Legislative efforts to change how Connecticut regulates alcohol prices have failed over the past three years, so a national liquor retailer is trying to win its argument in federal court.
Total Wine & More, a national retailer with four stores in Connecticut, filed a lawsuit Tuesday against the Department of Consumer Protection alleging that the state’s 35-year-old practice of regulating liquor prices constitutes a price-fixing scheme.
Edward Cooper, vice president of public affairs for Total Wine & More, said the consumer is the one who suffers as a result of Connecticut’s pricing practices.
Cooper said they will operate 150 retail stores in 21 states by the end of the year and Connecticut “is the only one in the union that does business like this.”
The same day the company filed the lawsuit it took out full-page ads in newspapers offering 30 different wines and spirits at below-the-state-minimum bottle prices in violation of Connecticut law.
Cooper said the advertisement is promoting the sale of spirits and wine for under the minimum bottle price. For example, the mandated price of a bottle of Grey Goose is $56.99 and Total Wine & More is selling it for $50.99, according to its ad. It is also selling a Laurent Perrier Brut champagne for $29.39 when the mandated price is $39.99.
Any person who violates Connecticut’s laws and regulations may be liable for fines of up to $1,000 or imprisonment up to one year or both. In addition, the Department of Consumer Protection has the authority to suspend and revoke a retailer’s permit for violating the Liquor Control Act.
The Department of Consumer Protection said it is investigating but opted not to comment on the lawsuit.
Carroll Hughes, executive director of the Connecticut Package Store Association, has thus far thwarted attempts led by Democratic Gov. Dannel P. Malloy to eliminate the minimum bottle price. Hughes said efforts to change how Connecticut does business have been “resoundingly rejected by legislative leaders and individual legislators.”
Under the existing laws and regulations, package stores can’t sell a bottle of alcohol for less than the “bottle price” set by wholesalers and posted each month. It’s a system that allows smaller stores to hold their prices close to the ones available at larger retailers.
Hughes argues that eliminating minimum bottle pricing would cause small package stores to go out of business and allow Total Wine & More to “dominate the marketplace as a predatory competitor.” He said the state has already allowed for the elimination of minimum bottle pricing on certain items agreed to by the stores and the Liquor Control division of the Department of Consumer Protection.
Hughes argued that eliminating the minimum bottle price would cause at least 600 package stores and 10 manufacturers of specialty spirit products to lose their businesses if the law is changed.
But Cooper said his customers are “demanding retailers come into the 21st century.”
He said their decision to file the federal lawsuit was really driven by consumers who can’t understand why they can buy the same bottle of wine in Massachusetts for less than in Connecticut.
Cooper said the state would benefit from eliminating the bottle price because it would be able to recapture some of the sales currently going to other states. Hughes has argued that Connecticut would lose sales tax revenue on the sale of each bottle because the price would be lower.
The lawsuit filed in U.S. District Court in New Haven alleges that “Total Wine & More has been prevented from offering the best prices by an anticompetitive regime of statutes and regulations that intentionally promotes horizontal and vertical price-fixing by Connecticut wholesalers of alcoholic beverages.”
The lawsuit goes onto state that the manufacturers and wholesalers have used the law to maintain prices at levels “substantially above what fair and ordinary market forces would dictate.”
A study done by the Distilled Spirits Council of the United States concluded, according to the lawsuit, that retail prices for wine and spirits in Connecticut are as much as 24 percent higher than prices offered for identical products in the surrounding states.
The lawsuit concludes that “price-fixing by wholesalers, facilitated and impelled by the challenged provisions, constitutes a horizontal restraint of trade and a per se violation of the federal Sherman Act.”
The lawsuit asks the court to declare that Connecticut’s statutes and administrative code are void and have no force and effect.