Miller Brewing Company v. Alcoholic Beverages Control Commission

• Decision Date: 19 December 2002
• Docket Number: No. 00-P-1935.,00-P-1935.
• Citation: 56 Mass. App. Ct. 801,780 NE 2d 80
• Court: Appeals Court of Massachusetts
• Parties: MILLER BREWING COMPANY v. ALCOHOLIC BEVERAGES CONTROL COMMISSION.

56 Mass. App. Ct. 801

780 NE 2d 80

MILLER BREWING COMPANY v. ALCOHOLIC BEVERAGES CONTROL COMMISSION.

No. 00-P-1935.

Court of Appeals of Massachusetts, Suffolk.

September 10, 2002.

December 19, 2002.

Present: LENK, KAPLAN, & MASON. JJ.

Matthew A. Porter (Bernard J. Bonn III with him) for the plaintiff.

Romeo G. Camba, Assistant Attorney General, for the defendant.

LENK, J.

Miller Brewing Company (Miller) appeals a judgment of the Superior Court affirming an order of the Alcoholic Beverages Control Commission (commission) that suspended for fourteen days Miller's certificate of compliance, issued pursuant to G. L. c. 138, § 18B, to export and sell alcoholic beverages to licensees in the Commonwealth. The commission's order followed its determination that, in violation of G. L. c. 138, § 25A, Miller had discriminated in the price of alcoholic beverages it sold to Massachusetts wholesalers, and, in violation of G. L. c. 138, § 2, had sold alcoholic beverages to a Massachusetts merchant lacking the necessary license under G. L. c. 138, § 18, to buy them.

The facts of record pertinent to each determined statutory violation are few and undisputed. Miller, a Wisconsin corporation with a beer brewery in North Carolina, holds a certificate of compliance issued by the commission pursuant to G. L. c. 138, § 18B.¹ As such, Miller is authorized to export or sell alcoholic beverages to those in Massachusetts duly licensed by the commission to import or buy them. Those in Massachusetts holding a wholesalers' and importers' license under § 18² may purchase alcoholic beverages from holders of certificates of compliance under § 18B (§ 18B certificate holders) such as Miller, while those in Massachusetts holding retailers' licenses, such as a ship chandler's license under G. L. c. 138, § 13,³ may not.

During November, 1996, Miller sold comparable alcoholic beverages to six Massachusetts wholesalers duly licensed under § 18. All six received credit terms from Miller; five were provided credit terms of net eleven days (i.e., eleven days within which to pay Miller in full) while one was provided net thirty days. The six wholesalers are not in competition with each other insofar as each distributes Miller products in an exclusive distribution territory in Massachusetts granted it by Miller.

On five separate occasions from August, 1995, through April, 1997, Miller sold alcoholic beverages to Klausen-Getsby Company, a ship chandler licensed under § 13 and located in Boston, pursuant to a written contract. Under the terms of that contract, alcoholic beverages sold by Miller to this ship chandler were shipped free on board (F.O.B.) from Miller's North Carolina brewery, where title passed to the ship chandler. The ship chandler transported the product into Massachusetts "for delivery to ships sailing from the port(s) of Boston, Massachusetts." The invoices for these transactions show cash on delivery net terms of payment effected by electronic funds transfers and "sold to" and "ship to" addresses of the ship chandler at its Boston location. The contract provided, inter alia, that all such sales "shall be for export, used at ships stores or for resale aboard ships after departure from the United States," and that the ship chandler "represents and warrants that it will not sell any such beer ... for resale within the United States or Canada." The ship chandler did not hold a license under § 18, and was apparently later held accountable by the commission for the aforesaid proscribed purchases it made directly from Miller.

In view of the foregoing, the commission determined that Miller's extension of different credit terms to Massachusetts wholesalers licensed under § 18 constituted price discrimination in violation of G. L. c. 138, § 25A,⁴ and that Miller's sales to the Boston ship chandler were in violation of G. L. c. 138, § 2,⁵ insofar as not in compliance with Miller's obligations under § 18B. Miller protests that § 25A does not prohibit § 18B certificate holders such as itself from extending disparate credit terms to wholesalers licensed under § 18. As to its sales to the ship chandler, Miller maintains that the statutory scheme set forth in c. 138 has no application to a sale, consummated out-of-State, of alcoholic beverages that are to be sold for consumption, not in Massachusetts, but aboard ships at sea. Even if the statute does apply to such sales, Miller contends, it has no obligation under § 18B to assure that the ship chandler had all necessary licenses to buy Miller's goods. We review the commission's decision pursuant to G. L. c. 30A, § 14(7), to determine whether, as Miller claims, it was based on errors or law, and whether the decision is supported by substantial evidence, i.e., "such evidence as a reasonable mind might accept as adequate to support the agency's conclusion." Seagram Distillers Co. v. Alcoholic Bevs. Control Commn., 401 Mass. 713, 721 (1988). While in our review we give due deference to the agency's expertise, technical competence, specialized knowledge, and discretionary authority in administering the statute, see ibid.; Van Munching Co. v. Alcoholic Bevs. Control Commn., 41 Mass. App. Ct. 308, 309-310 (1996),

the ultimate responsibility for interpreting the applicable statutory language nonetheless remains with the courts. M.H. Gordon & Son, Inc. v. Alcoholic Bevs. Control Commn., 371 Mass. 584, 588-589 (1976).

Section 25A: price discrimination. Miller claims that offering disparate credit terms to its wholesalers does not violate § 25A because such conduct does not constitute price discrimination. This is so, Miller contends, because § 25A does not mention credit terms; its plain language prohibits only discrimination in price and in discounts, and neither "price" nor "discount" encompasses the concept of credit terms. That the Legislature did not intend § 25A to include a prohibition against offering disparate credit terms, it argues, is only underscored by G. L. c. 138, § 25, the one section in c. 138 to deal with extensions of credit. Section 25⁶ expressly exempts § 18B certificate holders such as Miller from the limitations it places on credit terms. The commission maintains that the terms of credit that are extended to a buyer can reasonably be viewed as a component of the amount paid by the buyer and received by the seller. While acknowledging that no Massachusetts appellate decision is controlling on this point, it suggests both that the definition of price in M.H. Gordon & Son, Inc. v. Alcoholic Bevs. Control Commn., 371 Mass. at 591 ("the actual amount paid to the supplier for goods furnished to the buyer"), does not preclude this view and that decisions construing Federal antitrust statutes may be instructive in this regard. We agree both that M.H. Gordon & Son, Inc. v. Alcoholic Bevs. Control Commn., supra,

is not dispositive and that "[i]t is virtually self-evident that extending interest-free credit for a period of time is equivalent to giving a discount equal to the value of the use of the purchase price for that period of time. Thus, credit terms must be characterized as an inseparable part of the price." Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 648 (1980).

That credit terms may reasonably be viewed as a component of price is not, however, the end of the matter. Questions remain, first, as to whether the act of offering disparate credit terms, without more (i.e., irrespective of the magnitude or nature of such differences, the business factors considered in offering the terms, whether the same standards of credit worthiness were extended to all applicants, whether the applicants were in competition with each other, and whether there was impact upon competition), may itself constitute discrimination under § 25A; and, second, as to whether the Legislature intended § 25 to be the exclusive means of regulating extensions of credit.

As to the former, we appreciate that the six wholesalers were not competitors, at least vis-a-vis Miller products, and that the record is silent as to Miller's reasons for offering disparate credit terms, what factors it considered, and what if any financial impact the different credit terms extended may have had. While such matters are of undoubted import in determining whether price discrimination in violation of Federal antitrust laws has occurred, see, e.g., Craig v. Sun Oil Co., 515 F.2d 221, 224 (10th Cir. 1975), cert. denied, 429 U.S. 829 (1976); Thomas J. Kline, Inc. v. Lorillard, Inc., 878 F.2d 791, 795-796 (4th Cir. 1989), cert. denied, 493 U.S. 1073 (1990); Carlo C. Gelardi Corp. v. Miller Brewing Co., 502 F. Supp. 637, 646-648 (D.N.J. 1980); Whirlpool Corp. v. U.M.C.O. Intl. Corp., 748 F. Supp. 1557, 1566 (S.D. Fla. 1990), we are not persuaded of their significance when determining whether price discrimination in violation of G. L. c. 138, § 25A, has occurred. When enacting § 25A in 1946, the Legislature made plain its purpose in the emergency preamble to the legislation:

"Whereas, the practice of manufacturers and wholesalers in granting discounts, rebates, allowances, free goods and other inducements to favored licensees contributes to a disorderly distribution of alcoholic beverages; and

"Whereas, the deferred operation of this act would delay the proper regulation thereunder of the alcoholic beverage industry and be contrary to the interests of temperance, therefore this act is hereby declared to be an emergency law necessary for the immediate preservation of the public convenience."

St. 1946, c. 304. From its inception, then, § 25A has been firmly tethered to the goal of protecting the public through the strict regulation of the distribution and sale of alcoholic beverages; it was not enacted as an antitrust measure. Given the articulated purpose of eliminating differential treatment of "favored licensees," § 25A can reasonably be construed as prohibiting even seemingly minor discrepancies in prices offered by...