Liquor Wholesaler Glazer's Charged Wal-Mart More, Suit Says

by Mark Friedman  on Monday, Nov. 13, 2017 12:00 am   5 min read

Southern Glazer’s, which has a distribution site in North Little Rock, is accused in a suit by a fired employee of charging Wal-Mart more for alcohol than it charged competitors. (Jason Burt)

A former vice president at Southern Glazer’s Wine & Spirits LLC has alleged in a lawsuit that it charged Wal-Mart Stores Inc. more for alcohol than other retailers.

Jon Thompson of Rogers was fired on June 1 from Southern Glazer’s of Miami, the largest North American wine and spirits distribution company, according to the lawsuit he filed last month in Benton County Circuit Court. The suit has since been moved to U.S. District Court in Fayetteville.

The lawsuit didn’t say what reason Glazer’s gave for the termination, but Thompson alleged the company’s motives were “grounded in his unwillingness to engage in collusive, anti-competitive, illegal and deceptive conduct and his complaints concerning the same,” the lawsuit said. He is suing for wrongful termination and other counts and seeking at least $30 million in damages from Glazer’s and Southern Glazer’s Wine & Spirits of Arkansas LLC, which has its primary office in Dallas.

Starting in 2011, Thompson “uncovered and reported numerous illegal pricing practices that favored individual retailers, violated anti-kickback and commercial bribery laws and violated federal antitrust laws,” his suit said.

He alleged Glazer’s moves increased costs to Wal-Mart and Sam’s Club, but the lawsuit didn’t estimate how much.

Glazer’s attorney, Charles “Chip” Babcock of Jackson Walker LLP in Dallas, denied Thompson’s allegations.

“According to the complaint, Mr. Thompson claims that he has been aware of this for almost seven years, and yet he did not see fit to do anything about these alleged activities until after he was terminated,” Babcock told Arkansas Business. “We’re going to aggressively defend the case.”

Thompson’s attorney, Marshall Ney, with the Rogers office of Friday Eldredge & Clark, said in an email to Arkansas Business, “It’s clear from the complaint that Mr. Thompson is not ‘just now’ complaining about illegal practices. He raised concerns multiple times over a period of years — orally and in writing.”

Thompson’s case also should be important to Wal-Mart and other retailers, Ney said.

“It’s all about integrity of the alcoholic beverages market and a very large wholesale supplier that touches countless retailers across the country — from the mom-and-pop liquor stores to the Fortune [No.] 1 retailer,” Ney said. “I expect they all care if they have the same opportunities as their competitors or those required by state or federal laws.”

A Wal-Mart spokesman did not return a call or email seeking comment.

Southern Glazer’s has dealt with other allegations of wrongdoing in recent months. In July, subsidiary Southern Glazer’s Wine & Spirits of Pennsylvania LLC was one of four companies that agreed to pay millions of dollars in fines to avoid prosecution by the U.S. Attorney’s Office for the Middle District of Pennsylvania. Southern Glazer’s of Pennsylvania paid $5 million for its employees’ role in “providing cash, all-expense paid trips, tickets to shows and sporting events … and other things of value to officials” at the Pennsylvania Liquor Control Board from 2000-12, according to the U.S. Attorney’s Office.

Also in July, a California business owner filed a suit against Glazer’s seeking class-action status. One claim was that Glazer’s sold alcohol to different businesses at different prices “in violation of federal alcohol regulations,” according to the suit, filed by attorney Scott Edward Cole of Oakland, California.

Glazer’s has asked that the case be dismissed because the lawsuit “lacks any factual allegations” that would support the claims, according to the Glazer’s filing. That motion is pending.

Wal-Mart Pricing
Mary Robin Casteel, director of the Arkansas Alcoholic Beverage Control Division, told Arkansas Business that wholesalers who sell alcohol have to offer the same price to all retailers.

“There can be deals that can be price breaks, but they have to offer the same deal to all retailers,” said Castell, who wasn’t commenting on Thompson’s suit. Otherwise, special pricing would violate state and federal alcohol laws, she said.

Still, she said, it would be difficult for a retailer to know if a competitor were paying less for alcohol.

In his suit, though, Thompson listed examples of times when Wal-Mart paid more for alcohol than competitors did.

After joining Glazer’s in 2011, Thompson acted as its national account manager for Wal-Mart and Sam’s Club.

“During the next several years, Thompson continued to uncover and report numerous disturbing issues regarding [Glazer’s] conduct on preferential pricing, exclusives, credits, rebates, adjustments and collusion with its competitors in both pricing and nonpricing practices,” he said in the lawsuit.

Four years ago, Thompson sent an email notifying Glazer’s legal department and Senior Vice President Don Pratt about legal and ethical issues involving pricing discrepancies. The email was attached as an exhibit in the suit.

“Other chains have cost advantages in comparison to Walmart consistently and for October,” he wrote, adding that “Walmart has some cost advantages over the other chains dependent on the item/brand.” Differences were from “small” to several dollars a bottle, he wrote.

“You know the risks from ethical to reputation to legal. However this is becoming a much larger issue at Walmart and Sam’s which is placing me in a much more compromising situation. … I have no control over pricing to Walmart or Sam’s from any state,” Thompson wrote in the email dated Oct. 16, 2013. “Therefore, I am requesting support from you and the executive team to rectify the situation as I cannot continue implementing these practices.”

Merger Cited
Thompson said the situation didn’t improve after the email. But he hoped that pricing violations would stop once Southern Glazer’s completed in 2016 its acquisition of Southern Wine & Spirits of America Inc., bringing its total employment to more than 20,000 and resulting in it operating in 44 states. But the alleged illegal practices went on after the merger, according to Thompson’s suit.

Less than two months after the merger was completed, Thompson complained in emails to Glazer’s officials that Wal-Mart wasn’t receiving the best prices in Illinois; instead, he said, retailers Jewel-Osco and Binny’s Beverage Depot were.

To back his claim that Wal-Mart wasn’t being treated fairly, Thompson included in his lawsuit a company email showing so-called “money only” credits given to Texas retailers in 2016. “Money only” credits can be used as a tool to lower prices of products. Spec’s Wines Spirits & Finer Foods received $5.6 million in credits while Wal-Mart and Sam’s Club received less than $30,000 total.

In early May, Thompson said, he was told by a Glazer’s official that part of Thompson’s job was to align competitive interests with Glazer’s. The official allegedly told Thompson that he had no problem calling a client’s competitors to talk about policies, pricing and directives if it was in Glazer’s best interest.

Thompson replied it was not part of his job and he “had no intention of making calls like that,” according to the suit.

Thompson was fired June 1.

“It appears Jon’s termination was intended to silence and retaliate against him for his privileged conduct,” Ney said in a letter to Glazer’s Shawn Thurman, executive vice president of national accounts, which was included as an exhibit in the lawsuit.

As of Wednesday afternoon, Glazer’s hadn’t filed its response to the lawsuit.

 

 

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