US SUPREME COURT DECISIONS

Under § 101-bb of New York's Alcoholic Beverage Control Law and implementing regulations of the State Liquor Authority (SLA), liquor retailers must charge at least 112 percent of the wholesaler's "posted" bottle price in effect at the time the retailer sells or offers to sell the item. Wholesalers must file monthly "posted" bottle prices and case prices for an item with the SLA, and may reduce the posted case price for an item without reducing its bottle price. Since retailers generally purchase liquor by the case, wholesalers thus can compel retailers to charge more than 112 percent of the actual wholesale cost to the retailer. As a result of appellant retailer's selling certain bottles of liquor for less than 112 percent of the posted bottle price, its license was suspended for 10 days and it forfeited a bond. Appellant sought relief from the penalties on the ground that § 101-bb violated § 1 of the Sherman Act. A New York Supreme Court denied relief, but the Appellate Division reversed. The New York Court of Appeals upheld the validity of § 101-bb and reinstated the penalties. It held that § 101-bb was not immune under the state action exemption from the antitrust laws set forth in Parker v. Brown, 317 U. S. 341. The Court of Appeals nevertheless concluded that the statute was a proper exercise of powers reserved to the State by the Twenty-first Amendment.

Held:

1. Section 101-bb is inconsistent with § 1 of the Sherman Act. Resale price maintenance has long been regarded as a per se antitrust violation. The New York statute, which applies to all liquor wholesalers and retailers, allows "vertical control" by wholesalers of retail prices. Such industry-wide resale price-fixing is virtually certain to reduce both interbrand and intrabrand competition, because it prevents wholesalers from allowing or requiring retail price competition. Cf. California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97. Pp. 479 U. S. 341-343.

2. New York's pricing system is not valid under the state action exemption from the antitrust laws. The State's system does meet the first requirement of the two-part test for determining immunity under Parker v. Brown, supra, that the challenged restraint be "one clearly articulated and affirmatively expressed as state policy." However, chanrobles.com-red

Page 479 U. S. 336

New York's liquor pricing system does not meet the second requirement that the State's policy be "actively supervised" by the State itself. New York simply authorizes price setting and enforces the prices established by private parties. The State has displaced competition among liquor retailers without substituting an adequate system of regulation. Cf. California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., supra. Pp. 479 U. S. 343-345.

3. New York's pricing system is not valid under the Twenty-first Amendment. Although § 2 of the Amendment qualifies the federal commerce power, the Amendment does not operate to "repeal" the Commerce Clause wherever state regulation of intoxicating liquors is concerned. The question in each case is whether the interests implicated by a state regulation are so closely related to the powers preserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies. Pp. 479 U. S. 346-352.

(a) The State's asserted interest in protecting small retailers does not suffice to afford immunity from the Sherman Act. Although the New York Court of Appeals correctly concluded that the purpose of the 12 percent minimum markup was to protect those retailers, the court made no findings that the purpose of the "bottle price" definition of cost was to protect small retailers, and cited no legislative or other findings that either the markup or the "bottle price" definition of cost has been effective in preserving the retailers. The State's resale price maintenance system directly conflicts with the "familiar and substantial" federal interest in enforcing the antitrust laws. Pp. 479 U. S. 348-351.

(b) It is not necessary to consider whether New York's pricing system can be upheld as an exercise of the State's power to promote temperance. The Court of Appeals did not find that the statute was intended to promote temperance, or that it does so. This Court accords great weight to the views of the State's highest court on state law matters, and customarily accepts the factual findings of state courts in the absence of exceptional circumstances. No such exceptional circumstances appear in this case. Pp. 479 U. S. 351-352.

64 N.Y.2d 504, 479 N.E.2d 779, reversed and remanded.

POWELL, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, BLACKMUN, STEVENS, and SCALIA, JJ., joined. O'CONNOR, J., filed a dissenting opinion, in which REHNQUIST, C. J., joined, post, p. 479 U. S. 352. chanrobles.com-red

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