thank your honor good morning i'm william murphy counsel for connecticut fine one in spirits which does business as total wine i'll probably refer to my client as total wine the district court in this matter dismissed on a preliminary motion a federal antitrust challenge to a state pricing regime and i say something just for yes i say just for myself i am most interested in helping spend a decent person decent amount of time  and what to do about it if anything because to me that sort of it that at the center of the hardest part of case again i haven't discussed this with my colleagues it's just a personal request but given the amount of time i have al about a partner then you're on her we think first of all that the statutes need to be looked at because they are interrelated they should be looked at together and that the district court erred in sort of separating them out but when the district court separated the statutes out and looked at them separately with respect to the horizontal posting and holding of case prices the court found that but apparently it was controlling we think that that's that's wrong for at least three reasons the first reason is that apparently is distinguishable from this case this is a case that doesn't involve just wholesale prices to the retailers it also involves mandatory minimum price is set by the wholesalers that the retailers must charge and that means it brings that within much more closely to the decisions of the supreme court in midtown and three twenty four liquor those are vertical arrangement arrangements but they also had horizontal aspects and in mid cal the court expressly recognized the horse won all aspects and they talked about it just as paul talked about it again in three twenty four liquor but if you think about it this is a system where it's horizontal in that all of the wholesalers are posting both the case price and the bottle price all of them are posting that for every product so that every retailer must follow that minimum bottle price for every product offered for sale in the state that clearly has horizontal impacts on both the wholesale level and the retail level and ultimately to the consumer is your argument that there's a horizontal agreement other than at the wholesale level our argument your honor is that there's not really a need for an agreement the state has authorized and mandated that these prices be set and as such there's no need for there did to be an agreement as the supreme court held in three twenty four liquor footnote eight i was indistinct are you saying that the problem here is horizontality solely at the horrors at the wholesaler level or at a lower level at both levels both at the wholesale level and at the retail level there is a horizontal impact in that every retail store in connecticut must sell every product that it offers for sale at a minimum price at least at that price which is not set by them and it's not based on their cost necessarily set by the wholesalers based on an arbitrary deviations sometimes between the case price and the bottle price now getting back to about a possibly insureds and judge sachs question we think that that aspect of the of the statu said i'm not confronted in this case with a situation in which which the retailers are bound to follow the price schedules set by the wholesalers and so that's why our case is distinguishable that was his way of distinguishing the  retail price maintenance resale price maintenance aspect of the case it was his way of i would say not having to deal expressly with which at that time had held that the reach of this kind of resale price minutes maintenance was per se invalid and preempted now the other thing that i want to say about the better paglia and the reasoning of judge friendly is that although he says several times in the opinion that i'm not deciding necessarily that there has to be an agreement in order for there to be an unlawful price restraint by statute when you read his preemption analysis what he ends up with saying is that the wholesalers in new york didn't have to conspire nor did they have to engage in conscious conscious parallel pricing therefore this scheme is subject to rule reason analysis and under rice it's not preempted i think that the problem there is that he really in his preemption analysis is saying there's no agreement here and our position is that when you have a statute that commands at here it's to price schedules that are set by the wholesalers there is no need for an agreement the search for an agreement is illusory it's it's fanciful why do you need an agreement that the hybrid restraint cases all deal with anticompetitive behavior initiate private parties in the market place who are setting prices and manipulating prices and the state has an overlay of enforcing those private marketing decisions there is no need for an agreement this year tells us though that the test is whether the private actors are granted a degree of private regulatory power yes why is it one way to look at this to say each individual wholesaler still is setting its own right making its own independent price choices within a framework that's been narrowed by red regulation but none of them has private regulatory power they're each making conscious parallel decisions perhaps but they're each ultimately acting separately well that gets back i think to the whole aspect of this because the the the wholesalers not only are setting prices but they are required by the state to hold those prices for thirty days and that's the other aspect of battipaglia which i think subsequent decisions in the leading any trust commoners have all concluded unanimously i would say that that aspect of battipaglia was wrong that this really is a horizontal price restraint and that it really is per se oppose the hold that's correct and then judge winter makes that point in its dissenting opinion and i think that judge winter's dissenting opinion is absolutely correct so what i would say about that apparently is three things one it's distinguishable because we have both aspects of the across the board wholesale case price fix as well as the minimum bottle price imposed upon the retailers that's distinguish it number two the reasoning is flawed after three twenty four liquor which basically says you don't need to look for the agreement that judge friendly was looking for add all because this is this a system where the private decisions are being enforced by state law the state law is providing all the glue that's needed to hold the conspiracy together and then the third point is that even taking it on when it's at its own level and even looking just at the horizontal aspect of it just the price fix one case prices there is a problem here that courts like t f w compels the individual wholesalers to match each other's prices it invites that possibility by allowing the one time downward movement yes but equally in theory the wholesalers could stick it their independen separate pricing decisions they just have to stay put for a month but what we what we know is that they don't and that's what our our chart that was attached the complaint shows where wholesale reds sell the same product to retailers and most of the of the many of the major liquor brands your maker is more your tank or a gen have multiple wholesalers they all routinely every month when they make a change they make the same change at the same level on a case price dropping sometimes ten dollars a bottle but they don't drop the minimum bottle price they keep that profit margin there for the retailers which is it is it your position that even if there was a variation rather than samus the hold period with make it per se unlawful yes in any of it it would in any event this is i mean this is so much worse than what the the situation in ws that marilyn statue just was a post an old statute just for the wholesale price to the retailer it did not have this aspect which connecticut has which is unique in the whole the whole the united states this is the only state which has this minimum bottle pricing regime which really allows wholesalers to dictate the profit margins of the retailer and dictate to the consumer the a minimal amount that you're going to pay and for a popular product chardonnay in connecticut every liquor store in the state is going to sell kendall and charted a at the exact same price it's the minimum price set by the wholesaler that month usually it's ten ninety nine and that's what you'll pay in every store in connecticut there's absolutely no competition whatsoever within that brand and con and also across brands because there's no interbrand competition here either which is why we say that the decision of the supreme court in league in which said that vertical price maintenance in the private enterprise system are subject to the rule of reason and therefore you would couldn't have a preemption claim well that doesn't apply to a statutory claim there's nothing about the analysis of justice kennedy in league in that makes any sense if you think about this statute because league in all turns on the fact that resale  or inter brand competition because the wholesalers are all setting fixed prices that the retailers have to maintain i gather you're saying with respect with respect to your  it's you know it's not it's ok but not to o t but but the real thing is that the kendall jackson would be sold by my client perhaps for eight dollars and ninety nine cents a bottle because that's what he's buying it for from could if he could he buys it at that price he can't sell it at that price he's forced to sell it at the artificial minimum bottle price dictated by the wholesalers that has nothing to do with cost as everything to do with maintaining profit margins in the retail sector ask a remedy question suppose that you are right that there is a horizontal price fixing problem here while i understand that the argument is that analytically we should consider all the component parts together what's the remedy is it just invalidating postin whole does that get you the relief you need now well i don't think so and i think when you think about this and whether the statutes have to be construed together you think about what the remedy is if you eliminated post hold but kept the requirement that minimum bottle prices are set how how does that work well how does anybody know what the minimum bottle price is unless it's posted and held so that doesn't make a lot of sense to me what about just the hold part if the hold part wind would you still have a horizontal price fixing problem that's i think it more difficult question if if it was just a price posting requirement if the if the court upon review was also to eliminate the minimum bottle aspect of it i think then you might have a statute that you know we would have a hard time saying that that statute is so in a competitive that it doesn't override the state's twenty first amendment interest in regulating the liquor industry in a valid way but that's an issue that should be decided after discovery on remand if we prevail in this argument that these statutes ought to be presumptively preempted under the sherman act and then let the state show either that it's actively supervising the system which it's not because it's not regulating prices or that the twenty first interest twenty first and then interest that they said that they have this is so important that it that it outweighs the the federal interest in a in a fair system in other words if you prevail here yes on this appeal the case goes forward without any relief in your favor at this time that's right i mean it would be vacated remanded for proceedings which i think would be proceedings on probably the twenty first amendment defense and the state action supervision requirement the state chooses to try to say that that's what they do so your time is long expired you reserve two minutes for about oh we'll hear from the commissioner thank you good morning your honor gary becker assistant attorney general for the state of connecticut for the commissioner your honor if i can turn to to entangle myers question first the  wholesaler chooses the case prices you know they choose their own case prices for their own product and they could inform the retailer what that case price is it's a it's a mechanical process to figure out what the minimum bottle prices to save the parts that are constitutional if there is a challenge and i think that that is our position i would argue that all three statutes that are challenged are in fact constitutional and should be upheld by this court for only one of them to be treated as preempted rather than all three that is correct your honor that is correct you judge on them are you also raise you out so ask about what about the hold part well if you look at the post and hold there's no posting provision where they all have to post all their prices and that to a degree that allows them to set that price it's not dictated by the state what price they post the part that is really dictated by the state and i would argue as a unilateral restraint is the hold part the state says when she posted you must hold that it's no different then if a mattress manufacturer says we're having a sale on queen mattresses for the next two weeks puts the advertisement in the paper that if they don't sell the mattress for that price for the next two weeks then our consumer protection not a vision will go after just to have addressed a post and hold provision of least post fisher have held it to be unilateral  i think you're correct your honor t f the us and costco did not do that but let's not conflate the unilateral test with the per se test though the mere fact that you might think you disputing that what what is the argument agreement between either the producer and the wholesaler in mid cow as to what the price to retailers would be or the wholesale and retail and swagman they agreed and then they impose that on other players in the market here when a wholesaler post price the only entity that's bound is that wholesale or if the other manufacturers don't match what they sell at their own price there is i'd say less regulatory power private regulatory power in our system then then the system is considered in mid kalish wegman doesn't the overall system effectively obviate the need to get together for an agreement if in effect everyone posts their prices is bound to them but can't match the others on a one way basis within several days and in practice there's no need to get together and communicate the communication has been put up there in skywriting effect pursuant to state statute the question is your honor you know what they posted last every month if you're a wholesale you must make a decision what do i post this month maybe i will post a higher price because i think i understand the market and i want to better margin this month nobody can match me at a higher price and you know what the what your competitors posted last month but you don't know you don't know what they will post this month if in addition they had an agreement among themselves that they would post the same price every month that would be a different case but the statute doesn't require i think it's just stating that because of the particulars of this business post in the hold means a particular price right across the board may not say it has to be the same price but given the dynamics of the business it does not so you're on i understand that's what the wind said a fact but i don't think it's on official challenge you look at what the statute says and what it allows what it commands and the statute does not say you should all post the same prices or one of  post the pricing controls the rest of the statute allows some matching not only matching down and the thing to keep in mind your honor is there are some wholesalers sell you multiple brands of product and there may be two brands of gin that the market consumers we consider to be interchangeable brand a and brand b now maybe somebody else sells brand b you can envision where the wholesaler who sells both says well i want people to drink brandy because i'm the only one who sells it in that case i might actually raise the price on brand to be lower the price on brand a to convince the market to shift over to brand a because they think it's interchangeable and take market share away from my competitor who only sells brandy that's permitted by the statute i think would be understandable behavior the other thing i would comment on counsel says that one is the same price in every retail store in connecticut  is not a facial challenge either he doesn't have to be just simple economics would tell you if you lived out in the country and it were a twenty mile drive to the next liquor store you would not sell at the minimum i allowed to take that argument mean i'm trying to work with the notion which is right that it's a facial challenge but i'm trying to remind myself after doing this for many years what i'm allowed to take into account when i'm looking at honor i think to analyze a statue you can do that but to accept as fact that the price is the same in every retail store in connecticut is not a facial challenge and that would be that's factual as applied challenge this is a deeply anti competitive set of statutes you would agree whether or not it that is bears on its being percent a problematic there are very anti competitive aspects of the arrangement here there are some aspects that are anti competitive but as we know from the days of parker vs brown the state can do anti competitive things the states have a lot of conflicting issues to balance protecting people against over consumption of alcohol is one of them provisions and hold them hold our prices low post our prices and hold them for a month subject to the short term opportunity to match downward if the wholesalers got together and reached that agreement without any more specific agreement as to the content of pricing would you agree that that is it per se violation of the sherman act not necessarily your honor i think we take this from the sugar institute case and recall sugar institute sugar is fungible it's just sugar there are no different brands of sugar there's no interbrand intra brand distinction and there was a private agreement privately reached and where they agreed that they would change the prices and they would change prices only if everybody else agreed that the price could go in that one would raise the price the others would either match it or not if they didn't match at the price then go up here there is no private agreement to do that does they command that you will post a price whatever your own prices and to answer your question directly if if they agree that they would merely post their prices and keep them that way but those prices were not the same and i don't see any reason why that should be accorded person a treatment well that does does it does is it required that the prices be the same or that there would be an agreement as to price among the competitors with all due respect to the for the latter with all due respect to the supreme court in three twenty four liquor while there might have  been sufficient private regulatory power in new york's minimum resale price law to justify holding that an agreement was not necessary there i don't know that it's more general application than an agreement is unnecessary everywhere with respect to post and hold this court and todd vs exxon looked at something that was similar it was that the employers would share data about what they pay their employees so they would bid against each other and the understanding was they will share the data and they will match those prices and yet the court here in a pinion written by justice so to my or said that it needs to be looked at under a rule reasons to have you're not a person a standard thank you counsel thank you your honor here from the wholesalers wine and spirits thank you your honor and actually i am also speaking on behalf of all of the intervenor defendants besides preston barton so that would include the beer wholesalers as well as the package store which is the off premise retailers as well as the return restaurants association which would be an on premise retailer your honor i am going to try to address specifics about what's already been spoken about rather than have a presentation and try to specifically perhaps clear up some computer in which i think may be here one thing that i think is very important to note in this happened was very clear on making mr murphy stay in her boxes as she called it any time that mr murphy talks about a response to what is wrong with post in hold you hear him slide off into saying it's bad because it's not just post and hold it's the minimum bottle provision but you can only do that you can only undertake that analysis and use if you will the chinese menu approach in other words post in whole has this but doesn't have that minimum bottle has this but doesn't have that if you accept mr murphy's construct which is the bundling or as we've called it lumping in order to analyze the statutes and that is not appropriate for the very reasons that judge paul set out in the beginning part of her opinion i'm not going to get into those unless you have questions dictate the most narrow remedy of the backend if there is a problem you can certainly consider how the statutes work i totally agree with you there and that's another issue because people seem to get off the rails and when they're discussing how the statute work that's entirely appropriate because this is a scheme and i do not mean that in a pejorative sense but it's like any other scheme i mean the securities act for example but when you doing a preemption analysis in order to determine whether the norman williams test or even if you want to use flip it and do it the way judge paul did it whether they have  put them through their paces and each of those statutes then you have to look at that statute on its face not when combined in effect with another statute and that's particularly apparent here because mr murphy continues to use minimum bottle for the retail aspects in order to bolster the post and hold which is only at the wholesale level in action well he answered your question judging a liar well is it just that the wholesale aspect and he said well it's at both levels because of the  statute he forever is tying the two together so unless you buy into bundling and the only case that he can cite that has done that is his own case in maryland then you cannot go down that post them because it's postin hold that the same district court said she nothing she can do about it because she's bound by our decisions but it's but it should be preempted underlying statutes in three twenty four liquor were substantially the same as those as posted hold here which is incorrect and i'm happy to get into that but the other thing perhaps more importantly for for your purposes and since she wanted to focus on battipaglia she was also in correct in assuming that judge friendly had nothing to say or or no relevance to the notion of unilateral vs hybrid and so once she made that determination on virtually a timeline basis in other words fischer came after bad a paglia therefore she got herself off onto an avenue that we believe was incorrect and if you look at the battipaglia decision literally in terms of the language that judge friendly uses and you compare it to the language in fisher and then some of the subsequent cases that talk hybrid uses unilateral he was essentially foreshadowing this and also keep in mind that with all due respect to justice powell he did  not have some apocalyptic moment and come up with this hybrid concept yes he put that front and center but the concept of hybrid had been mentioned in norman williams for example and in other intervening cases between norman williams and fisher so judge paul was wrong i think when she viewed friendly as being able to provide us with any instruction or guidance may i continue on thank you on the issue of unilateral vs hybrid so if if you take judge friendly's opinion you look at the language you compare with fischer then we believe that if you could turn back the clock judge friendly could have determined that post and hold was unilateral but he didn't have to your honor you know why because he viewed the statutory analysis the way that we suggested judge hall might want to do in that way she would have had to get to the whole issue of hybrid versus unilateral approach post and hold if you look at just the post and hold provision and let's see you we are we conclude that it's hybrid and so we move to per se why is judge friendly whose decision scarcely mentions the whole provision on like the winter descend more persuasive than let's say the ninth circuit's treatment of what appears to be an analogous post and hold pretty in fact judge friendly does talk about the whole aspect and he he then cites cases the connecticut cases including several in which talk about the whole aspect so again i believe judge hallways in correct went in her assessment in her decision where she said it's interesting that the only cases that judge friendly references are with respect to posting that's just not correct judging a liar but separate and apart from that let's look at judge winter's dissent judge winter relies front and center on two cases sugar institue and cattle and neither of those cases was a preemption case both of those cases involved definite agreements as you know sugar institue there was a trade association that was specifically formed for the purpose of post of exchanging a price and if you wanted to be a member of the club you had to agree to that price so that is not in any way going on here first of all again we're in preemption we're not in a sherman one claim if that's what mr murphy wanted to bring then he should right why why is that wrong he goes down the same path that judge winter was the line leader for in other words they all are talking about sugar institue and that is the very threshold  start of their and alice's all of them judge winter miller and the canterbury all every single one if you look at it it's almost as if they run the same that yes judge for he was right and the other people rule that's right i mean you know again no disrespect to judge winter but you know and for example mr murphy also points to not only subsequent cases none of which by the way are controlling but also you know the great read in hope in camp but look at a reading hovan camp they're also talking about sugar institute and they're saying judge winter's dissent is more in line with made kael absolutely right i mean that's no late breaking news because it but judge friendly also discusses mitt cal  and by the way judge owen and the district court level likewise discussed mitt cal and specifically said these are two different statutes one is post in hold in one is resale price maintenance so again if you if you stay true to judge friendly's analysis and that is not being disrespectful to judge winters but judge friendly does cover all the bases he needs to cover and he does not forget about the hold and he doesn't he is also almost pression in terms of the hybrid versus unilateral which will become more prevalent in subsequent cases  only amendment down that is possible under the posted hold is with respect to the same identical product period full stop so while that has an no effect at all on any other kendall jackson product and any other wine white red rose a or any other color so again we've got a little bit of slippage here when mr murphy tries to paint a very dark picture but this is there are two mandates under this scheme one you cannot price below cost and by the way that's at all three tiers suppliers can't do it wholesalers can't do it and retailers can't do it which is one of the ways that this statute is different from those in three twenty four the other thing is you can't discriminate in pricing that also suppliers can't discriminate to wholesalers wholesalers can't discriminate against retailers again a distinction with three twenty four so when you put those two bookends together in those are the mandates here and it's straight up on the face of this statutory scheme then it makes sense as to why this system works the way it does and why the wholesalers are bound if they want to follow the statue right they they don't have a whole lot of wiggle room right yes they can change their case price but mr murphy is wrong if they have a sale or a post office which is what the jargon is in the industry the post office price of your case does not change the case price for purposes of the algorithmic statutory formula to determine the bottle price now that may be confusing but it's not collusion so it can it can be difficult to understand these concepts but you have to go back and you have to look at what the statute mandates you have to look at what the definition of bottle prices and then you have to remember that you're in a world where you can not you have to have uniform pricing and you cannot price below cost so if that's a scheme ok but those two factors noble low cost pricing and no discrimination among your seller excuse me your purchasers those two purposes goals mandates ar totally not anti competitive they may result in certain competitors business models not working the way they want to because in this case total line can't get quantity discounts and they can't squeeze a wholesaler for a better price absolutely correct but that does not make the system anti competitive for sherman act purposes and it surely doesn't for purposes of a preemption analysis the place to stop your honor i'm sorry get passionate about alcohol mr murphy you have two minutes for about oh thank you your honor the reason that we challenge both aspects of this  restraint in one statutory claim is because the statute says and section thirty sixty three see which is in the reply brief as an appendix for alcohol like liquor other than beer each wholesaler shall post with the department monthly the bottle can and case price there's no way to separate those out both the bottle price which goes to the minimum bottle price that the retailer must charge and the case price what i'm going to charge you for the case of kendall jackson or both in the same statute they both must be posted monthly then most both must be held monthly the statutes are intertwined the definition of what a what the bottle prices is in a different statute but the requirement of post and hold covers both there is confusion about the statute and i i think if you look at i'm myself i'm a fan of jamieson's irish whiskey if you look at my footnote in the reply brief jamieson's is offered for sale most of the year at the eight cents more than a bottle price but three times a year that reduces all the wholesalers produce at the same level they do not apply a statutory algorithm they don't change the bottle price commensurate with the change in the case price they does sometimes don't change at all sometimes they change it a little bit there's no restriction on what the wholesalers can do they have to charge that the create a price that's at least eight cents a bottle more but they could make it a dollar a two dollars and eight and then  dollars more than what they're selling it to the retailer for so my client buys that jamieson's at thirty five dollars a bottle he still has to sell it at forty nine ninety nine a bottle just like every other retailer in the state of connecticut the fact that there is similarity across the board is also what we see and wobbly in all the conscious parallelism cases i thought the evil of section one was the agreement not the common pricing or not in fact a harm to competition the hardest problem for you in my view in this case is why even the detailed regulatory scheme here is tantamount to an agreement equivalent such that we would treat it as preemptive  that i think that when you read rice versus williams the the statute to be preempted must either mandate or authorize the anticompetitive conduct now here the statute mandates the posting every month and holding those prices every month and it authorizes exactly what we're talking about where wholesalers are able to match each other's prices month after month after month down to the penny it's authorized by the statute and that's why i say there's why is that not authorized in real life without the statute to in other words if the prices were not posted and not held and i was a wholesaler and learned what my competitors were selling probably reasonably learnable enough why couldn't i do like go and match them you couldn't i guess but if it if it became so pervasive as it is in connecticut month after month year after year that the system has been in effect at some point that conscious parallelism is going to give rise to an agreement that the plus factors that lead to an allegation and proof that there was a conspiracy that was going on here there's no need for that because the statute obviates the need for the agreement and that's really what footnote eight a free twenty four liquor says when you have a preemption claim a facial challenge to the statu there is no need to search for a contract combination or conspiracy in rich strain of trade that restraint of trade is created by the statute which and forces the private pricing decisions made by in this case the wholesalers and the statute just gives them kind of the the patina of regulatory authority that allows them to do what they've done and to create a system in which there is no retail price competition matter probably james probably so why is that why is that so here and not infinite well there is no minimum bottle pricing requirement here in new york for one thing so that you don't have a wholesaler dictating to all the retailers you can't charge any less than this for jamieson's and then if you're in a competitive marketplace and that the statement is i can charge getting less than this but i want to charge as little as i can bring customers to my store i'm going to charge that minimum bottle price that's what's happening in connecticut thank you thank you thank you all for a very lively argument will reserve decision