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Costco, backers of liquor privatization sue over Initiative 1183 implementation

Post by Jordan Schrader / The News Tribune on June 22, 2012 at 10:39 am with No Comments »
June 22, 2012 10:47 am

Costco and its allies wrote the initiative that privatized liquor sales in Washington and spent $20  million convincing voters to approve it , but they’re not happy about some of the results.

The group announced today they are suing the state Liquor Control Board to challenge the rules it made to implement Initiative 1183. The liquor board declined to comment, but it explains its rules here, along with some of the objections.

The lawsuit (below) was filed Thursday in Thurston County Superior Court.

The suing coalition, which also includes restaurants and other groceries, says the board’s interpretation of key parts is wrong and favors big wholesale distributors — the very distributors who opposed the initiative.

For example, the initiative allows retailers for the first time to sell liquor and wine to other retailers, and to restaurants — but says “no single sale may exceed twenty-four liters.” The liquor board has interpreted that as banning sales of more than 24 liters to a single customer in a single day. The idea is to keep retailers from getting around the law by making a series of 24-liter purchases, one after the other. But the law’s authors say they never meant to put such strict limitations on how much restaurants can buy from retailers.

Here’s the news release from the Costco coalition:

I-1183 coalition files legal challenge to Liquor Control Board’s rulemaking on initiative

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.

“Thousands of small businesses throughout the state will be harmed by the LCB’s rules, which impede competition and transfer market power away from the consumer,” said Anthony Anton, WRA president and CEO. “We recognize how difficult this transition has been for the LCB, and are hopeful they will reverse course and fix these erroneous rules.”

Furthermore, these rules place an overwhelming burden on businesses in Washington state’s most rural communities. The 1183 coalition refuses to accept the LCB’s flawed interpretation of a voter initiative that was designed specifically to promote competition and broaden the scope of options and product availability for businesses and consumers.

“The rules adopted by the LCB directly conflict with what 59 percent of the voters adopted last November,” said Joe Gilliam, president of the Northwest Grocery Association. “These anti-competitive rules must be changed in order for the market that the voters adopted to be allowed to develop.”

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