Costco, a hero?
Big box retailers are usually the subject of scorn rather than praise. But wine drinkers around the country are praising a recent court decision that handed a victory to Costco Wholesale Corp that could lower prices in Washington State and beyond.
Costco has become a successful retailer based on their business model of buying huge quantities directly from manufacturers, undercutting many other retailers, and then passing on the savings to consumers (Costco policy supposedly prohibits marking an item up by more than 14 percent). To date, they have been prohibited from implementing their purchasing strategy in wine and in 2004 they failed suit against the Washington Liquor Control Board. Eric Arnold summed up the issues in a thorough review of the case on winespectator.com:
Under dispute were Washington laws that required both distributors and retailers to mark up prices at least 10 percent; prevented volume discounts; prevented retailers from buying beer and wine on credit; required posting of prices with the state; and prevented retailers from storing wine or beer at a central warehouse. Costco argued that these provisions violated the Sherman Act, which seeks to prevent hurdles unfair to businesses.
“There is little evidence that the restraints are effective in advancing the state’s interests in promoting temperance, ensuring orderly market conditions, or raising revenue,” wrote U.S. District Judge Marsha Pechman as she struck down the disputed laws. The parties have 30 days to appeal the April 21 decision.
If the ruling holds, it could have ramifications nationwide since it would set a legal precedent for Costco or other retailers to challenge the “three-tier system,” which prohibits producers from selling directly to retailers in most states.
“It’s technical and doesn’t have the sex appeal of allowing consumers to deal with the wineries directly, but Costco could have an impact that affects wines at all price points,” I wrote about the case last year. Last year’s celebrated Supreme Court decision affected mostly high-end collectible wines given the high shipping costs from wineries to consumers.
Lower prices across the board? That’s something we could all raise a glass to!
On May 9th, 2006 at 9:34 pm ,Divya wrote:
Interesting, given that I have always bought my wine at Costco.