Total Wine wins challenge on discount liquor pricing

The Boston Globe reports that a decision by Suffolk Superior Court Judge Robert B. Gordon came in response to a lawsuit brought by the country’s largest alcohol chain, Maryland-based Total Wine & More, against the state Alcoholic Beverages Control Commission.

In January, the agency slapped Total Wine’s Everett and Natick stores with several-day license suspensions for allegedly selling Smirnoff vodka, Bacardi rum, and other liquors for $1 to $6 below their wholesale costs. State alcohol laws and regulations forbid retailers from offering such below-cost “loss leaders,” a policy the state says is necessary to prevent excessive drinking and predatory pricing.

Total Wine sued to overturn the license suspensions. The company argued its prices for consumers weren’t actually below its costs but were based on quantity discounts the company expected to receive from its wholesalers later on, after it had ordered enough of the products to qualify. The ABCC, Total Wine said, unfairly refused to acknowledge the true, ultimate cost of the liquor to the company, and instead looked only at initial invoices that listed a higher cost.

Judge Gordon agreed, saying the ABCC’s “starchy” and “semantic” definition of cost “bears no rational relationship to the legislative policy of prohibiting anti-competitive pricing practices.”

“There was clearly no predatory pricing carried out in this case,” Gordon wrote in his decision, “only a salutary effort by a retailer to pass along savings derived from volume purchasing at the wholesale level to its customers. This is something the law should promote rather than punish.”

The ABCC, he added, should have realized that the delayed quantity discounts were “integral to a calculation of the true net cost of an alcoholic beverage product” — a question simply of “the sequencing of the invoice paperwork, and not the substance of the product pricing itself.

Total Wine owner David Trone hailed the ruling as a victory for consumers.

“The court clearly recognized that Total Wine is lawfully providing the best values for the products we carry,” he said in an interview with the Globe.

Gordon declined to rule on Total Wine’s argument that the pricing law violated US anti-trust laws, a claim the company also pursued in an ultimately unsuccessful federal lawsuit challenging a similar minimum pricing requirement in Connecticut.

That means Massachusetts retailers are still barred from selling below cost, a reprieve for the owners of smaller package stores who say the requirement prevent large chains such as Total Wine that can afford to sell products at a loss from unfairly undercutting their prices and driving them out of business.

 

A spokeswoman for state Treasurer Deborah Goldberg, whose office oversees the ABCC, said the agency is still reviewing the ruling and has not yet decided whether to appeal, the Globe reports.

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