A federal judge has ruled that the State of Washington’s three-tier beer and wine distribution system violates federal anti-trust law. The issuance of the decision ends the first stage of a two-year legal battle between Costco Wholesale Corporation and the Washington Liquor Control Board. The case is being appealed to the Ninth Circuit Court of Appeals. If upheld, the decision will have far reaching implications on state beer and wine distribution laws, including Oregon’s.

The April 21 decision represents an important victory for Costco, whose business model is based on buying products directly from the manufacturer, offering them at a deep discount and selling them in massive quantities. For small retailers, however, the decision is cause for concern. Many of the state laws found to be in violation of federal anti-trust law provide important protections to small retailers. If the decision is upheld, large volume retailers, such as Costco, will be able to negotiate for price discounts and other concessions that as a practical matter will not be equally available to small store owners.

It will likely be a number of years before the litigation is finally resolved. However, if the twenty page opinion by U.S. District Court Judge Martha Perchman is upheld, the following state law restraints on alcohol distribution will be deemed to violate federal antitrust law:

(a) Policies that require beer and wine distributors and manufacturers to “post” their prices with the state and to “hold” those prices for a full month;

(b) Policies that require beer and wine distributors to charge uniform prices to all retailers”

(c) Prohibitions on selling beer and wine to retailers on credit;

(d) Prohibitions on volume discounts for beer and wine sales:

(e) Policies that require beer and wine distributors to charge the same “delivered” price to all retailers, regardless of the actual delivery costs:

(f) Prohibitions on central warehousing of beer and wine by retailers:

(g) Policies that require a 10% minimum mark-up on sales of beer and wine from producers to wholesalers, as well as a 10% minimum mark-up of beer and wine from distributors to retailers.