Washington State Wine Reform Lawsuit Captures Nationwide Attention

In March of last year, The Costco Corporation had brought suit in the United States District Court of Western Washington against the Washington Liquor Control board and other parties, claiming that the state's distribution structure boosts wine and beer prices to the consumer. This lawsuit to overturn the three-tier system in Washington, is a case that might well have national implications toward a national mandate to overturn a system put in place in Prohibition-era days preventing individual wne and beer enthusiasts from buying wine directly from out-of-state producers. Potentially, this suit could eventually overhaul the way in which restaurants buy beer, wine and liquor. The three tiered system refers to the current channel by which alcohol products are moved from the actual producer to the wholesaler and then to the retailer, such as a restaurant. Costco claims that warehouse clubs and retailers would lower their costs and offer better prices if they could negotiate discounts based on their volume buying and distribution practices. But Washington State’s current system of restraints on competition allegedly inhibits Costco’s ultimate goal of offerings its goods at the cheapest prices to its customers. Washington State regulations bar retailers from buying directly from out-of-state wineries and breweries. Hard liquor sales, limited to state stores, are not at issue. Under the three-tier system, adopted in 1935 after the repeal of Prohibition, the 13,000 retailers licensed to sell beer and wine in Washington state may buy only from 200 to 300 licensed distributors. The distributors, in turn, must charge markups of at least 10 percent, maintain selling prices for an entire month and charge the same price regardless of how much a retailer buys or who delivers the merchandise. In recent months The U.S. Supreme Court has considered whether some state laws should be voided so that consumers could purchase wine directly from out-of-state vintners. This in effect challenges the 21st Amendment, which permits states to regulate alcohol distribution. Distributors contend that the three-tier system is necessary to maintain a fair marketplace that discourages overconsumption, protects smaller retailers with controlled pricing and facilitates the collection of state taxes. Costco argues that such laws restrict competition and violate the Commerce Clause of the U.S. Sherman Act that protect free interstate commerce. Restaurant operators and those in the wine community are watching the case closely and have mixed views. Some restaurants would like to have a professional relationship with a winery and feel frustrated by distributors; others would miss the added value that the distributor provides such as marketing, insurance and inventory storage. http://www.findarticles.com/p/articles www.nrn.com