Business & Tech

Total Wine wins challenge on discount pricing

Total Wine operates four Massachusetts stores, including in Everett (above) and Natick.

John Blanding/Globe Staff/File 2017

Total Wine operates four Massachusetts stores, including in Everett (above) and Natick.

A Boston judge has ruled that Massachusetts alcohol retailers can legally sell booze at deep discounts when they order it in bulk, rebutting state regulators who said the practice can violate a state law that prohibits selling alcohol at less than cost.

The decision Tuesday by Suffolk Superior Court Judge Robert B. Gordon came in response to a lawsuit brought by the country’s largest alcohol chain, Maryland-based Total Wine & More, against the state Alcoholic Beverages Control Commission.

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In January, the agency slapped Total Wine’s Everett and Natick stores with several-day license suspensions for allegedly selling Smirnoff vodka, Bacardi rum, and other liquors for $1 to $6 below their wholesale costs. State alcohol laws and regulations forbid retailers from offering such below-cost “loss leaders,” a policy the state says is necessary to prevent excessive drinking and predatory pricing.

Total Wine sued to overturn the license suspensions. The company argued its prices for consumers weren’t actually below its costs but were based on quantity discounts the company expected to receive from its wholesalers later on, after it had ordered enough of the products to qualify. The ABCC, Total Wine said, unfairly refused to acknowledge the true, ultimate cost of the liquor to the company, and instead looked only at initial invoices that listed a higher cost.

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Gordon, the judge, agreed, saying the ABCC’s “starchy” and “semantic” definition of cost “bears no rational relationship to the legislative policy of prohibiting anti-competitive pricing practices.”

“There was clearly no predatory pricing carried out in this case,” Gordon wrote in his decision, “only a salutary effort by a retailer to pass along savings derived from volume purchasing at the wholesale level to its customers. This is something the law should promote rather than punish.”

The ABCC, he added, should have realized that the delayed quantity discounts were “integral to a calculation of the true net cost of an alcoholic beverage product” — a question simply of “the sequencing of the invoice paperwork, and not the substance of the product pricing itself.”

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Total Wine coowner David Trone hailed the ruling as a victory for consumers.

“The court clearly recognized that Total Wine is lawfully providing the best values for the products we carry,” he said in an interview.

“It’s a strongly written opinion that sent a clear message to the ABCC that consumers are first.”

However, Gordon declined to rule on Total Wine’s argument that the pricing law violated US anti-trust laws, a claim the company also pursued in an ultimately unsuccessful federal lawsuit challenging a similar minimum pricing requirement in Connecticut.

That means Massachusetts retailers are still barred from selling below cost, a reprieve for the owners of smaller package stores who say the requirement prevent large chains such as Total Wine that can afford to sell products at a loss from unfairly undercutting their prices and driving them out of business.

The head of the association representing package stores in the state declined to comment.

Total Wine has a long history of challenging alcohol regulations that prevent it from leveraging its size — the company owns around 160 stores in 20 states — to prevail over local competitors.

Company officials said that, for now, they have no plans to challenge the Massachusetts pricing law again, but will continue a campaign to loosen other booze laws in the state.

A spokeswoman for state Treasurer Deborah Goldberg, whose office oversees the ABCC, said the agency is still reviewing the ruling and has not yet decided whether to appeal.

Dan Adams can be reached at daniel.adams@globe.com. Follow him on Twitter @Dan_Adams86.
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