Costco Wins Against The WA Beer & Wine Wholesalers Association…Sort Of
June 25, 2009 by Doug Haugen
According to the Seattle Times, on Tuesday, an appeals court judge ruled mostly in favor of the Washington Beer and Wine Wholesalers Association, overturning a previous decision that the State’s laws about beer and wine distribution violated federal anti-trust laws. Costco had initially filed suit against the State and WBWWA quite a while ago, and won the first decision. Now, it has been reversed.
The current laws, dating back to Prohibition, establishes a three-tier system where a winery can choose to be two of the three following: manufacturer, distributor, retailer. If wineries produce the wine, and sell it directly from tasting rooms, they cannot also distribute the wine to other retailers. If they do not sell wine at retail, they can. This is bad for Costco, because they cannot buy wine directly from wineries, cutting out the middle man and lowering prices. The court mostly preserved this law.
This law went into effect after Prohibition because of the mob. When booze was illegal, the mob had an unofficial monopoly on liquor sales as they illegally distributed bootleg liquor. When Prohibition ended, the government was afraid that the mob would profit greatly from liquor distribution, now legitimately, so to limit the impact and make way for new businesses, the three-tier system was formed. This system now does little to help the wine industry, or the consumer, even now that the mob is not a factor. Kudos to Costco for challenging it.
Two things went well for Costco, though. One law was overturned that said a business must wait thirty days after filing a price change with the Washington State Liquor Control Board. Now, new prices can take effect immediately.
The second thing that went well for Costco was that the court ordered the State and the WBWWA to share most of the court costs for this long battle, a bill amounting to about $1.9 million. No small chunk of change.