Another Day, Another Lawsuit, Another Reason to Cheer

Oregon Should Surrender Without a Fight in the new lawsuit over self distribution

Let’s look at this from a wine retailer’s perspective: A requirement that the wine retailer purchases their inventory from wholesalers alone is the primary state alcohol regulation diminishing the profitability and adaptability of American wine stores.

I bring this up to draw your attention to a federal lawsuit recently filed in Oregon (my adopted home state). Washington State brewers are suing Oregon because its retailers are allowed to purchase beer directly from Oregon brewers, but bans them from buying from out-of-state brewers. This kind of protectionism and discrimination against out-of-state brewers is a classic case of violating the dormant commerce clause of the Constitution.

The Washington brewers are going to win this lawsuit. In fact, a federal court has already addressed this issue and not too far from the state of Oregon. In 2005 Costco sued the state of Washington over its law allowing WA retailers to buy wine directly from WA wineries (going around wholesalers) but prohibiting them from purchasing wine from out-of-state wineries. The federal court ruled for Costco based on the recently decided Granholm v Heald Supreme Court case dealing with discrimination in wine shipments to consumers.

The same lawsuit now challenging Oregon self-distribution laws also happens to be challenging Oregon’s discriminatory law allowing Oregon brewers to sell and ship wine directly to Oregonians, but prohibiting out-of-state brewers from doing the same. The Washington brewers are going to prevail on this issue too.

The Alcohol Law Review, which is a front group for the National Beer Wholesalers Association, had this description of the recently filed lawsuit. (Note the snarky last line):

“A lawsuit was filed this week by three Washington breweries against Oregon on its laws relating to direct sales to consumers and for direct sales to retailers. The lawsuit alleges violations of the dormant Commerce Clause. It was filed in the federal district court in Oregon. Apparently, the plaintiffs believe the Oregon market is not craft beer-friendly enough.”

And the plaintiffs are correct that Oregon’s market is NOT craft beer-friendly enough. It’s not friendly enough to consumers nor to Oregon retailers. With all retailers in Oregon stuck with ordering beer from the same in-state wholesalers, it is near impossible to distinguish yourself from your competitors. A retailer’s ability to distinguish itself from competitors through its inventory is the primary way it competes. Oregon law doesn’t allow this. And while I appreciate why a state would seek to screw consumers to help boost the competitiveness of its own craft brewers, such blatant unconstitutional laws can’t go unchallenged.

When the Washington plaintiffs in this lawsuit win in a walk, Oregon consumers, Oregon retailers, and brewers across the country will be better off. And they will win.