Why Costco is Important
Reading this week’s Costco v. Hoen decision by the U.S. Ninth Circuit Court of Appeals is enough to make any non-lawyer’s eyes glaze over. Much of the legal analysis is about just that, what line of analysis should be applied when making the decision as to whether the state of Washington’s rights protected by the 21st Amendment to regulate alcohol is trumped by the antitrust provisions of the Sherman Antitrust Act. Important stuff, but not interesting reading for most people. The ultimate result turned on the Circuit Court’s rejecting the District Court’s analytical framework, thereby reaching the opposite conclusion. All of the esoterica about “post and hold” and “central warehousing” issues are important to industry professionals but the layperson probably doesn’t much care about such things. So why is this decision important? Costco is important because the Circuit Court made a point of applying an analytical framework that would shore up the current three-tier system at a time when it has been slowly chipped away by free trade advocates, of which I am one, I should say. This line of analytical reasoning will no doubt be used by future courts looking to uphold the current system. I frequently speak of legal precedent and it’s importance in this blog and this case sets a huge precedent by reversing a trend towards modernizing the three-tier system. There are merits to the three-tier system and I’m not one looking to entirely junk it in favor of a free-for-all system. But the system needs to catch up to modern technology and the way business is done in the 21st century. This decision is one that will hinder that prospect for some time.