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A setback for Costco

A three-judge panel of the United States Court of Appeals for the Ninth Circuit ruled yesterday in the case of Costco Wholesale Corp. v. Hoen. The panel largely reversed the April, 2006 decision that declared much of Washington’s three-tier system to be unconstitutional.

Although the court did agree with Costco that the “post and hold” requirement that forces suppliers to post their prices and hold them unchanged for a period of time is unconstitutional, it disagreed with Costco on two main points. The first upheld the liquor board’s right to ban central warehousing, meaning that distributors must deliver product to each retail store instead of to a central warehouse owned by the retailer. This takes away a key advantage that Costco has in efficient distribution. The court also upheld the liquor board’s right to ban high-volume discounts to different retailers.

Both sides now have the option of appealing the court’s decision within two weeks. They could also appeal to the United States Supreme Court within three months. Costco has expressed disappointment in the decision, but it is not clear whether either side will appeal the ruling.

Read the full Court of Appeals decision

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