Liquor store's fight with state appears headed for Round 4

Appellate court rejects, for a 3rd time, district ruling in price-fixing challenge

August 10, 2005|By Jamie Smith Hopkins and Tricia Bishop | Jamie Smith Hopkins and Tricia Bishop,SUN STAFF

For the past six years, Beltway Fine Wine & Spirits in Towson and its parent company have been locked in a legal battle with the state of Maryland over liquor laws that limit competitive pricing, and it looks like they're going for another round: A U.S. appeals court in Virginia yesterday sent the case back for the third time to a lower court in Baltimore for further consideration.

At issue are two price-fixing regulations that TFWS Inc., the parent company of Beltway Spirits, says violate federal antitrust laws. The first bans wholesalers from giving volume discounts to big-buying retailers, and the second requires retailers to file their prices for competitors to see - and then hold them there for a month.

TFWS wants the regulations to go away, saying the move will ultimately lower prices for consumers. But not all retailers are on board with that claim: Those who own small liquor stores worry the change will allow wholesalers to raise their prices, and they don't move enough volume to qualify for discount pricing.

Yesterday's decision, which rejected a lower-court victory for TFWS, was a small win for the state.

"We won a battle, but we didn't win the war," Steven M. Sullivan, an assistant attorney general who argued the case for the comptroller's office before the U.S. Court of Appeals for the 4th Circuit, said of yesterday's decision. The attorney for TFWS wouldn't comment on the decision.

The fight started in 1999, when TFWS sued Comptroller William Donald Schaefer in U.S. District Court in Baltimore, asking that the laws be struck down. Schaefer's camp filed a motion to dismiss the case, which was granted, but overturned on appeal. Then Schaefer's legal team asked for a judgment without a trial and won, but that, too, was overturned on appeal.

This time around, the District Court held a trial and found in favor of TFWS, but the appeals court - in its third decision - said the district judges did not fully consider the issues.

"We cannot conclude that the District Court's determination is free of clear error," the appellate opinion stated.

TFWS has two weeks to request that the Court of Appeals rehear the matter. Otherwise, the case will return to the District Court as remanded, a ruling issued and - likely - a fourth appeal.

"That's pretty much a certainty," Sullivan said. "Whatever happens, there will be a further appeal."

The various court rulings suggest that for Maryland to keep its regulations on the books, it must prove that those rules raise prices and that the higher prices keep people from drinking as much. The state's defense relies on its 21st Amendment right to regulate alcohol, which it claims to do by keeping prices higher.

TFWS argues that Maryland's prices are lower than those of neighboring Delaware, which doesn't have similar regulations, and that this demonstrates that the Maryland regulations don't promote temperance. But the U.S. Court of Appeals said the District Court failed to consider that Delaware's liquor excise taxes are much higher than Maryland's.

Jim Bishop, general manager of Ronnie's Fine Wine & Spirits in Forest Hill, said the law creates an "equal playing field" that he prefers, though his store is a large retailer.

If the rules are overturned, wholesalers would offer discounts to big stores but Bishop doubts many retailers would pass the savings to customers. Meanwhile, residents shopping at small stores would pay more, he said.

And if the law is changed, he added, "I'm afraid the effect would be that it would squeeze out the little guy."

Others with an interest in the outcome - such as the Maryland State Licensed Beverage Association (MLBA), which filed a brief supporting the current state regulations - dismissed the decision as preliminary.

"We don't know what the end result is," said Jane Springer, MLBA's executive director. "Who knows what will happen from here?"

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