence of below-cost pricing is not alone sufficient to permit an inference of probable recoupment and injury to competition. The determination requires an estimate of the alleged predation’s cost and a close analysis of both the scheme alleged and the relevant market’s structure and conditions. Although not easy to establish, these prerequisites are essential components of real market injury.”