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Wineries also wary of the Costco lawsuit.

AP--Washington-state small winery owners are concerned that a legal battle between Costco and their state could affect their ability to self-distribute their wine.

The issue arises from the lawsuit filed last year by the Issaquah, WA-based Costco against Washington state, challenging statutes that regulate the distribution and sale of beer and wine.

While Costco can buy alcohol directly from Washington producers, the store must go through distributors to purchase wine and beer from other states. The company says this prevents it from being able to negotiate quantity discounts.

Costco claims the Washington Liquor Control Board regulations that prevent it from negotiating directly with producers is unconstitutional and violates the federal Sherman Antitrust Act, which says every contract or conspiracy in restraint of trade or commerce among states or foreign nations is illegal.

But Washington wine interests worry the legal battle could restrict their ability to market their product.

"Our primary concern is that if the court finds in favor of Costco, that as a remedy the court will stop all self-distribution," said Tim Hightower, president of the Washington Wine Institute, a lobbyist group that represents Washington wineries.

Hightower said without the ability to sell wine without a distributor, Washington's boutique wineries could be in jeopardy. "The distributor takes a 30 percent cut, and to a small winery that's a huge portion," said Hightower. "I don't know that the court is aware of the financial impacts that would have on small wineries in the state."

David Hankins, an assistant attorney general representing the state, said if large retailers have the ability to buy direct and sell at lower prices, there will be serious social impacts. "They'll be able to sell cheaper, then consumption will go up and we'll see an increase in DUIs and domestic violence," he said.

Hankins said if the state wins, nothing will change for Washington wineries. They will still be able to self-distribute following the same rules already in place--no discounts for large quantities, no selling alcohol on credit, the prices must be posted and producers must account for every bottle sold.

Hankins said the state's laws allow small stores to buy alcohol at the same prices as large retailers and allows state investigators and auditors to enforce the laws. "Our system right now works," Hankins said.

A 10-day bench trial is scheduled for March 20 in Seattle.
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Publication:Modern Brewery Age
Date:Oct 24, 2005
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