Document: 479 U.S. 335 107 S.Ct. 720 93 L.Ed.2d 667 324 LIQUOR CORP., dba Yorkshire Wine & Spirits, Appellantv.Thomas DUFFY et al. No. 84-2022. Argued Nov. 3, 1986. Decided Jan. 13, 1987. Syllabus Under § 101-bb of New York's Alcoholic Beverage Control Law and implementing regulations the State Liquor Authority (SLA), liquor retailers must charge at least 112 percent wholesaler's "posted" bottle price in effect time retailer sells or offers to sell item. Wholesalers file monthly prices case for an item with SLA, may reduce posted without reducing its price. Since generally purchase by case, wholesalers thus can compel more than actual wholesale cost retailer. As a result appellant retailer's selling certain bottles less price, license was suspended 10 days it forfeited bond. Appellant sought relief from penalties on ground that violated 1 Sherman Act. A York Supreme Court denied relief, but Appellate Division reversed. The Appeals upheld validity reinstated penalties. It held not immune under state-action exemption antitrust laws set forth Parker v. Brown, 317 341, 63 307, 87 L.Ed. 315 (1943). nevertheless concluded statute proper exercise powers reserved Twenty-first Amendment. Held: 1. Section is inconsistent Resale maintenance has long been regarded as per se violation. statute, which applies all retailers, allows "vertical control" retail prices. Such industrywide resale fixing virtually both interbrand intrabrand competition, because prevents allowing requiring competition. Cf. California Retail Dealers Assn. Midcal Aluminum, Inc., 445 97, 100 937, 233 (1980). Pp. 341-343. 2. pricing system valid laws. State's does meet first requirement two-part test determining immunity supra, challenged restraint be "one clearly articulated affirmatively expressed state policy." However, second policy "actively supervised" itself. simply authorizes setting enforces established private parties. displaced competition among substituting adequate regulation. supra. 343-345. 3. Although 2 Amendment qualifies federal commerce power, operate "repeal" Commerce Clause wherever regulation intoxicating liquors concerned. question each whether interests implicated are so closely related preserved prevail, notwithstanding requirements directly conflict express policies. 346-352. (a) asserted interest protecting small suffice afford correctly purpose 12 minimum markup protect those court made no findings "bottle price" definition cited legislative other either effective preserving retailers. conflicts "familiar substantial" enforcing 348-351. (b) necessary consider power promote temperance. did find intended temperance, so. This accords great weight views highest state-law matters, customarily accepts factual courts absence exceptional circumstances. No such circumstances appear this case. 351-352. 64 N.Y.2d 504, 490 N.Y.S.2d 143, N.E.2d 779 (1985), reversed remanded. POWELL, J., delivered opinion Court, BRENNAN, WHITE, MARSHALL, BLACKMUN, STEVENS, SCALIA, JJ., joined. O'CONNOR, filed dissenting opinion, REHNQUIST, C.J., joined, post, p. 352. Bertram M. Kantor, appellant. W. Stephen Cannon, Washington, D.C. U.S., amicus curiae, special leave Christopher Keith Hall, City, appellees. Justice POWELL Court. requires liquor, permits presented * A. 3 file, "post," schedules (SLA). N.Y.Alco.Bev.Cont. (ABC Law) 101-b (McKinney 1970 Supp.1986).1 report, "with respect item," "the retailers." 101-b(3)(b). ABC itself require bear any relation however, promulgated rule stating cases containing 48 fewer bottles, multiplied number exceed "breakage" surcharge $1.92. SLA Rule 16.4(e), 9 NYCRR 65.4(e) (1980).2 4 Retailers below "cost." Law, 101-bb(2).3 defines "cost" plus twelve percentum price." 101-bb(2)(b). "Price," turn, defined Ibid. terms expressly authorized reduce, "post off," Bulletin 471 (June 29, 1973).4 By cost. Similarly, 101-bb(2)(b) when item, large quantities month low then abnormally high raising succeeding months. prices, markups, regard costs. advertise trade publications their offs" will guarantee sometimes excess 30 percent. App. 32-35. also buying while extra profits after raised. Juris.Statement 101A. complex statutory provisions permit maintain artificially levels. B 5 Corporation sold two investigators June 1981 Because had "posted off" appellant's represented 18 over violation, $1,000 violates Act, 15 U.S.C. petition. Corp. McLaughlin, 119 Misc.2d 746, 464 355 (1983). 102 App.Div.2d 607, 478 615 (1984). J.A.J. Store, Inc. Authority, (1985). doctrine (1943), actively supervise system. Amendment, underlies [the statute] sufficient magnitude override Federal laws." N.Y.2d, 522, 153, N.E.2d, 789. We noted probable jurisdiction, 475 1080, 106 1456, 89 714 (1986), we now reverse. II 6 In (1980), invalidated producers, wholesalers, rectifiers wine fair contracts State. establishes framework our analysis 7 "threshold question," Midcal, Id., 102, S.Ct., 941. imposes regime violation Act "since early years national enforcement." Monsanto Co. Spray-Rite Service Corp., 465 752, 761, 104 1464, 1469, 79 775 See Dr. Miles Medical John D. Park Sons Co., 220 373, 404-409, 31 376, 383-85, 55 502 (1911). Our recent decisions recognize possibility vertical imposed single manufacturer wholesaler stimulate even reduces Continental T.V., GTE Sylvania 433 36, 51-52, 97 2549, 53 568 (1977). Accordingly, have concerted nonprice restrictions judged reason. 59, 2562. announce advance refuse deal who fail comply. 1469; United States Colgate 250 300, 39 465, 468, 992 (1919). Neither these qualifications restricts subject failure adhere schedules. moreover, liquor. facilitate cartelization. 51, n. 18, 2558 18. Mandatory well manufacturers specifically forbids wholesalers. 8 essentially similar Midcal. true were required contract schedule geographical area. 99-100, 940-941. therefore involved horizontal fixing. provided additional reason invalidating decision rested prevent dictating charged wholesalers." 103, 942. explained Rice Norman Williams 458 654, 3294, 73 1042 (1982), "it mandated maintenance, activity Act." 659-660, 3298-3299 (emphasis original; footnote omitted). hold Act.5 apply "to anticompetitive conduct acting through legislature." Town Hallie Eau Claire, 34, 38, 105 1713, 1716, 85 24 Brown rests principles federalism sovereignty. principles, "an unexpressed nullify state's control officers agents lightly attributed Congress." 351, 313. At same time, "a give violate authorizing them it, declaring action lawful." Brown. "First, 'one policy'; second, 'actively supervised' itself." 105, 943 (quoting Lafayette Louisiana Power Light 435 389, 410, 98 1123, 1135, 364 (1978) (plurality opinion)). liquor-pricing meets requirement. legislature adopted maintenance. Just clearly, supervised "simply parties."6 943. "neither nor reviews reasonableness schedules." "does monitor market conditions engage 'pointed reexamination' program." 106, Bates Bar Arizona, 350, 362, 2691, 2698, 810 (1977)).7 Each sets own prices; month-to-month variations Nor amount corresponding decrease, if any, frequency posts off. "The favor cannot thwarted casting gauzy cloak involvement what price-fixing arrangement." 943.8 III reserves regulate, prohibit entirely, transportation importation within borders.9 "grants complete sale how structure distribution system." 110, 946. States' powers, though broad, circumscribed Constitution. Larkin Grendel's Den, 459 116, 122, 5, 103 505, 510, 74 297 (1982) (Establishment Clause); Craig Boren, 429 190, 204-209, 451, 460-463, 50 397 (1976) (Equal Protection Wisconsin Constantineau, 400 433, 436, 91 507, 509, 27 515 (1971) (procedural due process); Department Revenue James Beam 377 345-346, 84 1247, 1249-1250, 362 (1964) (Export-Import Clause). rejected view "that somehow operated 'repeal' concerned." Hostetter Idlewild 324, 331-332, 1293, 1297-1298, 350 (1964).10 Instead, engaged "pragmatic effort harmonize powers." 109, 945. "whether policies." Capital Cities Cable, Crisp, 467 691, 714, 2694, 2708, 81 580 11 "was designed preserve industry stabilizing economic position 520, N.Y.S.2d, 152, 788. traced history 1964, Moreland Commission completed extensive study governing alcoholic beverages. Comm'n Report Recommendations Nos. 1-3 (1964). Commission's major consumers suffered serious discrimination compared severe lack existed market." 519, 151, 787. Legislature responded 1964 enacting sweeping changes primarily version prohibited sales 1970). During between 1971, stores declined. Senate Excise Committee investigated decline mass unable compete volume outlets emerged." Legislature, Committee, Final 29-30 (Mar. 1971). 1971 enacted current "protec[t] agree 12-percent price," differ paid 339-340. There indication history, defining amendments Law. amendments, found, increase retained basis added reflect overhead operating expenses. Indeed, considered put slight disadvantage. "[t]he present 'cost' [as] scheduled some margin profit particular, and, lesser extent, buy case." Report, 8-9. suggested "consideration accorded . [r]evision elimination 'post offs' practices discriminatory advantages possession purchasing power." 41. recommend amendment matter "outside scope directive given Committee." Ibid.11 13 found nothing record suggest California's wine-pricing actually helped sustain 113, 947. establishments, own. cites evidence "fair laws" unlike higher rates firm failure, slower growth stores, free 1956 1972. 947 (citing S.Rep. 94-466, (1975)). only relevant indicates continued 1979. Juris Statement 99A. unwilling assume 14 unsubstantiated [is] stature goals 114, enforcement "Antitrust general, particular important preservation freedom free-enterprise Bill Rights protection fundamental personal freedoms." Topco Associates, 405 596, 610, 92 1126, (1972). conclude Act.12 Appellees finally argue furthers promoting Brief 39-44. One would hardly out temperance increasing Rather, appellees decrease consumption On contrary, conclusion do 521, 2, 788, 1, 17). Of course, bound undercut 111, 946; Hooven Allison Evatt, 652, 659, 65 870, 874, 1252 (1945). accord "great court" Indiana ex rel. Anderson Brand, 303 95, 100, 58 443, 446, 82 685 (1938), accept 111-112, 946-947. review discloses case.13 reach could IV 16 provides authorization private, unsupervised reverse judgment remand further proceedings opinion. 17 ordered. whom THE CHIEF JUSTICE joins, dissenting. 19 Immediately ratification recognized broad language conferred plenary regulate boundaries. Ziffrin, Reeves, 308 132, 60 163, 128 (1939); Finch McKittrick, 305 395, 59 256, 83 246 Indianapolis Brewing Comm'n, 391, 254, 243 Board Equalization Young's Market 299 57 77, 38 (1936). STEVENS recently observed, has, years, "completely distorted Twentyfirst Amendment" "[i]t barely discernible cases." Newport Iacobucci, 92, 98, 383, 387, 334 (1986) (dissenting). I believe borders interference, dissent Part Court's affirm Appeals. 20 (1964), took step toward eviscerating authority into duty-free shops Kennedy Airport. fact Customs already airport. Black, Senator creation wrote thoughtful powerful dissent. After reviewing Black Senators approved thought they returning absolute States, "were seeing Government interfere restrict Amendment." 338, 1301 seen fit dismiss "obscure," Bacchus Imports, Ltd. Dias, 468 263, 274, 3049, 3057, 200 (1984); ante, 346-347, 10, fresh examination origins order overdue. 21 neither House Representatives ratifying conventions deliberated see 76 Cong.Rec. 2776 (1933) (statement Rep. Lea Cal. section extreme rights" obligated assist "however unwise improvident"), detail. Those discussions demonstrate intent confer exclusive 22 When began deliberations proposed included granted concurrent limited aspects "Congress shall drunk premises where sold." 4138. proposal remnant traffic gave rise real controversy 337, 1300. Even Blaine, Chairman Subcommittee hearings opposed grant According organized Constitution "surrendered interstate commerce." 4141 (1933). He viewed restoration surrendered joined Union. "restor[ed] effect, right respecting commodity—namely, liquor." his view, Congress import 2: 23 "Mr. President, my viewpoint upon contrary resolution. am endeavoring views. restore constitutional affecting enter confines States. enact liquors, once gives effect. Thus larger greater protection, take away eighteenth amendment." 4143. Wagner especially vigorous opponent failed "correct central error prohibition. responsibility local problems. withdraw field police trespassed." 4144. Wagner's danger trade: 25 "If sold, probably attempt declare during hours open, located, operated, sex age purchasers, beverages sold. 26 "It entirely conceivable prohibition might not. And regulated, manufacture. If amendment—and there every expect it—then obviously expelled front door readmitted forthwith back 3." 4147. 28 Other fear "any Government, seemingly narrow one, used whittle 2." Hostetter, 1300 (Black, dissenting); 4143 (Sen. Blaine); id., 4177-4178 Black). Still others emphasized Walsh, member said: provision resolution reported committee make passed line before gets hands consignee thereafter." 4219. response Swanson, Robinson Arkansas affirmed left determine manner places transported." 4225. Thus, motion Robinson, voted strike 4179. 29 emphasizing importance importantly removing contained manifest interference attempts trade. difficult anticipated ever strongly supports Black's return use Given desire certainly policy. behavior view. Contemporaneously enactment report sponsored Rockefeller, Jr., recommended muster political support monopolies should adopt equivalent solution price-control keep R. Fosdick Scott, Toward 52 "profit motive core problem." 61. encouraged stimulated consumption. 149. "direct bearing consumption," 81, "as one most instruments control." 82. ideas Rockefeller dominant flesh post-repeal legislation states." Dunsford, Monopoly Price-Fixing Distribution, 1962 Wis.L.Rev. 454, 464. surprising, therefore, Miller-Tydings Fair Trade 1937, Stat. 693, exercised "bold drastic experiments control," including posting, associations, mandatory contracts. de Ganahl, Practice Price Industry, Contemp.Prob. 665, 680 (1940). ratified immediately very type strikes down today. 32 With clear immediate better apparent Frankfurter Frankfort Distilleries, 293, 300-302, 661, 665-666, 951 (1945) (concurring). Frankfurter's "according notions freed implies ordinary articles 665. pursuant Clause, yield drawn 301, concluded: 33 reasons deems desirable standardize direct permissive sanction discourage temptations cheap cutthroat gainsay it. offend distillers middlemen dealers believed regulatory scheme laws, fully applicable intrastate Distilleries itself, respondents. Once 302, 666. 34 alone repealing Act—which laws—the continue impose Judiciary repeal explicitly assured change Amendment: 35 "Liquor affected products Twenty-First alcohol pass statutes (1975), U.S.Code Cong. Admin.News 1975, pp. 1569, 1571. 36 compelling Despite intent, balancing resolve again today, ventured still adopting unprecedented focuses wisdom powers. For today invalidate involves outside Amendment—indeed, controls authorities. reminiscent long-repudiated Lochner York, 198 45, 539, 49 937 (1905), concludes law "effective" establishments decreasing inquiry, chose wisely law, motivation doing linked "central purpos[e]" sole "question Constitution." 287, 3064 (STEVENS, dissenting). 37 plainly exercising trade, respectfully 101-b(3)(b) provides, part: "No brand purchased unless schedule, section, authority, writing duly verified, copies form contain, exact name, capacity package, nature contents, proof stated label, net seller, instance, individual 'combination' discounts quantity, payment, any. except prior written permission good cause shown chapter. provides: "For listed containers approximately $1.92 containers. figure reached adding dividing rounding nearest cent. Where packed computed cent, Variations permitted approval authority." 101-bb(2) licensee off-premises sell, offer solicit term: "(b) mean declared determination represent average necessarily incurred connection paragraph term "price" discounts, hundred one-b chapter purchases liquor; except, appropriate fraction invoiced retailer." "Case off month, months, accompanying reduction choices period post-off: "1. May elect legal base 12% mark-up. "2. conform post-off consistent reduced "3. extremes '1' '2' above, "Wholesalers note placed consecutive months post-offs scheduled." "temporary reductions threatening drive business consolidating relatively few distributors dictate ultimate injury consumers. ." 779, 788 Matsushita Electric Industrial Zenith Radio 574, 1348, 538 predatory schemes "rarely tried, rarely successful." 589, 1357. success practically nonexistent, outlet. 63.5 event, pricing, simple "minimum markup" satisfy "active supervision" requirement, exempt Morgan Control, Conn. Dept. Business Regulation, 664 F.2d 353 (CA2 1981) (upholding statute). 101-bb, greatly explained, 339-340, price—the retailers—without "is 101-b(3) mandate ratio prices." 523, 154, 790. "construe construction State." O'Brien Skinner, 414 524, 531, 94 740, 744, 702 (1974). invalidation 101-bb. contend establishing relationship price; indeed, 16.4(e) relationship. 24-25, 37. Invalidation alone, markups subsequent 340. appellees' suggestion tolerated reasonable accounting method hedge against inflation. Juris. 101A (advertising guaranteed 31.3 August 1984 September 1984). occasion entitled Some completely E.g., Va.Code §§ 4-15, 4-28 comprehensive substitutes "unfettered freedom." Motor Vehicle Bd. Orrin Fox 439 96, 99 403, 412, 361 (1978). concurring Judge Jasen argued supervises Store 526-529, 156-158, 792-794. respond permitting depart 101-b(3)(b), "cost," 101-bb(3), "for shown." issued conditions. Moreover, frequently considers proposals alter "monitoring" periodic reexaminations legislature, exerts significant markups. considerations lead us reject contention "contract, combination ., conspiracy, trade." "private actors 'a degree power' attacked 1" "hybrid" restraint. Fisher Berkeley, 260, 268, 1045, 1050, 206 666, 3302, judgment)). Schwegmann Bros. Calvert Distillers 341 384, 71 745, 95 1035 (1951). principle pre-empt parties behavior. Northern Securities 193 197, 460-461, 679 (1904) opinion); P. Areeda Turner, Antitrust ¶ 209, 60-62 That squarely governs State, Territory, delivery therein thereof, hereby prohibited." concedes Post, 353. maintains debates "clearly demonstration congressional intent. sponsor point liquors. another point, Blaine appeared narrower interpretation: "So, assure so-called dry write permanently along line." 4141. following strictures commentator quoted saying " 'bold experiments' control. 357, quoting De Contemp. Prob. next paragraph, writer states "[b]ecause came fair-trade settled uncertainty much legislation." adopted, far extended A.L.A. Schechter Poultry 295 495, 542-548, 837, 848-851, 1570 (1935) (holding extend poultry, poultry shipped across lines). authorize agreements prescribing specified commodities, passage universally popular implies. 1940, example, 45 "wet" stabilization beverage statutes, 680, monopolized Shipman, Administrative Machinery 600, 601, situation periods resulted became known 'two bottle' 71A. precise explanation "two pricing" record, caption "Unlawful Discrimination Scheduling—Bottle Post-Down." suggests concerned ensuring markup. prevail decreases like sections recites fostering temperance." 101-bb(1) statement supported specific findings, record. accepted rejection declaration purpose. 112-114, 946-948 (discussing Bd., Cal.3d 431, 457-459, 146 Cal.Rptr. 585, 493-494, 579 P.2d 476, 493-494 (1978)). aimed need 30, (Mar.1971). concern 1971. 16. But recognizes finding consumption, "because multiplicity factors data specifics, portion attributable factors." 14.

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