Fourth
Circuit Rules Against State of MD in TFWS Case By Schwartz, Metz & Wise, P.A. –
MSLBA Lobbyist & Legal Counsel
Steve Wise
On Wednesday, July 15th, a 3-judge panel of the U.S. Court
of Appeals for the 4th Circuit issued its ruling in the
long-running TFWS v. Franchot (Trone) case--10 years to be
exact. The Court held that Maryland's post and hold
pricing system, as well as the ban on volume discounts, were
in violation of federal antitrust law. Thus, the
monthly posting of prices with the Comptroller is no longer
required, and large retailers like Trone will be allowed to
negotiate prices and demand volume discounts.
Notably, one of the 3 judges indicated that he was inclined
to uphold both laws, but was bound by a doctrine known as
the "law of the case." Simply put, when a case is appealed
one or more times, judges abide by earlier rulings in the
case so that they are not ruling again and again on the same
legal issues each time it is appealed. This case was
appealed to the 4th Circuit four times, and this judge was
stating that had he been on a judge on the first appeal, he
would have upheld the laws. However, he agreed he was bound
by the earlier rulings of other judges. At the end of the
day, this is like saying it was a close game--we still lost.
The Comptroller's Office has not enforced either of these
laws since an earlier ruling in the case, and obviously will
not be reinstituting them now. However, the Comptroller and
Attorney General will have to decide in the coming weeks
whether to appeal this case to the Supreme Court (they could
first seek review from the entire panel of 15 judges on the
4th Circuit, known as en banc review, but in my
opinion that is not a worthwhile endeavor).
There are common issues between this case and the Costco
case out of Washington State. In that case, a different
federal court ruled that the volume discount ban in
Washington was legal. This type of conflict between
lower courts often leads the Supreme Court to hear a case
(the Supreme Court does not hear every case
appealed to it).
• Most consumers say that they are cutting back on their on-premise spending but Nightclub consumers are not cutting back as much as the average consumers.
• Most consumers going out a little less often and they are also spending a little less per visit.
• When cutting back on on-premise spending per visit consumers cut back on food more than drinks.
• Most consumers say they are ordering about the same type of drinks but ordering a little less per occasion.
• Casual dining is the most important overall segment with Nightclub consumers visiting all on-premise segments more than the average on-premise consumers.
• Nightclub consumers tend to visit two venues per night while the average consumers tend to visit only one venue.
• When consumers decide where to go, Food, Atmosphere and Location are the most important factors.
• When consumers determine a bar / restaurant’s beverage quality perception, selection is most important.
• Beverage service is all about taking the order quickly, delivering the drink quickly and getting things right.
• The key occasions for each beverage alcohol type are:
Beer: Hanging Out, Socializing, Fun Meals
- Domestic Beer accounts for about 60% of consumption with Imports and Crafts combining for 40%. Nightclub consumers skew more to Imports than Crafts.
- Beer consumption is split almost equally between Regular and Light beer.
- Draught beer consumers prefer their beer to be served in the proper glass and for bartenders to take more care when pouring their beer.
Wine: Romantic Meals, Leisurely Meals, Celebration
- Domestic Wine accounts for nearly 50% of consumption with Imports accounting for about 30% and a significant amount of consumers that Don’t Know.
- Full-flavored and medium-flavored reds are the most popular Wine types.
Spirits: Celebration, Socializing, Fun Meals
• In terms of dayparts, all categories skew to the Dinner daypart with spirits and beer skewing more late night than wine.
• Most consumers do not know what beer, wine and spirit drink they will order in advance.
• The Beverage Menu is the most important order influencer but recommendations from friend and server bartender recommendations are also very important.
• Most consumers try new drinks at least every 90 days with Nightclub consumers trying them more often.
• Most consumers do read the drink menus with Nightclub consumers reading them even more than average.
• Consumers clearly prefer the Stand-alone drink menu over other menu formats.
• Consumers most want to see drink prices, descriptions and pictures on the menus.
• Consumers want to see 10-15 beers, 10-15 wines and 15-20 spirit drinks on the beverage menus.
• Consumers prefer to see the beer menu listed by domestic, imports, and crafts.
• Most consumers say price is important to them but only about 50% are aware of the drink price before ordering.
• Consumers strongly agree that premium brands make for better tasting drinks across beer, wine and spirits.
• Most consumers agree premium brands cost more and they expect to pay about $1.25 - $2.78 more for them.
• About one-third of consumers would try a server suggestion of trading up to a premium alcoholic beverage.
• About half of the consumers participate in special promotions with Nigthclub consumers much more promotionally responsive than the average consumers.
• Most consumers that participate in promotions knew about them in advance, indicating that they do drive traffic.
• In terms of promotion program interest, Everyday Low Drink Prices, Buy One Get One Meals and ½ Priced Drinks are the top three.
If you are a small employer with 2 to 9 employees
who work at least 30 hours per week (includes
owners) and have not offered employee health
insurance within the past 12 months, you and your
employees could each be eligible for an annual
health insurance subsidy of up to $5,000 each. The
amount of subsidy varies depending on the combined
average wage of your employees, requires 75%
participation of eligible employees and that the
majority of your employees work in Maryland. For
complete details regarding eligibility and subsidy
amounts visit the Maryland Health Insurance
Partnership website at:
http://mhcc.maryland.gov/partnership
Enrollment begins September 9, 2008 and is capped to
stay within the approved annual budget. If you
believe you are eligible, contact a health insurance
agent now to begin the application process.
CONTACT:
John Bodnovich
American Beverage Licensees
301-656-1494 bodnovich@ablusa.org
America’s Beer, Wine & Spirits Retailers
Celebrate 75th Birthday of the Three-Tier System Reject Activist Group’s False Claims About Wine
Deregulation
Bethesda, Md. – April 24, 2008 – With the
75th Anniversary of the repeal of Prohibition this April,
the American Beverage Licensees (ABL) is not only
celebrating the end of this failed experiment, but also the
75th birthday of the Three-Tier System. The effective and
efficient system of regulating alcohol beverages sales has
helped produce billions of dollars in revenue for the
federal government, states and municipalities; allowed state
and local governments to adapt laws and policies that best
reflect the values of their citizens; and most importantly,
introduced millions of consumers of legal drinking age to
beer, wine and spirits from different regions of the country
and every corner of the world.
“Thanks to the innovative producers and all-important
distributors of alcohol beverage products, retailers - those
last to handle beer, wine and spirits products before they
reach the customer - are extremely well served by today’s
Three-Tier System,” said ABL executive director Harry Wiles.
When it comes to alcohol beverage products, the selection
offered to American consumers is broader today than ever
before. Though much of this choice and variety has to do
with the increasing number of brands produced by alcohol
beverage manufacturers, this ever-widening selection of
products would not reach retailers and their customers were
it not for the hard work of alcohol beverage distributors.
“Walk into the average American liquor or package store, and
then walk into a liquor store anywhere else in the world.
Almost anywhere in the U.S. you can find wines and spirits
from every continent except Antarctica,” said Wiles. “The
U.S. has the most diverse and consumer-friendly beverage
alcohol marketplace in the world due to the cohesion that
exists between the three tiers.”
Despite the evolution and advances in the alcohol beverage
industry made over the past 75 years, there are still those
who wish to misconstrue the effectiveness of the Three-Tier
System. Peripheral activist groups such as the Specialty
Wine Retailers Association, speaking only for an elite cadre
of wine merchants, rather than the greater alcohol beverage
retail community they purport to represent, only serve to
blur and disparage the importance of proper regulation of
alcohol beverages.
“Comments about how ‘America's wholesalers have proven to be
a failure at providing retailers and their customers with
even a fraction of the wines available in the United States’
are simply not true and are misrepresentative of the
sentiments of the vast majority of retailers,” said Wiles.
Wiles added, “Any ability SWRA members have to provide
consumers with a wide range of products is derived directly
by the variety and selection provided by wholesalers.
“Retailers and their distributor colleagues are not
luddites. Technology is something that the alcohol beverage
industry is embracing. Whether it is inventory software
programs, fully-integrated POS systems or ID scanners to
verify a customer’s age, the industry is on the cutting
edge,” said Wiles.
“The past fifteen years have shown that the Internet holds
vast opportunities for commerce, but we should not let those
possibilities blind us to the fact that alcohol is a unique
and age-restricted product; states have the ‘unquestionably
legitimate’ right to regulate its sale and distribution; and
tearing down an effective system of regulation will increase
the costs associated with getting products to market and
handling the administrative, bureaucratic and regulatory
issues.”
Bricks-and-mortar retailers, who pay local property and
sales taxes, are an important link in the alcohol beverage
system and assets to their communities. If shadowy,
unregulated networks for alcohol sales undercut these
legitimate businesses, the losses in jobs, tax revenue and
public safety would be staggering.
The same is true for alcohol beverage distributors who
provide thousands of products to retailers and also ensure
product safety and product integrity on the way to the
marketplace. By centralizing distribution, they reduce the
costs of that process to both suppliers and retailers, and
pass those savings on to the consumer.
In New York State, for example, there are some 19,000 wine
products and almost 10,000 spirits products posted with the
state and available to every retailer. This means thousands
of manufacturers around the world make use of the
distributor tier to get their products to consumers.
“The fact is, the great majority of retailers in this
country feel very well served by their distributor friends,
both in terms of selection and in terms of the raw dollar
value distributors bring to the marketplace,” said Wiles.
“Wholesalers provide efficiencies and functions that benefit
suppliers, retailers and the consumer.”
ABL looks forward to another 75 years of consumer choice,
cost-effectiveness and a strong Three-Tier System.
About American Beverage Licensees (ABL)
American Beverage Licensees (ABL) is the preeminent national
trade association for retail alcohol beverage license
holders across the United States. Its members, who number
nearly 20,000, are comprised of on-premise and off-premise
retailers who annually help infuse billions of dollars into
the American economy. ABL represents the interests of
American small business owners and a historical part of the
American way of life. Many members are independent, family
owned operators who assure that beverage alcohol is sold and
consumed responsibly by adults. ABL serves as a way for
beverage alcohol retailers nationwide to bring their
combined wisdom and strength to bear on the challenges each
face daily.
States’ Rights to Regulate Alcohol Sales Endorsed By
Supreme Court
“All or nothing” direct shipping decisions to be
determined by states
Bethesda, MD (5/18/05) – The Supreme Court on Monday
reaffirmed the right of states to regulate the sale and
distribution of beverage alcohol within their borders but
also ruled to level the playing field for in-state and
out-of-state beverage alcohol producers.
The 5-4 ruling reaffirmed the Three-Tier System of beverage
alcohol sales and distribution as “unquestionably
legitimate”. The decision struck down laws in Michigan and
New York that held in-state and out-of-state producers to
different standards for directly shipping beverage alcohol
to consumers.
Writing the majority opinion, Justice Anthony M. Kennedy
said that by having different standards for the two parties,
these states were in violation of the Commerce Clause of the
Constitution. Despite the existence of the 21st amendment,
which repealed Prohibition and explicitly enumerated the
rights of states in beverage alcohol matters, the majority
found that alcohol must be treated as any other commodity so
as not to impinge upon the nondiscrimination principle of
the Commerce Clause.
In a dissent, Justice John Paul Stevens argued that the
decision seemed to be largely based on economic
considerations rather than stricter Constitutional
interpretation, stating that the Court’s decision “is not,
however, consistent with the policy choices made by those
who amended our Constitution in 1919 and 1933.”
Justice Stevens went on to acknowledge that if beverage
alcohol were not a substance of such unique nature, that it
would clearly be governed by Commerce Clause standards. To
that end he added, “our Constitution has placed commerce in
alcoholic beverages in a special category” thus keeping it
from the reach of Commerce Clause.
“While we are pleased that the Court upheld the rights of
states to regulate the sale and distribution of beverage
alcohol, we are eager to see how state legislatures and
regulatory groups might modify their laws in accordance with
the decision,” ABL Executive Director Harry Wiles said.
States that currently treat in-state and out-of-state
producers differently are faced with a choice of prohibiting
direct shipping altogether or opening their doors to
out-of-state direct shippers and allowing them to operate
under the same guidelines as in-state direct shippers.
Retailers, the last people to handle products before they
are consumed, are the final link in a system that promotes
responsibility. It is face-to-face transactions that
retailers are proud of and hope will be preserved by their
state governments.
About American Beverage Licensees (ABL) American Beverage Licensees (ABL) is the nation's largest
trade association dedicated to representing the
interests of “America's Beer, Wine and Spirits
Retailers”. ABL represents nearly 20,000 bars,
restaurants, taverns, and liquor stores, including
off-premise licensees in the "open" or "license" states
and on-premise proprietors in markets across the
country. Today, ABL has members in 348 of the 435
Congressional Districts across the nation. For more
information about ABL, please visit
www.ablusa.org
Fourth
Circuit Rules Against State of MD in TFWS Case
