WSWA President and CEO Says Ruling Confirms Primary State Authority in Regulating Industry and Continued Importance of Tied-House Prohibitions
(WASHINGTON, D.C.)—Yesterday, the U.S. Court of Appeals for the Ninth Circuit, in a 10-1 en banc panel decision, reinforced the legitimacy of the three-tier system of distribution and state authority under the Twenty-first Amendment to enforce tied-house laws protecting against vertical integration of the beverage alcohol marketplace. The case was Retail Digital Network, LLC, v. Ramona Prieto. Wine & Spirits Wholesalers of America (WSWA) President and CEO Craig Wolf today commended the court’s decision.
The ruling upheld a California statute prohibiting inter-tier payments for advertising, and underscored the importance of consumer protections provided by the three-tier beverage alcohol system of separate and independent suppliers, wholesalers and retailers.
“The Ninth Circuit ruling affirms two important, longstanding principles that help ensure the U.S. is the most open, product-diverse and competitive beverage alcohol market in the world—and, at the same time, a market that ensures effective regulatory oversight of a controlled substance,” Wolf said. “First is the importance of a three-tier system of independent suppliers, wholesalers and retailers to a healthy marketplace in beverage alcohol, and second is the importance of tied-house laws to prevent corrupt practices which could lead to vertical integration and the dominance of large companies to the detriment of other competitors in the local marketplace,” he added.
The Ninth Circuit stated that the law at issue “serves the important and narrowly tailored function of preventing manufacturers and wholesalers from exerting undue and undetectable influence over retailers. Without such a provision, retailers and wholesalers could side-step the triple-tiered distribution scheme by concealing illicit payments under the guise of ‘advertising’ payments.”
WSWA and the National Beer Wholesalers Association (NBWA) submitted a joint amicus brief to provide key information on the origins, importance and current consumer protections afforded by the state’s tied-house laws as well as the important oversight provided by the three-tier beverage alcohol system. Numerous additional trade associations and interest groups submitted amicus briefs supporting these important provisions as well.
A copy of the ruling is available here.
WSWA is the national trade association representing the wholesale tier of the wine and spirits industry, dedicated to advancing the interests and independence of wholesalers, distributors and brokers of wine and spirits. Founded in 1943, WSWA has more than 370 member companies in 50 states and the District of Columbia, and its members distribute more than 80 percent of all wine and spirits sold at wholesale in the U.S. Visit www.wswa.org to learn more.