US: Costco pushes for out-of-state law change

Costco Wholesale has argued in court for the right to buy directly from out-of-state wineries and breweries in Washington, thereby challenging the state's three tier distribution system.

The retailer believes it is unable to to sell beer and wine cheaply enough in the state, arguing, on Thursday (1 December), that the state's laws on distributing alcohol represent a restriction on trade.

However, lawyers representing the state Liquor Control Board have warned the judge presiding over the case that a change to the law could dramatically increase alcohol consumption in Washington, with the current distribution system helping to track what alcohol is coming into the state.

US District Judge Marsha Pechman said she would rule in two weeks on whether to grant summary judgment or have the case proceed to trial in March, according to local reports.

Costco filed its lawsuit early last year, challenging Washington's scheme for distributing alcohol from other states. The current law requires out-of-state vintners and brewers to sell to one of about 200 licensed distributors in Washington state, at a markup of at least 10% above cost. The distributors then sell to retailers, such as Costco or grocery stores at another markup.

Meanwhile, Washington-based wineries and breweries can sell directly to retailers, at a 10% minimum markup.

State liquor stores are allowed to buy directly from out-of-state wineries and negotiate better deals - according to Costco lawyer Dave Burman - even though the state claims such activity on the part of retailers such as Costco would increase alcohol abuse.

Earlier this year, the US' Supreme Court decided states could not apply one rule to in-state wineries and another for those out-of-state. Prompted by the ruling, New York signed a bill in July that will permit wineries to ship to consumers directly, with California and many other states, besides Washington, following suit.

The state argues that the Supreme Court's ruling is not applicable because it did not deal with the large quantities at issue in the Washington case.