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Costco v. Hoen (9th Cir. - Jan. 29, 2008)

By Shaun Martin

Prohibition. The Sherman Act. The 21st Amendment. Costco's mission to provide cheap intoxication to the masses.

Important interests, all. That directly collide in this case.

Costco challenged a variety of restrictions in Washington that drove up the price of alcohol -- e.g., by making volume discounts to retailers illegal -- as violating the Sherman Act. The district court largely agreed. But the Ninth Circuit, in a closely watched case, largely reverses.

It's a tough case. The interactions between the sovereign and the regulation of alcohol has always been a dynamic one. Especially here in the States. I have no doubt that the Washington regulations have the effect -- and probably the purpose -- of raising the price of alcohol. But the State's generally allowed to do that. Mind you, Costco has a pretty good response that if you want to do that, you should raise excise taxes rather than regulate competition. But Judge O'Scannlain makes a reasonable argument that, doctrinally, the regulations here are permissible -- even if imperfect -- as acts of the State. Sure, competitors couldn't engage in horizontal price-fixing in order to raise prices. But perhaps State regulation may permissibly accomplish the same end.

You don't read nearly as many antitrust cases nowadays as you did in the 80s. Much less do you read nearly as many cases involving the 18th and 21st Amendments as you did in the 20s. So this one is interesting.

Costco will undoubtedly seek further review. And consumers in Washington await the results.

Full post as published by California Appellate Report on January 29, 2008 (boomark / email).