CT: Connecticut’s liquor law faces legal challenge

ctpost
By Susan Haigh, Associated Press
August 27, 2016
HARTFORD, Conn. (AP) — After surviving a series of legislative challenges, Connecticut’s decades-old law prohibiting retailers from selling wine and liquor below a minimum price now faces a challenge in federal court.

Maryland-based Total Wine & More has filed a lawsuit claiming that provision and other parts of Connecticut’s liquor laws violate the Sherman Anti-Trust Act, creating a price-fixing system that protects “inefficient and politically well-connected participants in Connecticut’s alcohol beverage industry.”

It’s not the first time the chain, which says it’s the nation’s largest independent retailer of wine, spirts and beer, has accused a state of price-fixing. Total Wine & More, which has 138 stores in 18 states, including four in Connecticut, was involved in a similar 11-year battle in Maryland, where it challenged that state’s volume discount ban. Ultimately, the state settled the case after losing an appeal.

Total Wine & More, which plans to grow to 150 stores in 21 states by the end of 2016, has been involved in other lawsuits as it expands, often to the dismay of smaller stores that complain they can’t match the chain’s high-volume buying power and pricing.

“On behalf of the customers, we will always challenge an unfair law,” said Edward Cooper, a spokesman for the company. Similar suits challenging various state liquor laws have been filed over the years by other companies, such as Costco.

Cooper contends Connecticut’s law, which dates back to 1981, is an “outlier” and particularly egregious. It prevents retailers from selling wine and liquor below a minimum price, the wholesaler’s posted price-per-bottle in a case. The minimum pricing for beer is the lowest posted price for the month when the beer is being sold.

“This is the government okaying the wholesalers to set the price by which the retailers must sell their produce to consumers and they set it at an artificially high level,” Cooper said. “Customers in Connecticut are getting ripped off.”

Democratic Gov. Dannel P. Malloy agrees. He’s offered legislation over the past four years to change the system. Each time, however, he’s been thwarted by the Connecticut Package Store Association and its members, who claim eliminating minimum pricing would force 600 stores out of business, allowing big chains to monopolize the market and ultimately raise prices. There are approximately 1,150 retail package stores in Connecticut.

“The whole purpose here, the whole result would be to give business to the box store who is trying to take over everybody’s business in Connecticut,” Hughes said earlier this year. He declined to comment on the federal lawsuit.

Cooper contends there’s room for small, medium and large stores.

Mike Lashbrook is executive director of the Center for Alcohol Policy, which works with state policymakers and regulators, who have primary authority of alcohol policy since Prohibition was repealed in 1933. He said more than a dozen states have minimum mark-up rules that prevent companies from selling a product below cost or prohibitions against selling below cost. He said several others have some form price regulation, such as prohibiting quantity discounts.

“It’s a very common trait of alcohol laws and regulations to not have alcohol be a loss-leader or be priced too low,” he said. “Most states have some form of regulation that does not allow alcohol below cost. They do not want it to be deeply discounted and promote over-consumption. That inherently is a feature of most state laws.”

Brannon Denning, a law professor at Samford University in Birmingham, Alabama and an advisory board member at the Center for Alcohol Policy, said there have been a “series of full-frontal attacks” on the three-tier system for distributing alcohol. In place since Prohibition, it includes producers, distributors and retailers. Denning said some large retailers are looking to cut out the wholesaler and treat alcohol like any other loss leader product to attract customers.

The Connecticut Package Store Association claims Total Wine & More is already selling to consumers below the minimum price. The organization has filed a formal complaint.

“The loss of revenue for the state of Connecticut every day Total Wine defies this policy will be substantial,” Hughes warned in the complaint, reminding the state’s liquor control director he can fine and suspend Total Wine & More’s permits.

“I am sure there will be no exception here,” wrote Hughes.