Bottled-Up Competition

The Washington Times (Washington, DC), February 23, 1996 | Go to article overview
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Bottled-Up Competition


It's a long way from the producer to the consumer when it comes to Virginia beer and wine. The Virginia General Assembly may be making it more expensive, too.

Fabled Franklin County moonshine notwithstanding, by law producers can't sell directly to the consumer. First they must sell to wholesalers, who in turn sell to retailers and so on down the food chain until finally the goods make it to the dinner table. The producer-wholesaler-retailer-consumer arrangement is not unusual in industry. What should get consumers' attention in this particular case, however, are restrictions on dealings between producers and wholesalers.

Under current law producers cannot sever their distribution agreements with a particular wholesaler without "good cause." The concern apparently was that allowing a producer to enter the free market to seek out the best distribution deal for its goods would somehow give producers too much power over wholesalers and upset the delicate balance between producers, wholesalers and retailers. So once a producer made a deal with wholesalers, it could not change wholesalers later on without the aforementioned good cause.

Along came wine producer Brown-Forman, which decided that it would like to reduce its Virginia distributors from 18 to four, reasoning that fewer distributors with broader geographic areas would help improve sales. The losing distributors argued that increased sales were not good cause to terminate them. In 1991 the Alcohol Beverage Control board agreed.

Brown-Forman appealed the case to the Fairfax County Circuit Court to no avail and then to the Virginia Circuit Court of Appeals, which held that in fact good cause means any well-founded reason, including changing business or economic conditions.

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