Costco v. Washington: Pivotal case near decision
Pub Date: 5/1/2006
U.S. Distrtict Judge Marsha Pechman was apparently set to rule in mid-April, just after ABL Leader deadlines, whether she would sustain Washington state's three-tier system of regulating manufacture, distribution and retailing of adult beverages.
Earlier this year she ruled in favor of the giant retailer Costco when it sued to be allowed to purchase wine directly from wineries. In that ruling she acknowledged a May 2005 U.S. Supreme court ruling which found that states which allow in-state wineries to ship directly to consumers could not forbid out-of-state wineries the same privilege.
Washington had a law that allowed in-state wineries to direct-ship to consumers and its legislature has since changed the law to allow out-of-state wineries to do the same, at the same time expanding direct shipping of wine to retailers. But the Supreme Court simultaneously reaffirmed state's rights under the 21st Amendment to regulate alcohol within its borders as long as the regulations didn't discriminate between in-state and out-of-state producers.
Washington's Liquor Control Board has argued, along with the state's wholesalers, that the state is within its rights to call for state control to discourage abuse through price regulation and to use distributors to ensure proper tax collections.
Washington law also calls for a minimum 10 percent price mark-up, that prices be posted and held for 30 days and prohibits large volume discounting.
It remains to be seen if Judge Pechman rules individually on Washington's liquor control practices or will charge the legislature with overhauling the entire system.
Some producers and retailers have expressed concerns that, if big box stores come to dominate the retail tier, selection and availability could suffer and downward price pressure could mount, eating into everyone's margins.
That seems to be the case in England as Constellation Brands, one of the worlds biggest producers and distributors of wine, blasted British grocery chains in early April, including the European division of Wal-Mart, known as Asda.
Constellation's CEO, Richard Sands, said the big chains are focused on inventories of cheap, low quality wines and, as a result, were putting price pressure on supppliers that could result in better brands being pulled from the marketplace.