By Candia Dames
WASHINGTON – A federal judge this week upheld the state’s right to control liquor prices, ruling that Maryland’s interest in protecting residents against alcohol abuse outweighs possible antitrust violations.
The Monday ruling by U.S. District Judge Frederic Smalkin was the latest in a series of decisions in an antitrust suit filed in July 1999 by Beltway Fine Wine & Spirits against Comptroller William Donald Schaefer.
The Baltimore-based retailer charged that a state liquor policies violate the Sherman Antitrust Act, restricting trade and squelching competition. The state prohibits wholesalers from giving volume discounts to retailers, for example, and requires them to post liquor prices with the Comptroller’s Office so competitors can match those prices.
But Smalkin said that the welfare of the people is the supreme law, which outweighs any interest in fostering competition in the marketplace.
“While the promotion of competition is undoubtedly a valid concern, the protection of citizens from crime, disease, and social deterioration by promoting the responsible and measured consumption of alcohol outweighs the federal interest in ensuring a competitive market economy for alcoholic beverage retailers,” he said.
David Trone, the majority owner of Beltway Fine Wine & Spirits, called the ruling “wrong” and said his company plans to appeal.
It would not be the first time the case has been appealed.
The 4th U.S. Circuit Court of Appeals last year ruled that state policy violated the antitrust act and ordered the case back to Smalkin with instructions to weigh antitrust concerns against the 21st Amendment. That amendment, which ended Prohibition, also granted states the authority to pass laws regulating the sale of liquor within their borders.
The state’s liquor laws were designed to promote temperance and prevent price wars. Proponents of the state’s liquor policies argue that dirt-cheap alcohol could lead to higher consumption. They also believe that volume discounts for large retailers would drive corner liquor stores out of business.
But Trone said the laws do not promote temperance, they simply inhibit competition and drive up prices for both retailers and consumers. In fact, he argued, the state’s liquor regulatory scheme could actually boost consumption, since wider profit margins for wholesalers and manufacturers could be used to boost sales through marketing and advertising.
The court called such a possibility, “a remote, speculative, and tolerable one, in light of the direct effect that the scheme has on keeping prices high and the correlation between high prices and lower demand for alcohol.”
The court noted that statistics from every state link crime and misery to the use of alcohol.
Schaefer, in a prepared statement, welcomed the court’s ruling.
“Maryland’s liquor laws protect the people and small businesses,” he said.
Bill Marshall, manager of The Liquor Store in Baltimore, said he was also pleased that the state regulations were protected by the decision.
“If they were to allow retailers to get volume discounts, it would drive everyone else out of business and create a monopoly,” said Marshall, who described his 30-year-old business as a medium-sized operation.
But Trone said Maryland “is simply living in the past.”
“The federal antitrust laws were written to protect consumers and provide free competition and eventually that view will prevail,” he said.