324 Liquor Corporation v. Duffy

PETITIONER: 324 Liquor Corporation
RESPONDENT: Duffy
LOCATION: Adult Book Store

DOCKET NO.: 84-2022
DECIDED BY: Rehnquist Court (1986-1987)
LOWER COURT: New York Court of Appeals

CITATION: 479 US 335 (1987)
ARGUED: Nov 03, 1986
DECIDED: Jan 13, 1987

ADVOCATES:
Bertram M. Kantor - for the appellant
Bertram K. Kantor - on behalf of the appellant
Christopher Keith Hall - on behalf of the appellees
W. Stephen Cannon - on behalf of the United States as amicus curiae supporting appellant

Facts of the case

Question

Media for 324 Liquor Corporation v. Duffy

Audio Transcription for Oral Argument - November 03, 1986 in 324 Liquor Corporation v. Duffy

William H. Rehnquist:

We will hear arguments first this afternoon in No. 84-2022, 324 Liquor Corporation doing business as Yorkshire Wine and Spirits versus Thomas Duffy.

Mr. Kantor, you may proceed when you are ready.

Bertram K. Kantor:

Mr. Chief Justice, and may it please the Court, this afternoon I would like to establish three points in my argument.

The first is that the New York statutory scheme for resale... for retail liquor pricing constitutes resale price maintenance, in violation of Section 1 of the Sherman Act.

The second point I would like to establish is that the New York statutory scheme is not saved by the state action exemption.

And the third proposition is that the statutory scheme is not saved by the 21st Amendment.

Just some brief background to begin with.

Appellant is a neighborhood liquor store located in Manhattan who was suspended by the state liquor authority for alleged violation of Section 101(b)(b) of the New York Alcoholic Beverage Control law in that the appellant had made two retail sales of liquor below the minimum resale price for such items which had been set by the wholesaler for those items in the month in question.

It is noteworthy that the appellant was found to have violated a statute which ostensibly requires a 12 percent markup over what the statute calls 18 percent markup on the sales in question.

Now, the explanation for this curious phenomenon which I have described is that Section 101(b)(b) does not require a minimum markup over the retailer's actual cost, but rather over something called the bottle price, which is able to be set by the wholesaler freely without any state supervision or control.

However, the economic reality is that the bottle price is not a good proxy for the retailer's actual cost because retailers rarely purchase liquor from wholesalers by the bottle.

They rather purchase by the case.

Antonin Scalia:

The bottle price is a real price.

It is the real price at which the wholesaler would have to sell it if he sold it by the bottle.

Bertram K. Kantor:

Yes, Justice--

Antonin Scalia:

In which case he wouldn't be a wholesaler, I suppose.

Bertram K. Kantor:

--Well, yes, Justice Scalia.

Antonin Scalia:

Who do you charge the bottle price to, anyway?

Who does the wholesaler charge the bottle price to?

Bertram K. Kantor:

He would charge the bottle price to the retailer in the event that the retailer sought to acquire his liquor in less than case lots.

Antonin Scalia:

If he buys one and a half cases he gets half a case at the bottle price.

Bertram K. Kantor:

Yes, I believe so.

The example that comes to mind is the rare bottle of 40 or 50 year old Scotch that a retailer may purchase one bottle from a wholesaler or let's say a very exotic brandy or something like that.

The products that were involved here were something called Chatham Gin in a 1.75 liter bottle, which is not an item you would acquire by the bottle.

Antonin Scalia:

But it is still not theoretically just a made up resale price that the wholesaler can impose without any real world consequences to himself.

It is a real price, the price at which he will sell less than case bottles.

Bertram K. Kantor:

I would accept the first portion of your proposition.

I will not accept the second.

It is a real price in that it is available should the retailer want to buy by the bottle in the unlikely event.

The second portion of the proposition is that the real world consequences of setting a high bottle price is that you lose very few sales because the bulk of your sales are made at retail.