OLYMPIA – Costco Wholesale Corp. won a sweeping victory in federal court on Friday, with a judge agreeing that a long list of state liquor control laws are illegal antitrust violations.
State officials said they had not decided whether to appeal the ruling. If it stands, the decision could bring down the average price of beer and wine in Washington, the nation’s second-largest producer of premium wines behind California.
The lawsuit began about two years ago. Issaquah-based Costco, the nation’s largest wholesale club chain, argued that Washington’s beer and wine rules were artificially inflating prices.
In her ruling, U.S. District Judge Marsha Pechman of Seattle agreed that the state’s mandatory price markups and other rules unfairly prevent large retailers from exploiting competitive advantages, such as discounts for buying in bulk.
Pechman also said the regulations couldn’t be justified as a means to keep consumer prices higher and alcohol consumption down, or maintain a more “orderly” market for the state.
“The restraints challenged by Costco are plainly anti-competitive, and there is no dispute that these restraints increase the average cost of beer and wine in Washington,” Pechman wrote.
The state still could drive up beer and wine prices and raise money by levying excise taxes, which wouldn’t run afoul of antitrust law, she wrote.
The state regulations thrown out by Pechman were:
* Bans on volume discounts and credit sales of beer and wine.
* Minimum markup requirements, which force manufacturers to charge at least 10 percent over cost when they sell beer and wine to distributors. Distributors face the same rule when they resell the products to retailers.
* Mandates that manufacturers and distributors post product prices with the state, and keep prices the same for a month afterward. Distributors must charge that price to each retailer, and retailers can’t get discounts for paying for freight or picking up the product themselves.
* A ban on retailers storing or receiving beer or wine at a central warehouse.
Costco officials and lawyers did not immediately return phone messages left after business hours on Friday. But the company has said it could offer beer and wine at better prices by buying in bulk, striking deals directly with manufacturers and using its own distribution system.
The state Liquor Control Board declined comment on the ruling, but did point out that Pechman ruled in favor of a single regulation: the state’s ban on one retailer selling the alcoholic beverages to another, which the board said would “prevent Costco and other large retailers from acting as distributors in Washington.”
“We don’t know if we’re appealing or not. We’re going to get together with our attorneys and talk about it more,” board spokesman Bob Burdick said.
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