Joint statement on the Legislature’s proposed remedy to the Costco Wholesale Corp. v. Roger Hoen, et al., court case

Today we are pleased to announce that we have crafted a legislative solution to what is commonly referred to as the “Costco” case. Our solution, offered in Substitute Senate Bill 6823, reflects our efforts to protect our in-state wineries and breweries, distributors, and other entities involved in this growing industry.

Until now, Washington has allowed in-state wineries and breweries to distribute their products directly to retailers, while requiring out-of-state wineries and breweries to go through a licensed distributor to get their products to market.

Yet two months ago, federal district court Judge Marsha Pechman declared this system unconstitutional, saying it violates the U.S. Commerce Clause. Judge Pechman stayed her order until April 14, 2006, to give the Legislature time to take action. If we did not act, our in-state wineries and breweries would lose their ability to ship directly to retailers. Because many of these operations are too small to use distributors, this would have put them – and related businesses and industries – out of business and cost hundreds of Washingtonians their jobs.

While this is not an issue we wanted to address, we have been forced to do so. So today we are announcing bipartisan legislation that addresses those issues – and only those issues – that Judge Pechman’s December ruling directed us to solve.

With an eye toward crafting a solution that stays as close as possible to our current system, while still protecting our in-state wineries and breweries and the jobs they produce, here is what Substitute Senate Bill 6823 will do:

• Allows both in-state and out-of-state wineries and breweries to unlimited distribution of their products directly to licensed in-state retailers.
• Requires a sunset review, with provisions of the bill set to expire in 2008.
• Requires the Liquor Control Board to form a task force that will take a comprehensive look at the regulatory system controlling the sale and distribution of beer and wine in Washington. The task force will recommend any proposed changes to the Legislature by Dec. 15, 2006.

In this solution, we are addressing only that which allows us to do in order to be in compliance with Judge Pechman’s order – and nothing more. Judge Pechman has indicated she will rule on the remaining issues in the Costco lawsuit – including whether retailers can use common warehouse facilities and other anti-trust challenges – in March.

If need be – based on the outcome of the lawsuit and recommendations brought to the Legislature by the Washington State Liquor Control Board next December – we can address additional proposals during the 2007 legislative session.

Sen. Jeanne Kohl-Welles
Sen. Linda Evans Parlette

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