May 17, 2010

Deal with liquor discounters set for state sign-off

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By Andy Rosen
Andy@MarylandReporter.com

A decade-old lawsuit challenging Maryland’s regulation of alcohol prices appears headed for a final resolution Wednesday, which means larger liquor stores could soon secure lower prices for their products.

The Board of Public Works is set to review a settlement between Comptroller Peter Franchot’s office and the company that owns Beltway Fine Wine and Spirits in Towson. The state has agreed not to continue its challenge of a 2004 decision to throw out laws that prevented liquor retailers from getting volume discounts.

The next step in Maryland’s appeal based on antitrust rules would have been the U.S. Supreme Court. The federal appellate ruling will almost certainly become final after Wednesday’s BPW meeting.

The settlement would send $200,000 in legal fees to the company, and it would then donate those to a charity involved in alcoholism treatment. But in the interest of closing the book on the case, the company has agreed to take whatever the state is willing to give, even nothing.

There has been no prohibition barring the use of volume discounts since the law was thrown out, according to Jeff Kelly, director of field enforcement for the comptroller’s office. A provision that required wholesalers to register their current prices with the state, known as “post and hold,” was also thrown out.

But he said he’s only seen one distributor move to a volume discount system. Once the decision is final, it’s likely that more companies will change their pricing structure.

John Gorzo, of Glenwood Wine and Spirits in Howard County, said he has seen some volume discounts become available, but expects more in the future. He said small liquor stores like his will be put at a disadvantage because they don’t have the same buying power as larger stores like Beltway. Gorzo’s store is about 3,500 square feet, he said,a small fraction o Beltway’s size.

He said he’s not concerned about people avoiding his store for small purchases, but he’s worried that they’ll head to the warehouses for big celebrations like holidays and weddings.

“They’ll certainly do it, and that’s where it will hurt,” he said.

Steve Wise, a lobbyist for the Maryland State Licensed Beverage Association, which represents many smaller retailers, said he is holding out hope that a state law barring price discrimination will prop up some protections for smaller retailers.

But Kelly said that law doesn’t bar discounts from being available only for large purchases. The only restriction is that all deals have to be available to every retailer, though in reality many of them can’t buy enough to make the discounts meaningful.