State to appeal Costco beer, wine decision

The Washington State Liquor Control Board said Wednesday that it plans to appeal a federal court ruling that fundamentally alters who profits from the sale of wine and beer and how much consumers pay for it.

On April 21, U.S. District Court Judge Marsha Pechman ordered the state to stop enforcing key parts of its system that governs the sale and distribution of wine and beer — ruling that the state's interests do not trump federal law.

Costco had sued the state Liquor Control Board in February 2004, charging that its regulatory system was anti-competitive and violated a federal antitrust law designed to limit monopolies.

While the judge agreed with Costco in December, the aim of the trial, held in late March, was to determine whether the state was shielded by the 21st Amendment, despite the violation. The 21st Amendment ended Prohibition in 1933 and granted each state broad power to control the sale of alcohol within its borders.

The state responded by setting up a three-tier system — and injecting a middleman into the process — to prevent overconsumption and block any entity from monopolizing the system from beginning to end.

The state also introduced other controls to encourage moderate consumption by artificially inflating prices.

The ruling dissolved the majority of those controls, including regulations that require beer and wine distributors to sell their products to every retailer at the same price.

The Liquor Control Board said the judge ruled incorrectly when she placed the state's right to regulate alcohol as second to federal laws.

David Hankins, a state assistant attorney general, said the state will file the appeal within two weeks along with a motion to stay the judge's decision while the 9th U.S. Circuit Court of Appeals, based in San Francisco, considers the appeal.

Costco Chief Executive Jim Sinegal said the company was not surprised by the appeal.

"We fully expected that this was going to wind its way through the courts," he said.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com