Total Wine & Spirits has won the support of the nation’s largest alcohol beverage wholesaler, Southern Glazer’s Wine & Spirits, in its challenge to Connecticut’s “post-and-hold” requirement, minimum bottle pricing requirement and a prohibition of volume discounts by wholesalers.
The post and hold rule requires wholesalers to publish their prices in advance, giving a wholesaler’s competitors the opportunity to match but not undercut prices before they take effect. Once posted, a price can’t be changed for 30 days. Four other states – New York, Oklahoma, Idaho and Michigan – have similar requirements.
Those requirement, Southern argues, violate Federal antitrust law. Connecticut rules “effectively promote collusion on prices in a manner that suppresses competition and creates barriers to market entry.”
Southern would like to enter Connecticut, and might naturally seek to undercut current wholesalers prices as a way to win business.
“As a practical matter, this kind of post-and-hold scheme effectively eliminates the incentive for wholesalers to compete on price; price-cutters will not gain new customers or market share from price cuts, but instead will be price-matched by other wholesalers before prices take effect, and then forced to hold the prices fixed for 30 days, regardless of actual market conditions,” Southern says.
Post-and-hold laws can result in prices “at least [as] high as a single-product monopolist would charge, Southern says.
The wholesaler also notes that by making price cuts “temporarily irreversible,” even if they turn out to be unprofitable, hold requirements make price reductions riskier and “more expensive,” and thus “much less likely.”