Booze at Costco Mug.jpg
Chona Kasinger
To say the state's transition to private liquor sales hasn't gone as smoothly as hoped would be an understatement. The Liquor Control Board

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Bumpy Road to Privatization: Costco and Others File Lawsuit Over Liquor Control Board's Implementation of I-1183

Booze at Costco Mug.jpg
Chona Kasinger
To say the state's transition to private liquor sales hasn't gone as smoothly as hoped would be an understatement. The Liquor Control Board experienced several hiccups auctioning off rights to its liquor stores. There were the empty store shelves the weekend of the big transition. There were the people bitching about booze prices being higher than they were led to believe they would be when they voted for Initiative 1183. And now there's a lawsuit.

It was announced this morning that the I-1183 coalition - which includes the Washington Restaurant Association, the Northwest Grocery Association and Costco Wholesale Corp. - have filed a lawsuit in Thurston County court, claiming the Liquor Board's implementation of I-1183 is "is circumventing the language of the Initiative by arbitrarily restricting the wholesale distribution and pricing of wine and spirits," according to a press release distributed this morning. The I-1183 coalition contends the state Liquor Control Board is "creating anti-competitive barriers for Washington businesses."

More specifically, the I-1183 coalition is challenging several ways the Liquor Control Board has gone about its business in the aftermath of privatization, restricting the sale of wine and spirits from retailers to restaurants to 24-liters per day, restricting the delivery locations for spirit distributors, imposing fees on certain manufactures, and limiting foreign booze producers' ability to market their hooch to Washington retailers.

The Liquor Control Board has declined comment to every media outlet that's inquired about the lawsuit, though the agency does provide what it calls a "Concise Explanatory Statement" about the permanent rules adopted during the implementation of I-1183.

In regard to the retailer-to-restaurant 24-liters-per-day restriction, the Liquor Control Board notes:

The emergency rules adopted by the board simply repeated the language of the initiative that included the 24 liter limitation. In response to the emergency rules, the board received comments that suggested the rule should be more specific, such as limiting the retail-to-retail sales to one every twenty-four hours, or other limitation, such as requiring each sale to be completed and the product removed from the store before another transaction could be made.

The board set this matter for a work session at the February 22, 2012, board meeting and received numerous comments. Some of the comments asserted that the board has no authority to impose a limitation and that the "twenty-four liters per sale" language is clear.

Testimony at the board work session certainly supports the view that a limitation of some kind was intended, and that the inclusion of a limit on the amount of spirits and wine that may be sold in a retail-to-retail transaction was intended to be a meaningful limitation. Although I-1183 amends the powers of the Liquor Control Board, the board clearly has authority to do rulemaking that affects how licensees may sell liquor:

RCW 66.08.030 "The power of the board to make regulations under chapter 34.05 RCW extends to:

• (6) Regulating the sale of liquor kept by the holders of licenses which entitle the holder to purchase and keep liquor for sale;

• (12) Prescribing the conditions, accommodations, and qualifications requisite for the obtaining of licenses to sell beer, wines, and spirits, and regulating the sale of beer, wines, and spirits thereunder;

Together these sections referenced above clearly show that the board has the authority to adopt rules governing the sale of liquor by licensees, including a clarification or further limitation on sales.

Find the full press release from the I-1183 coalition on the following page along with the Liquor Control Board's Concise Explanatory Statement of the rules it has imposed.

This morning's press release from the I-1183 coalition:

FOR IMMEDIATE RELEASE

June 22, 2012

OLYMPIA, Wash. --The I-1183 coalition announced today it has has filed a lawsuit in Thurston County Superior Court, challenging the rules adopted by the Washington State Liquor Control Board in the implementation I-1183, the liquor privatization initiative approved last November by 59 percent of Washington voters. The I-1183 coalition includes the Washington Restaurant Association (WRA), the Northwest Grocery Association (NWGA) and Costco Wholesale Corp.

The lawsuit, filed late Thursday, asserts that the LCB is circumventing the language of the Initiative by arbitrarily restricting the wholesale distribution and pricing of wine and spirits. This approach erodes small businesses' ability to compete in the marketplace; it protects distributors from competition and increases prices for consumers.

Despite public opposition from businesses and consumers, the LCB has ignored the costs of its actions and has opted instead to violate the language of the Initiative, creating anti-competitive barriers for Washington businesses.

The lawsuit challenges these specific rules in the Board's implementation package:

• 24-liter per day restriction on sales of wine and spirits from retailers to restaurants

• Restrictions on delivery locations for spirits distributors

• Imposition of unauthorized fee on certain spirits manufacturers

• Discrimination against foreign spirit producers ability to market product to retailers

The I-1183 coalition contends that these rules violate statutory rulemaking requirements, and represent action beyond and contrary to the LCB's authority.

As written, none of these rules relate to the protection of public health and safety- a fact even the LCB does not dispute. Additionally, the coalition believes this rulemaking violates the Supremacy and Commerce clauses, as well as the Washington State Constitution.

Ironically, the LCB rules will chiefly benefit two large, out-of-state distributors by restricting competition, limiting product movement and availability and imposing unauthorized fees and restrictions on Washington businesses.

And here's the Liquor Control Board's Concise Explanatory Statement of the rules it has imposed:

Concise Explanatory Statement Permanent Rules to Implement 1183

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