Court rules for regulators, against Costco

A federal appeals court in San Francisco has upheld key parts of a Washington states system for regulating beer and wine sales, overturning an earlier ruling that favored Costco Wholesale Corp.’s effort to upend decades-old beer and wine distribution laws.

The appeals court handed a victory to Washington state alcohol regulators, upholding key parts of the law, including a ban on volume discounts and a rule keeping retailers from taking delivery of beer and wine at a central warehouse. The lower court had struck down eight of the nine legal provisions that Costco contested.

The appeals panel agreed with Costco on one matter: Beer and wine prices should not have to be posted publicly and remain in place for 30 days, as the state now requires.

Costco’s 2006 triumph grabbed national attention because it suggested that major changes might be in store for the three-tier system of regulating alcohol sales put in place after the repeal of Prohibition.

Costco is deciding whether to appeal the ruling. “We are pleased that the central part of the anticompetitive restraints provisions was struck down,” said David Burman, a Seattle-based lawyer handling the case for Costco, referring to the “post and hold” provisions. “It will be good for Costco members and other consumers.”

A spokesman for the Washington State Liquor Control Board couldn’t immediately be reached for comment. The ruling is “a very significant victory for the state of Washington,” said Phil Wayt, executive director of the Washington Beer and Wine Wholesalers Association.