Source: Wine & Spirits Daily
March 30, 2022
Provi, a B2B bev alc e-commerce marketplace, is taking the big guys to court. Yesterday, the company filed a complaint in US District Court in the Northern District of Illinois against Southern Glazer’s Wine & Spirits and Republic National Distributing Co. for alleged antitrust violations.
Provi did not pull any punches in its 88-page complaint. It’s a lot to unpack, so let’s break it down.
HOW WE GOT HERE. Provi was founded in 2016 by Taylor Katzman. It is now active in 35 states and valued at $750 million, and most recently, Provi joined forces with SevenFifty to “create a unified and expanded marketplace” [see WSD 01-26-2022].
Initially, Provi had a decent-or at least neutral- relationship with the major wholesalers. The company estimates that between about 2016 through the first half of 2021, SGWS and RNDC collectively fulfilled more than 120,000 bev alc orders totaling nearly $200 million in revenue that they received from retailers through Provi.
The relationships with the wholesalers started to falter in 2019, when each announced their own respective e-commerce solutions “in lock-step,” SG Proof and eRNDC, per the complaint. (Provi even goes so far as to suggest that both Proof and eRNDC were created by drawing on their experiences with Provi’s platform.)
“Unfortunately, Southern and RNDC eventually came to see Provi’s growing popularity as a threat to their market power and their plans to keep retailers away from other distributors and to extend their dominance,” per the complaint.
The company alleges that SGWS and RNDC, starting around May 2021, conspired together and separately “to boycott, disparage, and tortiously interfere with Provi’s business.”
ALLEGED ANTI-COMPETITIVE BEHAVIOR. As Provi tells it, SGWS and RNDC violated the Sherman Antitrust Act by:
. Blocking and rejecting orders made through Provi.
. Boycotting Provi by effectively forcing retailers to not use their platform. Here, Provi specifically calls out major national accounts, like P.F. Chang’s, Red Robin, Darden, Buffalo Wild Wings, and others.
. And for SGWS specifically, requiring all online sales to come through Proof.
Provi claims the two distributors “initiated similar and near-simultaneous communications to retailers and sales associates to stop Provi from gaining scale to compete effectively with their respective online marketplaces.”
To support its claim that the two distributors allegedly work together in anti-competitive efforts, the complaint brings up another ongoing Antitrust case against the two filed by Bryan Hendershot, former owner of the now out-of-business Boardwalk Distribution Company in Oklahoma. (For more on that case, see WSD 08-26-2021.)
Provi also pointed to the recent competition report from the Treasury Department, which highlights competitive concerns about consolidation in the distributor tier [see WSD 02-09-2022].
A MONOPOLY ON DATA? Another key point in this case is around data.
“Not only does Defendants’ strategy maintain their control of the distributor markets and extend that control to online alcohol marketplaces, it also gives them access to valuable purchasing data that further entrenches them with retailers and allows them new monetization streams, including advertising and data analytics.”
We all know the value of data. Provi claims that without third-party platforms, such as themselves, the data and insights available would be too limited, with recommendations and insights focused on the products that SGWS and RNDC carry.
“Provi has suffered, and continues to suffer, injury to its business and property as a direct and proximate result of Defendants’ unlawful conduct and is entitled to an injunction barring their illegal conduct, monetary damages, and all other legal and equitable relief available under law and that the Court may deem proper.”
DISTRIBS PLANS TO “VIGOROUSLY DEFEND.” In a statement to WSD, RNDC spokesperson says, “RNDC strongly denies the allegations in the complaint and we intend to vigorously defend the case.”
Similarly, SGWS evp and general counsel Alan Greenspan says: “We have reviewed the lawsuit and believe it to be meritless. We plan to vigorously defend and ultimately prevail.”
Alcohol-ordering startup uncorks suit against 2 dominant distributors
Provi Files Federal Antitrust Complaint Against Southern and RNDC, the Nation’s Two Largest Wine and Spirits Distributors