Costco Ruling Partly Reversed

“Big win for state and distribs.”

In a decision with major implications for the three-tier system, the Ninth Circuit Court of Appeals largely reversed a lower court ruling that deemed unconstitutional many of Washington State’s alcohol-beverage trade laws.

Costco Wholesale Corp. had argued successfully in district court that a range of state laws, including bans on volume discounts and credit, were preempted by the Sherman antitrust act.

The Appeals Court disagreed. From the 47-page ruling:

“We disagree with the district court’s conclusions that the central warehousing ban, the volume discount ban, the delivered pricing requirement, the credit ban, the uniform pricing requirement and the minimum mark-up are hybrid restraints of trade subject to Sherman Act preemption.”

But the Appeals court did agree that the state’s post-and-hold law was “a hybrid restraint of trade that is not saved by the state immunity doctrine or the Twenty-first Amendment.” It also upheld the lower court’s ruling that the ban on retailer-to-retailer sales wasn’t subject to the Sherman Act.

The court’s conclusion stated:

“In conclusion, we reverse the judgment of the district court insofar as it held that most of Washington’s restraints on the sale of beer and wine were hybrid restraints subject to preemption under the Sherman Act. We affirm the district court’s rejection of Costco’s challenge to the retailer-to-retailer sales ban. We also affirm its conclusion that under our precedents, the post-and-hold scheme is a hybrid restraint of trade that is not saved by the state immunity doctrine or the Twenty-first Amendment. Each party shall bear its own costs on appeal.”

Beer Marketer’s Insights Express called the ruling “a big win for state and distribs.”

The question now is: What next? Even before this ruling came down, observers expected the verdict would be appealed to the Supreme Court.

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The ruling can be seen here.