The Massachusetts Supreme Judicial Court last week overturned a lower court ruling that would have allowed retailers to offer discounts on alcoholic beverages purchased in bulk.
The order comes two years after Maryland’s Total Wine & More (doing business as Massachusetts Fine Wines & Spirits LLC) successfully challenged the law.
Total Wine, which operates six stores in Massachusetts, brought the legal challenge against the Massachusetts Alcoholic Beverages Control Commission after the state regulatory agency suspended the chain store’s liquor licenses in Everett and Natick for allegedly selling various liquors for $1 to $6 below their wholesale costs.
Massachusetts law prohibits retailers from selling alcoholic beverages for “less than [the] invoiced cost.” The state defines “cost” as the “net cost appearing on the invoice for” an alcoholic beverage.
Total Wine, which has a history of challenging state and federal alcohol laws, sued the ABCC over the suspensions. The retailer argued that the ABCC’s decision was based off initial invoices that listed liquor at higher costs and did not account for “cumulative quantity discounts” (CQDs) offered by its wholesalers.
In July 2017, Suffolk Superior Court Judge Robert B. Gordon ruled in favor of Total Wine.
In his ruling, Gordon said the ABCC’s interpretation of the law “bears no rational relationship to the legislative policy of prohibiting anti-competitive pricing practices.” He called the ABCC’s actions ”arbitrary and capricious,” and he said the agency’s refusal to account for the bulk discounts in calculating the actual cost of goods sold to Total Wine disregarded the “substantive realities of transactions between alcoholic beverage wholesalers and their retail merchants.”
“There was clearly no predatory pricing carried out in this case, only a salutary effort by a retailer to pass along savings derived from volume purchasing at the wholesale level to its customers,” he wrote. “This is something the law should promote rather than punish.”
The ABCC appealed, and last week, the state’s highest court sided with the regulatory agency.
In its ruling, the Massachusetts Supreme Judicial Court defended the ABCC’s enforcement actions, calling the agency’s interpretation of the law “reasonable” due to the “plain language” of the law and “the commission’s need to effectively and uniformly enforce its own regulations in accordance with its legislative mandate.”
According to the state’s highest court, the ABCC was “justified in finding that Total Wine sold the liquor or wine ‘at a price less than invoiced cost.”
“It naturally follows that requiring all discounts and credits to appear on the single invoice applicable to a sale of liquor or wine is a reasonable means of ensuring compliance with the statutes and rules the commission is obligated to enforce,” the court said.
In a statement, Massachusetts Treasurer Deborah B. Goldberg said the state was “pleased that the SJC upheld our decision, reinforcing our commitment to leveling the playing field for all businesses across the state.”
An attorney for Total Wine did not return a message seeking comment.