Hopping Mad: What the beer boys fear about I-1100 (in addition to losing shelf space)

What the beer manufacturers and distributors fear about I-1100 is losing their government-enforced anti-competitive trade restraints.

These antiquated protectionist measures, imposed after prohibition with the intent of preventing the return of the 1890s saloon, were exposed to modern sunlight and became local news in 2004 when, as the P-I then summarized it:

Costco Wholesale Corp. is suing the Washington State Liquor Control Board, alleging its distribution regulations for alcoholic beverages limit competition and force retailers to charge higher prices for beer and wine.

Among the distribution regulations at issue in Costco v. Hoen:

• Beer and wine manufacturers and distributors required to post their prices with the liquor board and "hold" those prices for a month
• Beer and wine distributors required to charge uniform prices to all retailers
• Requirement that beer and wine distributors charge same "delivered" price to retailers regardless of actual delivery costs
• Prohibition against volume discounts to retailers
• Prohibition against sales to retailers on credit
• Prohibition on central warehousing of beer and wine by retailers
• Prohibition on retailer-to-retailer sales

The same Washington Beer and Wine Wholesalers Association which is now frightening mothers with Halloween stories about the supposed deadly social costs of (other vendors') alcohol in grocery stores, joined the Liquor Board as an Intervenor Defendant.

As usual, the LCB and the WBWWA tried to argue that these restraints delivered all kinds of public health, safety and other benefits to the People of Washington, other than transfer payments from consumers and efficient retailers to inefficient beer distributors and extra bureaucrats.

After being forced to listen to a lawyered-up version of this press release for several days, Federal District Judge Marsha Pechman ruled that the defendants' claims that the challenged restraints offered public benefits were equivalent to the end result of  feeding beer byproduct to livestock. As she wrote in her Findings of Fact and Conclusions of Law:

The Court concludes that the challenged restraints are ... either ineffective or only of minimal effectiveness in promoting temperance, ensuring orderly markets, or raising revenue. ... the state's interests do not outweigh the federal interest in promoting competition under the Sherman Act.

Costco won on nearly every point.

Later, however, most of Judge Pechman's ruling was overturned by the Ninth Circuit. But ONLY on the grounds that the Sherman Act does not preempt state law regarding most of the restraints. In its opinion, the Ninth Circuit did not dispute Judge Pechman's findings of fact regarding the anti-competitive and overall uselessness of the challenged restraints. Indeed it noted that:

The ban removes from the market certain firms or persons who might otherwise compete; with fewer, and likely larger, horizontal competitors, prices for the consumer may be higher than they would otherwise be in the absence of the ban. But the potential anti-competitive effect is not the result of private pricing or marketing decisions, but the logical and intended result of the statute itself.  

Nevertheless:

The State failed to demonstrate that its restraints are effective in promoting temperance;

So there. To the beer wholesalers, however, the state-enforced anti-competitive price-jacking is what they were and still are fighting for.

And if it wasn't already clear, I-1100 eliminates most of those same trade restraints.

Among those who filed Amicus Briefs in the appeal were the same beer interests that are funding the "Protect Our Communities Anti-competitive Trade Restraints" campaign -- the National Beer Wholesaler Association and the Beer Institute (whose #1 member is Anheuser-Busch, St. LouisLeuven, Belgium. It's touching that those Belgians care so much about protecting our communities! Perhaps it's out of gratitude for Herbert Hoover)

The Liquor Board used to post the Costco v Hoen documents on its website. They were silently taken down sometime after Costco announced its support for Initiative 1100. Hmm.  You can still find many of the filings and exhibits here at the Way Back Machine.