Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Wine retailer claims Connecticut alcohol law promotes price fixing, (Aug 24, 2016)

By Linda O’Brien, J.D., LL.M.

A Connecticut alcohol law that prohibits retailers from selling inventory at prices below minimum bottle prices and bars wholesalers from offering volume discounts to retailers promotes price fixing by wholesalers, according to a complaint filed by wine retailer Total Wine & More in the federal district court in New Haven against the state’s Consumer Protection Department Commissioner and Liquor Control Division Director (Connecticut Fine Wine & Spirits, LLC v. Harris, August 23, 2016).

Connecticut Fine Wine & Spirits, LLC, doing business as Total Wine & More, is the largest independent retailer of fine wine and spirits in the United States and operates in 21 states. Since opening its first store in Delaware in 1991, Total Wine & More follows a philosophy of offering the best prices, superior service, and the best selection of products.

According to the complaint, under Connecticut law, wine retailers are prohibited from selling their inventory at prices below the retailers’ statutorily defined cost, which means for wine and spirits, the posted "bottle price" from the wholesaler plus a markup for shipping and delivery. Wholesalers of alcoholic beverages are barred from offering volume discounts to retailers. Furthermore, the retail sale of alcoholic beverages is prohibited except as allowed by the Liquor Control Act.

Connecticut manufacturers and wholesalers have used those provisions to fix and maintain prices at supra-competitive levels, the complaint alleges. Specifically, wholesalers set bottle and case prices and share that information with each other through the state-mandated posting system. They consistently coordinate their prices to match their competitors’ posted prices, resulting in horizontal price fixing at the wholesale level.

The complaint states that wholesalers also engage in vertical price fixing by setting high minimum bottle prices derived from case prices during "on-post" months. They typically lower their monthly case prices throughout the year during regular "off-post" months, but without lowering the corresponding minimum bottle price to the lowered case price. Through this practice, wholesalers effectively control both the retail price and retailers’ profit margins.

These provisions facilitate and compel wholesalers to conspire to fix and maintain wholesale and retail prices for alcoholic beverages. They also frustrate Total Wine & More’s efforts to use its business efficiencies and economies of scale to deliver low prices to Connecticut consumers. Furthermore, no state agency actively supervises the posting, matching, and coordination of bottle and case prices among manufacturers and wholesalers of alcoholic beverages, which allow those manufacturers and wholesalers to fix anticompetitive retail prices.

The plaintiff asserts claims for horizontal and vertical price fixing in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:16-cv-01434-JCH.

Attorneys: James T. Shearin (Pullman & Comley LLC) and William J. Murphy and John J. Connolly (Zuckerman Spaeder LLP) for Connecticut Fine Wine & Spirits, LLC.

Companies: Connecticut Fine Wine & Spirits, LLC

News: Antitrust FranchisingDistribution ConnecticutNews