US: Costco wins first Washington legal round
Costco Wholesale Corp. has won a legal battle against the Washington State Liquor Control Board.
The US discount retailer has argued that Washington state law regarding beer and wine distribution was unconstitutional.
US District Judge Marsha Pechman ruled on Wednesday (21 December) that Washington's three-tier system for distributing beer and wine within Washington state breaks federal antitrust law. Pechman agreed with Costco's argument that the state law allowing in-state beer and wine producers to ship directly to retailers but prohibiting out-of-state producers from doing so violated the US Constitution's Commerce Clause.
The state's Liquor Control Board, meanwhile, said that the present law protects its citizens from the dangers of alcoholism and other abuse by keeping prices higher than the market would dictate. The current set-up requires out-of-state vintners and brewers to sell to one of about 200 licensed distributors in Washington state at a mark-up of at least 10% above cost. The distributors then sell to retailers, such as Costco, at another mark-up.
In her ruling, Pechman stayed her judgment that the Constitution requires in-state and out-of-state producers to have equal distribution rights in order to give the legislature time to act. She gave lawmakers until 14 April to either allow all producers of wine and beer - whether in-state or out - to distribute their own products to retailers, or to prohibit any of them from doing so.
Pechman's ruling is the first step on a long road to change Washington's laws. A trial on the matter is scheduled for March, while the state legislature is set to discuss the matter next month.
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