Schlitz Brewing Company failed to disclose on its registration statement, as well as in its periodic reports to the SEC, certain kickback payments that it was making to retailers to encourage them to...

Schlitz Brewing Company failed to disclose on its registration statement, as well as in its periodic reports to the SEC, certain kickback payments that it was making to retailers to encourage them to sell Schlitz products, as well as the fact that the company had been convicted of violating a Spanish tax law. The SEC claimed that the failure to include such information was a violation of the antifraud provisions of the 1933 and 1934 Acts because it was material. Schlitz claimed that the information was not material because the kickbacks represented only $3 million, a tiny sum compared with the company’s $1 billion in revenues. Was the information material, and was its omission thus a violation of Section 10(b) of the 1934 Act and SEC Rule 10(b)-5? Explain.