National Distributing Co., Inc. v. U.S. Treasury Dept., Bureau of Alcohol, Tobacco and Firearms
| Decision Date | 22 April 1980 |
| Docket Number | No. 78-2303,78-2303 |
| Citation | 626 F.2d 997,200 U.S.App.D.C. 133 |
| Parties | , 200 U.S.App.D.C. 133, 1982-83 Trade Cases 65,171 NATIONAL DISTRIBUTING COMPANY, INC., d/b/a Consolidated Seaboard Distributors, Petitioner, v. UNITED STATES TREASURY DEPARTMENT, BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, Respondent. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Abraham M. Buchman, Washington, D.C., a member of the bar of the District of Columbia Court of Appeals, pro hac vice, by special leave of court, with whom John W. Coggins, Washington, D.C., was on brief, for petitioner.
Ron Landsman, Atty., Dept. of Justice, Washington, D.C., with whom John J. Powers, III and Michael J. Pugh, Attys., Dept. of Justice, Washington, D.C., were on brief, for respondent. J. Mark Manner and Robert B. Nicholson, Attys., Dept. of Justice, Washington, D.C., also entered appearances for respondent.
Before WRIGHT, Chief Judge, ROBB, Circuit Judge, and CORCORAN, * Senior District Judge.
Opinion for the court filed by Chief Judge J. SKELLY WRIGHT.
This case raises the question whether the so-called "tied house" provision of the Federal Alcohol Administration Act, Section 5(b), 27 U.S.C. § 205(b) (1976), prohibits the sale of wine by a wholesaler at a price substantially below cost, pursuant to a published price offer valid throughout a sales area, where the purchaser makes no agreement, express or implied, concerning future sales or other matters. Jurisdiction of this court is invoked under 27 U.S.C. § 204(h) (1976).
The facts are undisputed. 1 Petitioner National Distributing Company, d/b/a Consolidated Seaboard Distributors (National), sells wine and other alcoholic beverages at wholesale in portions of Florida, Georgia, and California. Its territory includes Tallahassee, Leon County, Florida. National is an authorized supplier 2 of Lancers wine in Leon County by virtue of designation by a division of Heublein, Incorporated, the brand owner. A competitor of National in the Leon County Market is Seminole Distributors, but Seminole is not authorized as a dealer by Heublein, and must procure its Lancers wine from a Pensacola dealer. 3
On January 15, 1976 National's wine manager for the district including Leon County sent a circular to wine retailers in Leon County informing them that all flavors and sizes of Lancers wine would be available at a discount of $20 per case. This price was approximately $10 per case less than the total cost to National. 4 The offer was made to all retailers in the area without discrimination, with no conditions, restrictions, or quantity limitations. During February 1976 National sold up to 250 cases of Lancers wine at the discount price to retailers in Leon County. At the end of the month National's acting general manager for the district discovered the existence of the discount offer and immediately cancelled it. He later testified that the below-cost sale was a "mistake" 5 and contrary to company policy. 6
As a result of the low-price offer, several retailers that formerly had purchased Lancers wine from both National and Seminole purchased their supplies solely from National. The record does not make clear the extent or duration of the adverse effect on Seminole's sales. The parties stipulated that three supermarket retailers of Lancers wine did not buy from Seminole from February 1976 until the date of the stipulation, June 16, 1977, 7 but there is no evidence of what happened after that time or what happened with respect to the more than 100 other licensed retailers in Leon County. 8 Moreover, the Administrative Law Judge (ALJ) in the case noted for the record that Seminole's basic permit had been suspended because of unfair trade practices 9; this may account for some portion of the decline in Seminole's sales volume. The ultimate effect of National's temporary below-cost sales on Seminole's business is not, therefore, established on this record.
On April 12, 1977 the Southeast Regional Regulatory Administrator of the Bureau of Alcohol, Tobacco and Firearms of the United States Department of the Treasury (Bureau) issued National an order to appear before an ALJ to show cause why its permit should not be suspended. The order alleged that National's below-cost sales of Lancers wine violated Section 5(b) of the Federal Alcohol Administration Act (Act), 27 U.S.C. § 205(b) (1976). 10 National made a motion to dismiss the proceeding, 11 which the ALJ denied. 12 A hearing was then held on the basis of stipulated facts. 13 Two disputed legal issues were decided by the ALJ: first, whether National's below-cost sales violated the Act and, second, whether any such violation was willful. He decided both questions in the affirmative and therefore suspended National's operating permit for three days. 14 On October 31, 1978 the ALJ's initial decision was affirmed by the Acting Director of the Bureau. 15 This appeal followed.
After this appeal was filed but before oral argument was heard, the Fifth Circuit handed down a decision relevant to this case. In Castlewood International Corp. v. Simon, 596 F.2d 638 (5th Cir. 1979), the court held that the Bureau's interpretation of Section 5(b) of the Act, as reflected in ATF Ruling 74-6, 1974 ATF C.B. 50, is invalid in Florida under the Twenty-first Amendment because it conflicts with state law, which must prevail under the constitutional division of authority over the alcoholic beverage industry. National contends that, since the events leading to the case at bar occurred entirely in the State of Florida, "Castlewood is determinative on the question of Appellant's guilt * * *." Appellant's Memorandum Regarding Castlewood International Corporation v. Simon at 1. The Bureau has filed a petition for certiorari sub nom. Miller v. Castlewood International Corp., No. 79-1156, 48 U.S.L. Week 3490 (February 5, 1980).
In our view, the Castlewood decision is not "determinative" in this appeal. The Fifth Circuit has remanded the case to the District Court for entry of an order granting declaratory and injunctive relief; we do not know what the scope of that relief will be, or whether such relief will cover the circumstances of this case. We also do not know whether the Supreme Court will decide to review the case, or whether the Fifth Circuit's decision would survive such review. Moreover, we are able to decide this case on the basis of federal law, without touching on the constitutional issues raised in Castlewood. Our disposition of the case therefore does not conflict with, nor does it rely upon, the Castlewood decision. Our holding will be unaffected by any decision the Supreme Court may make on certiorari, since the reasoning we follow in this case is unrelated to questions of Florida state law or the Twenty-first Amendment. We therefore proceed to the merits of this case.
The Federal Alcohol Administration Act, 27 U.S.C. §§ 201-212 (1976), provides that persons importing, producing, distilling, rectifying, blending, bottling, or wholesaling wine or alcoholic beverages must obtain a permit from the Bureau. 16 Such permits are conditioned upon compliance with certain substantive provisions of the Act, with the Twenty-first Amendment, and with other federal laws relating to the alcohol industry. 17 The Act prohibits or regulates, among other things consignment sales, misleading labelling or advertising, retail bulk sales, and interlocking directorates. 18 The "tied house" provision, with which we are concerned, is one of three provisions in Section 5 of the Act, 27 U.S.C. § 205, designed to prevent producers, importers, and wholesalers from engaging in certain practices that might induce retailers to purchase products "to the exclusion in whole or in part" of products from other producers, importers, and wholesalers in interstate commerce, where the "direct effect" of the prohibited practice is "to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce (.)" Id. § 205(a), (b), & (c).
The practice prohibited by subsection (a) is entitled "Exclusive outlet," and is described as "(t)o require, by agreement or otherwise," the proscribed exclusion. Id. § 205(a). 19 The practice prohibited by subsection (c) is entitled "Commercial bribery," and is described as "(t)o induce" the proscribed exclusion "(1) (b)y commercial bribery; or (2) by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative" of the retailer. Id. § 205(c). 20 The practice with which National is charged, found in subsection (b), is entitled " 'Tied house,' " and is described as "(t)o induce" the proscribed exclusion
(1) (b)y acquiring or holding * * * any interest in any license with respect to the premises of the retailer; or (2) by acquiring any interest in real or personal property owned, occupied, or used by the retailer in the conduct of his business; or (3) by furnishing, giving, renting, lending, or selling to the retailer, any equipment, fixtures, signs, supplies, money, services, or other thing of value, subject to such exceptions as the Secretary of the Treasury shall by regulation prescribe * * *; or (4) by paying or crediting the retailer for any advertising, display, or distribution service; or (5) by guaranteeing any loan or the repayment of any financial obligation of the retailer; or (6) by extending to the retailer credit for a period in excess of the credit period usual and customary to the industry for the particular class of transactions * * *; or (7) by requiring the retailer to take and dispose of a certain quota of any such products(.)
Id. § 205(b). 21 If the Secretary finds that the permit holder has willfully violated any of these conditions, he shall, after notice and hearing, revoke or suspend the license. 22
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