The case involved Total Wine & More‘s Massachusetts operation, which sold bottles of liquor and wine at prices that were below the invoiced net cost from the wholesaler, violating a Massachusetts Alcoholic Beverages Control Commission regulation.
Total Wine argued it wasn’t in violation of the rule because “cumulative quantity discounts” (CQDs) which were credited in subsequent invoices brought its ultimate net cost per bottle below the sales price paid by consumers.
The Massachusetts Supreme Judicial Court ruled that the rule’s “plain language . . . requires the net cost of liquor or wine sold to a licensed retailer, including any credits applied to that sale from CQDs, be reflected in the invoice for that particular sale.”
in this case, Total Wine purchased cases of rum from a wholesaler at an original cost of $19.95 a bottle. The invoice allowed a 1% “prompt payment” discount, because Total Wine paid for the rum upon delivery. That reduced the price to $$19.79 a bottle. Total Wine sold the rum in two stores for $17.99 a bottle.
Retailers purchased 225 cases of the rum brand in a limited period of time qualified for a CQD of $2 a bottle which they could apply to future purchases.
Although Total Wine paid $19.79 a bottle upon delivery, Total Wine also knew it would receive the $2 a bottle credit because it purchased 225 cases. It factored the future credit in pricing the rum at $17.99 a bottle, 20 cents above what it considered to be its true “net cost” of $17.79.
The LCC held that any discounts must appear on the original invoice to be considered in calculating the retail price. The commission then suspended Total Wine’s license to sell alcohol beverages at its Everett location for eight days and at its Natick store for 11 days, although most of the suspensions was held in abeyance for two years, conditioned upon no more violations.
Our View: Total Wine’s actions weren’t unreasonable. But they did fly in the full face of the regulation. As the Massachusetts Supreme Judicial Court noted, any discount not reflected on the specific invoice for the purchase of a particular lot of product makes enforcement of the price regulation administratively difficult and opens the door for retailers “playing games.”