Washington Attorney General Rob McKenna issues statement on Costco decision

January 29, 2008 -- OLYMPIA --- The U.S. Court of Appeals for the Ninth Circuit today issued an opinion in Costco Wholesale Corporation’s antitrust lawsuit challenging nine specific restraints on the sale and distribution of beer and wine in Washington.

Reversing a district court decision, the Ninth Circuit found seven of the nine challenged regulations were valid.

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“We are pleased with the Ninth Circuit’s decision to uphold most of Washington’s liquor control laws,” Washington Attorney General McKenna stated. “The decision means the Legislature will continue to make any necessary policy changes to the distribution of beer and wine in our state. I want to thank Assistant Attorneys General Martha Lantz and David Hankins for their outstanding work in this case.”

The Ninth Circuit affirmed a number of Washington’s beer and wine regulations Costco argued were preempted by federal antitrust law:

* Uniform pricing (manufactures must offer uniform prices to distributors, distributors must offer uniform prices to retailers)
* Minimum mark-up (selling price at least 10 percent over acquisition costs)
* Ban on quantity discounts (no price break for volume purchase)
* Ban on credit (no distributor sales on credit to retailers)
* Delivered pricing (price to retailer includes cost of delivery, even if delivery declined)
* Ban on central warehousing (delivery is to licensed retail location only)
* Ban on retail to retail sales (retailers cannot sell to other retailers)

According to the opinion, the three-judge panel chose to uphold those provisions because their anti-competitive effect is from legislative choice, not from collusion or private action.

The panel found that only two of the challenged laws violated the Sherman Antitrust Act. These laws require alcohol distributors to record their wholesale prices with the state liquor board and to hold to these prices for at least 30 days.

Source: Washington Attorney General