Fourth Circuit rules Maryland liquor regulations violate federal antitrust law

[JURIST] The US Court of Appeals for the Fourth Circuit [official website] ruled [opinion, PDF] Wednesday that Maryland alcohol price regulations violate federal antitrust laws. The court upheld their previous ruling [opinion, PDF] from 2001 that state pricing schemes for liquor and wine wholesalers restrain trade and constitute horizontal price fixing under the Sherman Antitrust Act [materials]. The regulations required wholesalers to disclose and lock-in prices at a fixed date every month and restricted them from offering volume discounts to retailers. Maryland defended the laws, claiming that their rights under the 21st Amendment [text] outweigh the federal law. The Fourth Circuit previously rejected the state's claims that the suit was barred by 11th Amendment [text] state immunity and that the Sherman Act did not apply to state actors. The court discussed the 21st Amendment issue:


despite the scheme's violation of federal law, the state is given the opportunity to demonstrate that its own interests outweigh those of the federal government. Here, a determination of effectiveness is essential to weigh the competing interests because the state's interests are weighed in the balance only insofar as they are actually advanced by the regulatory scheme. ... The 21st Amendment may provide "shelter" for a state's liquor statutes that violate the Sherman Act only if the state's interest truly outweighs the federal interest.

In a 2003 decision [opinion, PDF] in this case, the Fourth Circuit remanded the district court's order for consideration of Maryland and Delaware's excise tax rates in relation to the effectiveness of the regulatory scheme. The district court then conducted fact-finding on the issue and found that "the federal interest in promoting competition" outweighed Maryland's interests. On this appeal, the Fourth Circuit rejected Maryland's claims that the district court finding on the scheme's impact was based on flawed data.

The Sherman Act is a frequent subject of litigation. Last month, the US Supreme Court [official website] granted certiorari [docket; cert. petition, PDF] to consider whether the NFL and its member teams are a single entity that is exempt from rule of reason claims [JURIST report] under the Sherman Act. The suit arose out of an agreement granting Reebok an exclusive license for 10 years to market and sell products with team logos. The Seventh Circuit had ruled that the NFL and its teams were a single entity. In May, the US Department of Justice (DOJ) [official website] announced that it was reversing Bush-era antitrust policies that made it difficult to act against large companies that harm the interests of smaller companies. The DOJ withdrew a report [text, PDF] released in September 2008 that explored single entity violations of § 2 of the Sherman Act in which a competitor seeks or maintains monopoly power which harms consumers.

 

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