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Costco Suite Takes Step Forward

Dec 8, 2005 - Lawyers for the big-box retailer Costco Wholesale Corp. have asked U.S. District Judge Marsha Pechman to let it and other stores buy directly from out-of-state wineries and breweries. State lawyers representing the state Liquor Control Board warned the judge that doing so would dramatically increase alcohol consumption in Washington.

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The judge said she would rule in two weeks on whether to grant summary judgment or have the case proceed to trial in March.

Costco's lawsuit, filed early last year, challenges Washington's three-tier system of distribution for alcoholic beverages. Under it, out-of-state vintners and brewers must sell to one of about 200 licensed distributors in Washington state, at a markup of at least 10 percent above cost.

Washington's 450 wineries and breweries can sell directly to retailers, at just a 10 percent minimum markup.

Costco, based in Issaquah, WA says that by buying in bulk, striking deals directly with out-of-state wineries and using its own distribution system, it could offer beer and wine at better prices. Company lawyer David Burman said the state cannot justify forcing retailers to use a middleman at an automatic 20 percent markup - especially when state liquor stores aren't subject to the same restrictions or markups.

State liquor stores are allowed to buy directly from out-of-state wineries and negotiate better deals - even though the state claims such activity on the part of retailers such as Costco would increase alcohol abuse, Burman said.

But Assistant Attorney General David Hankins noted that state liquor stores primarily sell hard alcohol and not much beer and wine. Profits, taxes and fees collected by the Liquor Control Board are returned to city and county governments across the state.


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