Lawmakers commit to addressing state beer and wine distribution laws

OLYMPIA – The 9th U.S. Circuit Court of Appeals issued a ruling yesterday that places much of Washington’s beer and wine distribution system in jeopardy, but Washington lawmakers vowed today to work in the 2007 legislative session toward a solution.

“We have a major undertaking ahead of us,” said Sen. Jeanne Kohl-Welles, D-Seattle, who chairs the Senate Labor, Commerce, Research & Development Committee. “I don’t think that rewriting our state’s alcohol laws topped anyone’s list of priorities for the upcoming session, but we’re prepared to meet the challenge the court has thrown our way.”

Sen. Linda Evans Parlette, R-Wenatchee, the ranking Republican member of the committee, agreed. “We worked very hard last session to develop a bipartisan legislative solution to address all of the court’s concerns in the Costco case without making drastic changes to the system. I’m confident we can work together again to address these new concerns.”

In 2005, discount retailer Costco challenged Washington’s beer and wine distribution practices in federal court, alleging that they violate the interstate commerce clause of the U.S. Constitution and federal anti-trust laws.

In a summary judgment ordered last Dec., federal district court Judge Marsha Pechman found a portion of the state’s distributing system unconstitutional, saying it violated the U.S. Commerce Clause. Judge Pechman stayed her order until April 14, 2006, to give the Legislature time to take action.

Kohl-Welles and Parlette responded by working together on Senate Bill 6823 to address Judge Pechman’s order. The Legislature approved the bill, which extended to out-of-state wineries and breweries the privilege that in-state wineries and breweries have of shipping to retailers without using a distributor. While the bill remedied the above portion of Costco’s lawsuit, it did not address the remaining challenges.

After a trial last spring in U.S. District Court on myriad antitrust issues, the court ruled with Costco that state laws on price posting and holding, minimum mark-ups, delivered pricing, uniform pricing, ban on volume discount, central warehousing and ban on credit sales are all unenforceable due to conflicts with federal antitrust statutes.

The state requested and received a stay of the judge’s order until May 2007. The Liquor Control Board and the distributor association appealed the judge’s decision to the 9th U.S. Circuit Court of Appeals and requested an extension of the stay. Yesterday, however, the court denied the state’s motion. The state will renew its motion for an extended stay in March. But it is unlikely that the matter will be resolved by the courts before the end of the 2007 legislative session.

The Legislature has been compelled to address the issue, Kohl-Welles said. However, she was cautious about predicting how this very complicated issue might eventually be resolved.

“I’m committed to working extensively with stakeholders to find a solution that the court finds acceptable,” Kohl-Welles said. “I prefer to let the committee process work.”

Parlette agreed. “This is a complicated issue and the stakes are high. We’re committed to developing a thoughtful solution, not a reactionary one.”

The 2007 legislative session is schedule to convene on Jan. 8 and last for 105 days.

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