Topic:
LEGISLATION; RETAIL TRADE; LIQUOR; CONSUMER PROTECTION DEPARTMENT;
Location:
LIQUOR;

OLR Research Report


November 30, 2004

 

2004-R-0876

(Revised)

LEGAL DEFINITION OF A “CASE” OF WINE

By: Daniel Duffy, Principal Analyst

You asked (1) for background on the controversy concerning the legal definition of the “case” of wine and (2) if the current situation creates an advantageous situation for large chain stores by doing quantity discounting.

SUMMARY

A state regulation set the number and size of the bottles in a case of wine until 2001. For example, a case consisting of 750 milliliters of wine was required to contain 12 bottles. It was part of a regulatory scheme relating to the state's regulation of wine sales. In 2001, the Department of Consumer Protection (DCP) repealed the regulation defining case size because some importers wanted to sell unconventionally packaged cases. Under current law, a “case” must be a container made of any material holding bottles of the same size, brand, age, and proof.

The repeal of the regulation affects the implementation of several statutes and regulations. All are related to the state's regulation of wine sales. The law requires wine manufacturers and wholesalers to post their prices, including case prices, for the coming month with DCP. It prohibits wholesalers from discriminating in the prices charged to retailers. It also prohibits quantity discounts. Specifically, manufacturers and wholesalers may not discriminate in price discounts or offer quantity prices or other inducements or special prices.

Since the repeal, DCP has investigated at least two wholesalers for matters involving the sale of very large cases of wine. In the first matter, DCP accepted an offer in compromise from Worldwide Wines relating to violations of the laws prohibiting quantity discounts. In the second, DCP took no action after holding a compliance meeting with Wine Merchants of Connecticut. A group of five wholesalers, aggrieved by DCP's failure to act against Wine Merchants of Connecticut, appealed the department's decision to Superior Court.

The General Law Committee reported a bill in 2004 that would have limited the size of a case to 135 liters and required the DCP commissioner to study the issue and report his findings. The Senate recommitted it.

State law prohibits a business from owning more than two package stores, with the exception of a few grandfathered chains. As a result, only a few chains could be advantaged by the current situation if they could acquire wine in a jumbo case at a lower price per ounce. The laws against quantity discount apparently reduce the degree of any advantage.

DEFINITION OF A “CASE” OF WINE

Prior to 2001, Connecticut regulations established the number and size of bottles that could be included in a case of wine as follows.

Table 1: Repealed Schedule of Bottles Per Case

Bottle Size

Bottles Per Case

Over 5 liters

1

5 liters

No more than 4

4 liters

No more than 4

3 liters

No more than 4

1.5 liters

6

1 liter

12

750 milliliters

12

375 milliliters

24

355 milliliters

24

187 milliliters

48

100 milliliters

60

DCP amended its regulations in a way that, among other things, eliminated this schedule. Department personnel have said that they had received an increasing number of requests for exemptions. The requests

were from importers who wanted to sell different varieties of wine that were packaged unconventionally. In order to make selling different varieties easier, DCP eliminated the restriction on bottles per case.

RELATED LAWS

Definition of “Case Price”

The law currently defines “case price” for wine as the price of a container of cardboard, wood, or other material, containing units of the same size, brand, age and proof of alcoholic liquor. (CGS 30-1(6)).

Price Posting

The law requires manufacturers and wholesalers to post their prices with DCP each month. Specifically, they must post their bottle, can, and case prices.

DCP must keep the posted prices available for inspection by manufacturers and wholesalers during regular business hours until 3 p.m. of the first business day after the posting deadline. The law allows manufacturers or wholesalers to amend their prices for a month to meet a lower price posted by another manufacturer or wholesaler with respect to the same brand of like age, vintage, quality, and unit size. The amended prices cannot be lower than the price being met, which must be identified in writing (CGS 30-63(c)).

Price Discrimination

The law requires wholesalers to charge the same price to all retailers in the state. Specifically, it prohibits wholesalers from shipping, transporting or delivering within the state, or selling or offering to sell, alcoholic liquor at a bottle, can, or case price higher than the lowest price at which they are selling, offering for sale, or shipping, transporting or delivering it (CGS 30-68k).

Quantity Discounts

We have identified two statutes and one regulation concerned with quantity discounts.

The statutes prohibit manufacturers and wholesalers from (1) discriminating in any manner in price discounts between one permittee and another on products of the same brand, age, size, and quality and (2) using any form of discount, rebate, free goods, allowance, or other inducement to make sales (CGS 30-63(b)).

They also prohibit liquor permittees from (1) directly or indirectly offering, furnishing, or receiving any free goods, gratuities, gifts, prizes, coupons, premiums, combination items, quantity prices, cash returns, loans, discounts, guarantees, special prices, or other inducements in connection with the sale of alcoholic liquor or (2) requiring a purchaser to accept additional alcoholic liquors as a condition of buying other alcoholic liquor (CGS 30-94(a)).

State regulations prohibit permittees in transactions with other permittees from directly or indirectly offering, furnishing, soliciting or receiving any free goods, discounts, gratuities, gifts, prizes, coupons, premiums, combination items, quantity prices, cash returns, loans, guarantees, inducements, special prices, or other inducements with the sale of alcoholic liquors (Conn. Agencies Regulation 30-6-A29 (a)).

QUANTITY DISCOUNT INVESTIGATIONS

Since the regulation has been repealed, some wholesalers have sold cases in sizes that are significantly larger than those formerly allowed. The department has twice considered sales of large cases in two disciplinary matters. In the first, Worldwide Wines, the department accepted an offer in compromise of $1,000. The offer was made relating to violations of the three laws prohibiting quantity discounts. A copy of the offer in compromise is attached (Docket No. 04-700).

The other matter concerned Wine Merchants of Connecticut. Liquor Control Commission minutes show that there was a compliance meeting and based on the meeting and the submission of information by the business, the commission determined that no further action was necessary. A copy of the relevant portion of the minutes is attached. (Notes for LIW. 0000528).

Appeal

Eder Brothers and four other liquor wholesalers are appealing DCP's decision to take no further action against Wine Merchants of Connecticut (Eder Bros. et al v. Department of Consumer Protection, Superior Court of New Britain, November 24, 2004). They filed suit on November 24, 2004 in superior court. The appeal asserts that Wine Merchants is giving quantity discounts to retailers when they sell jumbo cases of wine. They describe the jumbo cases as “simply normal cases of wine aggregated into multi-case lots.” They claim that Wine Merchants sells jumbo cases at a reduced price per bottle as compared to bottles sold in a normal case. They charge that DCP (1) followed an unlawful procedure when it dropped the matter against Wine Merchants without holding a hearing on a contested case, (2) made a clearly erroneous decision in view of the evidence in the record, and (3) made an arbitrary and capricious decision characterized by an abuse of discretion when it terminated proceedings based on “additional information” when the only additional information was two affidavits stating the Wine Merchants was selling jumbo cases.

2004 LEGISLATION

The General Law Committee raised An Act Concerning Case Pricing (SB 137) in 2004. As raised by the committee, the bill would have limited the size of a case of wine to 25 liters and required cases to be as originally packaged and sold by the manufacturer. As reported by the committee, the bill would have limited the size of a case of wine to 135 liters and required the DCP commissioner to (1) study the effects of allowing volume discounts and limiting the size of a case of wine to 135 liters and (2) report his findings to the General Law Committee by July 1, 2005. The bill was moved to the foot of the Senate calendar on April 14 and recommitted to the General Law Committee on May 5.

LARGE CHAIN STORES

With the exception of a few grandfathered businesses, the Liquor Control Act limits to two the number of package stores that one person or business may own (CGS 30-48a). The law allows businesses that owned more than two package stores on June 8, 1981, to continue to own them. As a result, the current law could be advantageous only to the few grandfathered chains, like A & P and M & R, and only if they could acquire bottles of wine packed in a jumbo case at a lower price per ounce. It could also possibly give an advantage to the large package stores capable of handling large cases. In either case, the laws prohibiting quantity discounts and price discrimination apparently mitigate the degree of the advantage.

DD:ts