102 A.D.2d 607, 324 Liquor Corp. v. McLaughlin

Citation:102 A.D.2d 607, 478 N.Y.S.2d 615
Party Name:324 Liquor Corp. v. McLaughlin
Case Date:July 12, 1984
Court:New York Supreme Court Appelate Division, First Department
 
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Page 607

102 A.D.2d 607

478 N.Y.S.2d 615

In the Matter of the Application of 324 LIQUOR CORP. d/b/a

Yorkshire Wine & Spirits, Petitioner-Appellant, for a Review Pursuant to Article 78 of the Civil Practice

Law and Rules,

v.

Edward J. McLAUGHLIN, Hugh B. Marius, Robert Doyle, Terrence

R. Flynn and Frederick Pannozzo, Respondents-Respondents.

Supreme Court of New York, First Department

July 12, 1984.

        [478 N.Y.S.2d 616] Seymour Howard, Jericho, for petitioner-appellant.

        Robert S. Hammer, Asst. Atty. Gen., of counsel (Richard G. Liskov, Asst. Atty. Gen., with him on the brief, Robert Abrams, Atty. Gen.), for respondents-respondents.

        Before SULLIVAN, J.P., and CARRO, MILONAS and ALEXANDER, JJ.

        MILONAS, Justice.

        This Article 78 proceeding was commenced by petitioner, a retail liquor and wine dealer, to review and annul a determination of the State Liquor Authority, dated November 12, 1982, which held it in violation of section 101-bb of the Alcoholic Beverage Control Law (ABC Law) and imposed a penalty of a ten day suspension of its license plus a $1,000 bond forfeiture. At the administrative hearing in connection with the instant matter, counsel for both parties stipulated that on June 24, 1981, a State Liquor Authority investigator purchased a 1.75 litre bottle of Chatham Gin, 92 proof, for $9.45 plus sales tax and a 1.75 litre bottle of Smirnoff Vodka, 80 proof, for $11.59, plus sales tax. Both of these brands were advertised by petitioner at the same prices. The Authority then produced as its only witness the principal clerk in charge of the price scheduling section, who testified as to the price schedules filed by petitioner's suppliers for the month of June 1981. These schedules, which were introduced into evidence, indicated that the minimum consumer retail price for Chatham Gin was $9.65 plus tax and $11.89 plus tax for Smirnoff's Vodka.

        While the foregoing facts are not in dispute, petitioner does challenge the validity of the statutory scheme and the regulations involved herein. In that regard, petitioner contends that the state's pricing machinery requires wholesalers to establish minimum retail prices for brands of liquors, eliminates price competition between retailers and is, therefore, invalid as a violation of the federal Sherman Anti-Trust Act. Petitioner also asserts that by promulgating Rule 16, as set forth in Bulletin No. 471, the State Liquor Authority exceeded its lawful authority. Respondents, however, argue that the statutory provisions in question do not establish a mechanism for price maintenance but, rather, is merely a price-posting law of the sort found to be valid by the Court of Appeals in Matter of Admiral Wine & Liquor Co. v. State Liquor Authority, 61 N.Y.2d 858, 473 N.Y.S.2d 969, 462 N.E.2d 146. In addition, respondents claim that Rule 16 constitutes a reasonable exercise by the State Liquor Authority of its authority under the ABC Law. In dismissing the Article 78 proceeding, Special Term considered respondents' [478 N.Y.S.2d 617] position to be persuasive.

        Sections 101-b(3)(a) and (3)(d) of the ABC Law mandate manufacturers and distillers to file monthly schedules with the State Liquor Authority, listing their prices to wholesalers, along with an affirmation that the prices are no higher than the lowest prices charged to wholesalers in any other state. This requirement does not affect the minimum retail price which the retailer may charge the consumer. Section 101-b(3)(b) requires wholesalers to file schedules of their prices to retailers which shall state "the number of bottles contained in each case, the bottle and case price to retailers ..., the discounts for quantity, if any...." Consequently, when a wholesaler first obtains a brand of liquor for resale to retailers, it alone fixes its "legal price" for that brand. No statute or rule dictates the initial price which a wholesaler may set; there is no review procedure in existence, nor does the Agency maintain any standards or prohibitions. The only restriction on pricing is that a wholesaler may not thereafter increase its price without the agency's approval.

        When a wholesaler has fixed the "legal case price" on a brand of liquor, Rule 16 then comes into operation. According to Rule 16(e):

        For each item of liquor listed in the schedule of liquor prices to retailers there shall be posted a bottle and a case price. The bottle price multiplied by number of containers in the case must exceed the case price by approximately $1.92 for any case of 48 or fewer containers. The figure is to be reached by adding $1.92 to the case price, dividing by the number of containers in the case, and rounding to the nearest cent. Where more than 48 containers are packed in a case, bottle price shall be computed by dividing the case price by the number of containers in the case, rounding to the nearest cent, and adding one cent....

        Thus, if the "legal case price" of a brand of liquor is determined by the wholesaler to be $60.00 per case, and the case contains six bottles, the legal price becomes $60 plus $1.92 divided by six, or $10.32 per bottle. After having filed the first schedule, the wholesaler may at its own discretion reduce or "post-off" the "legal...

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