# Amicus Curiae Brief — Massachusetts Food Ass'n v. Massachusetts Alcoholic Beverage Control Commission

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_0684%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2000
- **Citation:** 529 U.S. 1105

## Text

: Supreme Court, US.
FILED
(Z t=
‘wean 30 900
No. 99-1449
a ~ Orr Ghee
IN THE a -

Supreme Court of the United States

MASSACHUSETTS FoopD ASSOCIATION, et al.,
. Petitioners,
MASSACHUSETTS ALCOHOLIC BEVERAGE
CONTROL COMMISSION, et al.,
Respondents.

On Petition for Writ of Certiorari to the
United States Court of Appeals
for the First Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE
AND BRIEF OF AMICI CURIAE
BEER DISTRIBUTORS OF MASSACHUSETTS, INC.,
WINE & SPIRITS WHOLESALERS OF
MASSACHUSETTS AND MASSACHUSETTS
PACKAGE STORES ASSOCIATION, INC.
IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI

ERNEST GELLHORN
Counsel of Record
ANN G. WEYMOUTH
Suite 100
2907 Normanstone Lane, N.W.
Washington, DC 20008-2725

March 30, 2000 (202) 319-7104

WILSON-Epne Printine Co., Inc. - (202) 789-0096 - WASHINGTON, D.C. 20001

22 ef

IN THE

Supreme Court of the United States

No. 99-1449

MASSACHUSETTS Foop ASSOCIATION, ef al.,

- Petitioners,

MASSACHUSETTS ALCOHOLIC BEVERAGE
CONTROL COMMISSION, et al.,
Respondents.

On Petition for Writ of Certiorari to the
United States Court of Appeals
for the First Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

The Beer Distributors of Massachusetts, Inc., the Wine
& Spirits Wholesalers of Massachusetts and the Massa-
chusetts Package Stores Association, Inc. (“Amici”)
hereby move, pursuant to Rule 37.2(b) of the Rules of
the Supreme Court of the United States, for leave to
file the attached Amicus brief in opposition to the peti-
tion for certiorari. The grounds for this request are as
follows:

1. Petitioners in this matter have consented to the
filing of the Amicus brief. Their consent is filed with the
Clerk of Court.

2. Respondents have not objected to the filing of this
Amicus brief, but have declined to sign a letter of consent
thereto.

3. Petitioners do not address the 21st Amendment in
their Petition and Respondents have only noted but not
argued the Amendment’s application in their argument
below, even though it is dispositive.

4. The Amicus brief presents the argument that the
2ist Amendment bars Petitioners’ Complaint because the
three-store limit on ownership of retail liquor stores, which
is the basis for this controversy, is within the “core
powers” of the Amendment. The statutory provision,
therefore, is immunized from challenge under the
Supremacy Clause whether or not it conflicts with the
Sherman Act.

WHEREFORE, Amici respectfully request that this
motion for leave to file their Amicus brief be granted.

Respectfully submitted,

ERNEST GELLHORN
Counsel of Record
ANN G. WEYMOUTH
Suite 100
2907 Normanstone Lane, N.W.
Washington, DC 20008-2725
March 80, 2000 (202) 319-7104

TABLE OF AUTHORITIES
INTEREST OF AMICI CURIAE ........

TABLE OF CONTENTS

INTRODUCTION AND SUMMARY OF ARGU-
SETTTE chads civics wieiintsetabitsbes wisinls

TAIT ceitstinsiniininsitiinictrceins Shinobi

3.

Il.

It.

THE HISTORY OF THE 21ST AMENDMENT
CLEARLY SHOWS THAT A PRINCIPAL
PURPOSE WAS TO ALLOW STATES “AB-
SOLUTE CONTROL” OVER THE DISTRIBU-
TION AND RETAIL SALE OF ALCOHOLIC
PID. Scncsiiccsstlesnataonedisraiiebaasoiiteasinas

STATES HAVE “PLENARY POWER” TO
REGULATE THE DISTRIBUTION AND

SALE OF ALCOHOLIC BEVERAGES .............

MASSACHUSETTS’ THREE-STORE OWNER-
SHIP LIMITATION FURTHERS CORE CON-
CERNS OF THE 21ST AMENDMENT AND
THUS SURVIVES A SUPREMACY CLAUSE
III i tris eiesie Ssadid deiuebastetiastaiassclapesianls

IIT, iiciiceilvasatoeachidieninitineldaihiatapelinindctial gedtcrnichaanes

(i)

Page
ii

ii

TABLE OF AUTHORITIES
Cases:

Actmedia, Inc. v. Stroh, 880 F.2d 957 (9th Cir.
1986) .....
Bacchus Imports, Ltd. v. Dias, 468 U.S. 268
(1984)
Boston Neighborhood Tazi Ase’s nv. Dept. of Pub-
lic Utilities, 410 Mass. 686, 575 N.E.2d 52
(1991) i
Brown-Forman Distillers Corp. v. N.Y. State
Liquor Authority, 476 U.S. 573 (1986) ..............
California Retail Liquor Dealers Ass’n v. Midcal
Aluminum, Inc., 445 U.S. 97 (1980) ..................
City of Columbia v. Omni Outdoor Advertising,
ea. Se es A IID ices: tottvaniencansncinainiensbonneen
Community Communications Co. v. City of Boul-
der, 455 U.S. 40 (1982)
Connolly v. ABCC, 334 Mass. 6138, 138 N. E. 2d 131
- CRED escrencccice
Craig v. Boren, 429 U.S. 190 (1976), reh’g denied,
429 U.S. 1124 (1977)
Department of Revenue v. James B. Beam Distill-
Sea Cag BIT TE. GAL CUGBE) cc cvsscccecsecectesciccecasnee
In the Matter of Detroit Auto Dealers Ass’n, Inc.,
111 F.T.C. 417 (1989), aff’d, 955 F.2d 457 (6th
Cir.), cert. denied, 506 U.S. 978 (1992) —...........
Exxon Corp. v. Governor of Maryland, 437 U.S.
117 (1978), reh’g denied sub nom. Shell Oil Co.
v. Governor of Maryland, 489 U.S. 884 (1978)..
Fisher v. City of Berkeley, Cal., 475 U.S. 260
(1986) *
44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484
(1996)
FTC v. Ticor Title Insurance Co., 504 U.S. 621
(1992) ......
Healy v. Beer Institute, 491 U.S. 324 (1989)........
Hoover v. Ronwin, 466 U.S. 558 (1984) ...............
Hostetter v. Idlewild Bon Voyage Liquor Corp.,
877 U.S. 324 (1964) ...........
Johnson v. Martignetti, 374 Mass. 784, 875 N.E.
2d 290 (1978) .........

Page

10
4,8

13

11

13
4

7,8

iii

TABLE OF AUTHORITIES—Continued
Page

Joseph E. Seagram & Sons, Inc. v. Hostetter, 384
Ee I ecieen ei e eel f= 8
Massachusetts Food Ass’n v. Massachusetts Al-
coholic Beverages Control Commission, 197 F.3d
560 (1st Cir. 1999), affirming, 184 F.R.D. 217
(D. Mass. 1999) pesilelbblasdiisadade dint 3
Milton S. Kronheim & Co. v. District of Colum-
bia, 91 F.3d 193 (D.C. Cir. 1996), cert. denied,

Fs ee 8
New Motor Vehicle Bd. v. Orrin W. Fox Co., 489

A ae ee ee ee 13
North Dakota State Bd. of Pharmacy v. Snyder's

Drug Stores, Inc., 414 U.S. 156 (1978) _............. 13
North Dakota v. United States, 495 U.S. 423

INTENT Aithsscuiabihintssateiannadinticdinel tsa thah cask al age 5, 7,9
Patrick v. Burget, 486 U.S. 94 (1988) ................. 4

Prices Corner Liquors, Inc. v. Delaware Alcoholic
Beverage Control Commission, 705 A.2d 571

I SR I i Ed 14
Rice v. Norman Williams Co., 458 U.S. 654
aR IE rele RT a PRN e O 4

Simms v. Farris, 657 F. Supp. 119 (E.D. Ky.
1987), aff'd per curiam, 840 F.2d 18 (6th Cir.

Se vi enasbablasins 14
Southern Motor Carriers Rate Conference, Inc. v.
United States, 471 U.S. 48 (1985) 0... 4

324 Liquor Corp. v. Duffy, 479 U.S. 385 (1987)... 4, 6,9
Town of Hallie v. City of Eau Claire, 471 U.S. 34

(1985) . siiiciineanaaaas 4
Victoria, Inc. v. ABCC, 33 Mass. App. Ct. 507,

EE teen 12

Constitution & Statutes:

U.S. Constitution, XXI Amendment ....................... passim
Mass. Gen. L. c. 188, §§ 2 et seq. 2. ence cccececeeee 11
Mass. Gen. L. c. 188, § 12 ........ inisbacalaiteamiiaiiil 11,12
Mass. Gen. L. c. 188, § 12A oo. ccececceeecenceceeceneee 11
| ne passim

Mass. Gen. L. c. 188, § 16... = 11

iv
TABLE OF AUTHORITIES—Continued

pc CPU anwkintevvainesianeivihioncssnebecaniobones
RE IP es ccerenencvasnnitiiernsanaaniiniiins
i RT Eis bicicn chests tense cncaliph einraon

Q ©

i EN IIE iccconnsessclnccciesiileiusidlbicaanaaansunas
Sk) * Cea ae PER rae
ES UII ssn: cncinbosuisaiatinenbcsdeancbaneliekaciinion
[ELE TED ~sassbsibnsiecetuliteacaccnbinonalscgs
fT ex dicsSiisnisiihuntenenustdsuadaiaecaten
i MII METI cs otesasenncnsendieaninavionns spohiicretbedaita
isIE III wins Sbesicctticcesnsensticeliotihantedoasin
pI snccsiipainicauchactecaedilininisicvannanibsiodiay
I oh ca ccdlncsnenateiiinans onadei
I a, I in scscisneiniacninsenemengneensancalinkes
BF Re TE FERRE parse ep sue ap monER OR me eerie mene ere

=
A
@
op)
SSS8S5 8!
TrrerreS
e2AAAefAangnne

3

oP)
83855!
Pree rre

Miscellaneous:

gk BTR 5 SAR ge nONEE ese: moana ne BE SIEE on DO
U.S. Dept. of Justice & Federal Trade Commission,
Joint Horizontal Merger Guidelines § 2.0
I sii cesasslanileeccotlcdlalelbeincanonataabainmiaieasdaainadns
2. Fe ee SE okdietrcctnradinndosnn
PU Se, Fs Be CD wsvniniicesctirnnenntirecsscneisscrrccinn
FE Ci, Fees BED CII aici csierevenniteritbinttiicccnn
TE Gortes. Tae. GET CIGD assess icin ctnintestireniinrcornecs
T. Krattenmaker & L. Powe, Regulating Broad-
cast Programming (1994) ................-.cccccccesseseeeees
Ratification of the Twenty-first Amendment to the
Constitution of the United States (E. S. Brown
Oe IID: cist wivinsicninsesiisnnscaipeaadbeceaguts aiintbiaddeadehiiak

IN THE

Supreme Comet of the United States

No. 99-1449

MASSACHUSETTS Foop ASSOCIATION, et al.,

- Petitioners,

MASSACHUSETTS ALCOHOLIC BEVERAGE
CONTROL COMMISSION, ef al.,
Respondents.

On Petition for Writ of Certiorari to the
United States Court of Appeals
for the First Circuit

BRIEF OF AMICI CURIAE
BEER DISTRIBUTORS OF MASSACHUSETTS, INC.,
WINE & SPIRITS WHOLESALERS OF
MASSACHUSETTS AND MASSACHUSETTS
PACKAGE STORES ASSOCIATION, INC.
IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI

-

INTEREST OF AMICI CURIAE

The Amici herein are three trade associations: the
Beer Distributors of Massachusetts, Inc. (“BDM”); the
Wine & Spirits Wholesalers of Massachusetts (“WSWM”);
and the Massachusetts Package Stores Association, Inc.
(“MassPack”).* Together they represent 26 wholesalers
and approximately 600 retailers in the Commonwealth of
Massachusetts who are engaged in the distribution and

* Pursuant to Supreme Court Rule 87.6, Amici state that no
counsel for a party authored this brief in whole or in part, and no
persons other than the Amici, their members, or their counsel,
made a monetary contribution to the preparation or submission of
this brief.

2

sale of alcoholic beverages. Their operations are closely
regulated by the Defendants herein.

The issue in this case as presented by Petitioners,
whether the three-store retail ownership limitation in the
Massachusetts Alcoholic Beverage Control Act, Mass.
Gen. L. c. 138, § 15, is preempted by the Sherman Act,
15S U.S.C. § 1, could fundamentally alter how alcoholic
beverage wholesalers and retailers of Massachusetts con-
duct their business. The motion of BDM, WSWM and
MassPack to participate as Intervenor-Defendants in this
matter was denied by the courts below, but they partici-
pated by submission of an Amicus brief with the parties’
consent. The Amici believe that they can provide a
different perspective for the Court’s benefit because, while
briefed below, neither party presents an argument herein
on whether the 21st Amendment to the U.S. Constitution
immunizes § 15 of the MABC from antitrust challenge.

INTRODUCTION AND SUMMARY OF ARGUMENT

Section 2 of the 21st Amendment provides that “[t]he
transportation or importation into any State .. . for
delivery or use therein of intoxicating liquors, in violation
of the laws thereof, is hereby prohibited.” This Court
has ruled repeatedly, and without exception, that the “core
power” conferred on the States by §2 is the power to
control the distribution and sale of imported alcoholic
beverages.

The Massachusetts Alcoholic Beverage Control Act
(“MABC Act”) provision at issue, limiting to three the
number of retail outlets that a single person or entity
may own, Mass. Gen. L. c. 138, § 15, is a clear example
of a State liquor law that falls within the purview of the
21st Amendment. Section 15’s multiple ownership restric-
tion serves several vital State interests directly related to
the distribution of alcoholic beverages in Massachusetts,
such as ensuring orderly market conditions, “controlling the

3

tendency toward concentration of power in the liquor
industry,” and “preserving the right of small, independent
liquor dealers to do business.” Johnson v. Martignetti,
374 Mass. 784, 792, 375 N.E.2d 290, 297 (1978) (up-
holding § 15 against challenges under the Due Process
and Equal Protection Clauses).

Both the District Court and First Circuit below ruled
that the three-store limit in § 15 of the MABC Act was
“unilaterally imposed by government . . . to the exclusion
of private contro!” and thus that § 15 was neither within
the coverage of the Sherman Act nor subject to pre-
emption under the Supremacy Clause. Massachusetts
Food Ass'n v. Massachusetts Alcoholic Beverages Control
Commission, 197 F.3d 560, 566 (1st Cir. 1999) (quoting
Fisher v. City of Berkeley, 475 U.S. 260, 266 (1986)),
affirming, 184 F.R.D. 217 (D. Mass. 1999). We agree
that such a conclusion is mandated by this Court’s prece-
dents and we support Massachusetts’ argument that the
case does not warrant the grant of a writ of certiorari.

However, we separately argue herein, as we did below,
that the Court should reject the Petition for the additional

1 Both the District Court and First Circuit declined to address
the 21st Amendment argument preserved by the State-Defendant
and presented fully by the Amici. In its denial of party participa-
tion to the Amici as Intervenor-Defendants, the District Court
ruled that the 21st Amendment (and state action immunity) argu-
ments “appear more appropriate for consideration after some
factfinding, if that is necessary.” Pet. App. 26a n.7. The First
Circuit also did not address the 21st Amendment argument but
stated cnly that intervention was unnecessary because the In-
tervenors’ “other legal arguments (for example, based on the
Twenty-First Amendment) to sustain the statute. . . . were easily
presented in amicus briefs.” Pet. App. 12a (emphasis in original).

In accordance with the First Circuit’s lead, the Amici file this
brief on the 21st Amendment issue to ensure that the Court is fully
apprised of the argument that the three-store ownership limit in
§ 15 of the MABC Act also is immune from challenge under the
Supremacy Clause because it is within the State’s core powers as

4

reason that § 15’s three-store restriction is immune from
challenge because of the 21st Amendment’s reservation
to the States of “virtually complete control over . . . how
to structure the liquor distribution system.” California
Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc.,
445 US. 97, 110 (1980). Section 15 of the MABC Act
is a basic structural requirement setting forth one of sev-
eral criteria that must be satisfied for the issuance of a
retail license. Accordingly, § 15 comes within the pro-
tective umbrella of the 21st Amendment and, in this
circumstance, overrides any preemption by the Sherman
Act under the Supremacy Clause Thus, this is not an
appropriate case for the Court once again to consider
the boundaries between state regulation and the Sherman

Act.”
ARGUMENT

The history of the 21st Amendment demonstrates that
the purpose of § 2 thereof was to empower the States

defined in the Amendment. That the lower courts did not address
the 21st Amendment does not prevent its consideration by this
Court because it is not a fact-based issue (and the District Court
identified no relevant factual questions) and its consideration now
can fully resolve the case and avoid the necessity for a remand.
See Bacchus Imports, Ltd. v. Dias, 468 U.S. 268, 274 n.12 & 279 n.3
(1984) (majority and dissent agreed that 2lst Amendment issue
was properly before the Court although it was not argued below).

2 Between 1982 and 1992, the Court addressed the metes and
bounds of the state action immunity from federal preemption under
the antitrust laws in ten cases. FTC v. Ticor Title Insurance Co.,
504 U.S. 621 (1992); City of Columbia v. Omni Outdoor Ad-
vertising, Inc., 499 U.S. 365 (1991); Patrick v. Burget, 486
U.S. 94 (1988); 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) ;
Fisher v. City of Berkeley, Cal., 475 U.S. 260 (1986); Town of
Hallie v. City of Eau Claire, 471 U.S. 34 (1985); Southern Motor
Carriers Rate Conference, Inc. v. United States, 471 U.S. 48 (1985) ;
Hoover v. Ronwin, 466 U.S. 558 (1984); Rice v. Norman Williams
Co., 458 U.S. 654 (1982); Community Communications Co. v. City
of Boulder, 455 U.S. 40 (1982). :

5

not only to control the importation of alcoholic bever-
ages, but also to regulate all aspects of their distribution
and sale where importation was allowed. Distribution
and sale in this context include ownership qualification
requirements and, more specifically, the number of retail
stores that one person or entity may control. Because
the statute in question is one way by which the State con-
trols the marketing of alcoholic beverages, it “fall[s]
within the core of the State’s power under the Twenty-
first Amendment,” North Dakota v. United States, 495
U.S. 423, 432 (1990) (Stevens, J., plurality opinion),
and therefore cannot be preempted by the Sherman Act.

I. THE HISTORY OF THE 21ST AMENDMENT
CLEARLY SHOWS THAT A PRINCIPAL PURPOSE
WAS TO ALLOW STATES “ABSOLUTE CONTROL”
OVER THE DISTRIBUTION AND RETAIL SALE
OF ALCOHOLIC BEVERAGES

The first purpose of the 21st Amendment was, of
course, to end Prohibition.* If that were all, however,
§ 1’s “repeal” of the 19th Amendment would have been
sufficient.

Section 2 was an acknowledgment that the “noble ex-
periment” had failed because the effort to establish one
uniform: standard through national regulation did not take
account of “local sentiment and local habits.” 76 Cong.
Rec. 4146 (1933) (statement of Senator Wagner). Ac-
cordingly, when the House version of the. Amendment
contained no express statement of State authority to regu-

3 Section 1. The eighteenth article of amendment to the Con-
stitution of the United States is hereby repealed.
Section 2. The transportation or importation into any State,
Territory, or possession of the United States for delivery or
use therein of intoxicating liquors, in violation of the laws
thereof, is hereby prohibited.
U.S. Constitution, XXI Amendment.

6

late the importation and distribution of alcohol, see H.R.J.
Res. 480, Senator Blaine, the chairman of the Judiciary
Committee and primary sponsor of the Amendment, pro-
posed the addition of §2 “to restore to the States by
constitutional amendment absolute control in effect over
interstate commerce affecting intoxicating liquors which
enter the confines of the States.” 76 Cong. Rec. 4143
(1933) (emphasis added). As a consequence, the Senate
_approved the addition of § 2 because, as revised, the 21st
Amendment would leave it “entirely to the States to deter-
mine in what manner intoxicating liquors shall be sold or
used and to what places such liquors may be trans-
ported.” Jd. at 4225 (statement of Sen. Swanson; con-
currence of Sen. Robinson). See generally 324 Liquor
Corp. v. Duffy, 479 U.S. 335, 353-57 (1987) (O’Connor,
J., dissenting).

This conclusion is confirmed by the Senate’s considera-
tion and rejection of a proposed § 3 that would have
granted Congress “concurrent power” to regulate or pro-
hibit sales of alcoholic beverages in on-premises establish-
ments (i.e., restaurants and bars). See S. Rep. No. 1022,
at 1 (1933). It was rejected by the Senate because the
grant of such authority to Congress to regulate distribu-
tion would be contrary to the objectives of § 2. 76 Cong.
Rec. 4143 (1933) (Senator Blaine); see id. at 4177-78
(Senator Black). State ratifying conventions similarly
understood that the grant of full authority to the States
to regulate who, how, where and when alcoholic beverages
are to be distributed and sold within their boundaries was
a central purpose of the 21st Amendment. Ratification of
the Twenty-first Amendment to the Constitution of the
United States 172 (E. S. Brown ed. 1938).

7

IL STATES HAVE “PLENARY POWER” TO REGU-
LATE THE DISTRIBUTION AND SALE OF ALCO-
HOLIC BEVERAGES

The judicial construction of the scope and effect of the
21st Amendment has often been said to have changed
substantially since 1933. It was initially interpreted as
exempting all state regulation from challenge under the
Commerce Clause. Later cases, however, rejected its ap-
plication to state laws affecting constitutionally protected
individual rights or federal laws not related to the “core
powers” identified in § 2 of the Amendment. These cases
are not inconsistent; they simply cover different subjects.
This Court always has and continues to read the “core
powers” of § 2 as granting States “plenary power to reg-
ulate and control . . . the distribution, use, or con-
sumption of intoxicants within [its] territory.” Depart-
ment of Revenue v. James B. Beam Distilling Co., 377
U.S. 341, 346 (1964); see also 44 Liquormart, Inc. v.
Rhode Island, 517 US. 484, 51415 (1996) (state
regulatory power over distribution “largerly unfettered by
the Commerce Clause”) (citation omitted). Thus, under
the 21st Amendment, the Court has given state controls
on the structure of the distribution system a strong “pre-
sumption of validity.” North Dakota, 495 U.S. at 433.

Nor are these merely isolated examples. Cases holding
that the 21st Amendment does not apply to price fixing,
discriminatory classifications, etc., have invariably taken
special note of the core power immunity. For example
in Craig v. Boren, 429 U.S. 190, 205-07 (1976), reh’g
denied, 429 US. 1124 (1977), after reviewing the
history of State regulation and of the adoption of the
2ist Amendment, the Court observed that State con-
trols focused specifically on importation, transportation
and distribution are immune because it is “transparently
clear” that they are within the core powers protected by.

8

§ 2 of the Amendment. Jd. at 207. See also id. at 215
(Stewart, J., concurring) (“Every State has broad power
under the Twenty-first Amendment to control the dispen-
sation of alcoholic beverages within its borders.”). Other
illustrative cases include: Brown-Forman Distillers Corp.
v. N.Y. State Liquor Authority, 476 U.S. 573, 584
(1986) (21st “Amendment gives the States wide latitude
to regulate the importation and distribution of liquor
within the territories”); Bacchus Imports, Ltd. v. Dias,
468 U.S. 263, 282 (1984) (Stevens, J., dissenting) (deci-
sions have “consistently reaffirmed” and “repeatedly ac-
knowledg[ed] the broad nature of state authority to regu-
late commerce in intoxicating liquors”); Joseph E. Sea-
gram & Sons, Inc. v. Hostetter, 384 U.S. 35, 42 (1966)*
(“wide latitude” given to State liquor regulation); Hos-
tetter v. Idlewild Bon Voyage Liquor Corp., 377 US.
324, 337 (1964) (Black, J., dissenting) (States given

“plenary powers”).

Of course, State liquor control laws imposing require-
ments outside the core areas of importation, transporta-
tion and distribution can be preempted by contrary federal
law. See, e.g., California Retail Liquor Dealers Ass'n v.
Midcal Aluminum, Inc. supra. But, “[nJothing in Bacchus
or the other later cases overrules the principles iterated in
the Boren and Beam cases” that liquor regulation within
the “core powers” granted to the States continues to be
immune under the 21st Amendment. Milton S. Kronheim
& Co. v. District of Columbia, 91 F.3d 193, 203 (D.C.
Cir. 1996), cert. denied, 520 U.S. 1186 (1997). Accord
44 Liquormart, 517 U.S. at 514-15 (quoted p. 7, supra).

To be sure, where the challenged State laws have
involved authorization of private conduct directly setting

| 4 The price affirmation law upheld in Seagram, not in issue here,
was abrogated in Healy v. Beer Institute, 491 U.S. 324 (1989).

9.

wholesale or retail prices of such products by private
parties, the Court has found that the State liquor laws
preempted by the Sherman Act were not immunized by
the 21st Amendment. The control of price competition, at
least by private parties, was not the kind of State control
envisaged by § 2 of the 21st Amendment because it does
not relate to “the structure of the. distribution . system.”
See California Retail Liquor Dealers Ass’n v. Midcal
Aluminum, Inc., supra at 110 (State authorized resale
price maintenance preempted by Sherman Act); see also
Healy v. Beer Institute, 491 U.S. 324 (1989) (price
affirmation law requiring that in-state prices charged by
brewers not exceed lowest price for beer products in
border States); 324 Liquor Corp. v. Duffy, 479 U.S. 335
(1987) (posting law delegating price setting authority to
private parties); Brown-Forman Distillers Corp. v. N.Y.
State Liquor Authority, 476 U.S. 573 (1986) (requiring
distillers not to sell to wholesalers at a price no higher
than the lowest price they charged anywhere in the U.S.).

However, where the primary interests of § 2 of the
21st Amendment are being served by the State regulation
and price is not controlled by private agreement, the 21st
Amendment trumps any application of the Supremacy
Clause to overturn State law. None of the Supremacy
cases identified above involved an ownership or locational
restriction. None involved typical qualification require-
ments regulating who could own a retail establishment
(e.g., non-felons with experience and adequate assets) or
the number of retail outlets permitted in any community
(e.g., quota and locational limitations).

North Dakota v. United States, 495 U.S. 423 (1990)
is illustrative of the latitude given to State laws which
regulate the distribution of alcoholic beverages. There,
the Court unanimously upheld a “reporting requirement”
under which out-of-state liquor distributors had to report

10

the volume of all liquor shipped to federal enclaves in-
cluding military bases. A second regulation imposing a
“labeling requirement” under which out-of-state distrib-
utors had to label liquor bottles shipped to a federal en-
clave so as to identify that the liquor was for consump-
tion only within the federal enclave was upheld more nar-
rowly on a 5-4 vote. Although there was no majority
opinion on the labeling issue, both the 4-member plurality
by Justice Stevens and the concurrence by Justice Scalia
reaffirmed that regulation of the distribution system was
within the State’s core powers protected by the 2l1st
Amendment as follows:

[I]n the interest of promoting temperance, ensuring
orderly market conditions, and raising revenue, the
State has established a comprehensive system for the
distribution of liquor within its borders. That system
is unquestionably legitimate. (Stevens, J., plurality
opinion) (495 U.S. at 432)

The Twenty-first Amendment . . . empowers North
Dakota to require that all liquor sold for use in the
State be purchased from a licensed in-state whole-
saler.” (Scalia, J., concurring) (495 U.S. at 447)

Under these principles, § 15 of the MABC Act fits
within this 21st Amendment framework. It limits the
number, and therefore the power, of retailers; past ex-
perience shows that such power often has been abused.
Cf. Actmedia, Inc. v. Stroh, 830 F.2d 957, 966 (9th
Cir. 1986) (three-tier ownership restrictions designed to
control “dominance or undue influence”).

11

Ill. MASSACHUSETTS’ THREE-STORE OWNERSHIP
LIMITATION FURTHERS CORE CONCERNS OF
THE 21ST AMENDMENT AND THUS SURVIVES
A SUPREMACY CLAUSE CHALLENGE

The three-store ownership limit in § 15 of the MABC
Act is but one of a series of requirements by which Massa-
chusetts closely regulates who may be licensed as a retailer
(or wholesaler) of alcoholic beverages (§§ 12, 15 & 18),
the personal background of those with ownership interests:
(§§ 12 & 15), the interests of manufacturers and whole-
salers in retail stores (§ 25), the number of on- and off-
premises outlets permitted in the State (§§ 15 & 17),
the location of on-premise outlets as approved by local
committees (§§ 12, 16C & 16D), the hours and days of
operation of retail sales (§§ 12, 15, 33, 33A & 33B),
the adulteration of alcoholic beverages sold at retail
(§ 16), the collection of sales (or excise) taxes (§ 21),
the reporting to the MABCC of all purchase orders and
sales invoices by wholesalers (§ 18), the acceptance of
unannounced inspections of wholesaler records and prem-
ises (§ 12A, 18, 19, 19B & 19C), and so forth. See
Mass. Gen. L. c. 138, §§ 2 et seq.

Theoretical arguments can, of course, be asserted that
each of these provisions, examined in isolation and out of
context, could have deleterious effects on competition and
thus be within the reach of the Sherman Act (assuming
that other elements of an antitrust offense are shown).
The requirement, for example, that retail establishments,
including bars and restaurants, must restrict sales to pre-
scribed hours or lose their licenses (MABC Act §§ 12 &
15), can be said to be a limitation on output. Cf. In the
Matter of Detroit Auto Dealers Ass'n, Inc., 111 F.T.C.
417 (1989), affd, 955 F.2d 457 (6th Cir.), cert. denied,
506 U.S. 973 (1992) (joint advertising agreement by
auto dealers to close their showrooms at 6 p.m. held
to be an agreement to shorten business hours and, thus,

12

‘an output reduction). The same can be said for the -
requirements that retail licensees must be of good char-
acter and without a felony record, and that they must
not sell liquor to minors. MABC Act §§ 12, 15, 34 &
64. Those restrictions limit the number of potential sellers
and buyers, thereby suppressing both supply and demand.
Indeed, other provisions in the MABC Act, not challenged
by Petitioners herein, set express quotas on the number
of off-premise outlets (e.g., no more than 250 in Boston)
as well as the number and location of retail stores in
their locales (§ 17). See also Victoria, Inc. v. ABCC, 33
Mass. App. Ct. 507, 512, 602 N.E.2d 578, 581 (1992)
(Commission to look at local public interest in addition
to population in granting licenses).

In fact, however, the purpose and effect of these restric-
tions is to protect public health and safety, to prevent
unauthorized trafficking (and diversion), to foreclose
underage consumption, and to collect excise and sales
taxes. See, e.g. MABC Act § 23 (“[t]he provisions for
the issue of licenses and permits hereunder . . . are en-
acted with a view only to serve the public need and in
such a manner as to protect the common good”); Con-
nolly v. ABCC, 334 Mass. 613, 618-19, 138 N.E.2d
131, 135-36 (1956) (ABCC could consider patronage
by school children, proximity to churches and propriety
in evaluating license application). According to Massa-
chusetts’ highest court in Johnson v. Martignetti, supra,
the ownership limitation in § 15 serves multiple public _
interest objectives, none of which involves price setting
or output restriction:

Concentration of retailing in the hands of an eco-
nomically powerful few has been thought to intensify
the dangers of liquor sales stimulations, thereby
threatening trade stability and promotion of temper-
ance. Regulation of the number of licenses issued,

13

therefore, aims at controlling the tendency toward
concentration of power in the liquor industry; pre-
venting monopolies; avoiding practices such as in-
discriminate price cutting and excessive advertising;
and preserving the right of small, independent liquor
dealers to do business. (374 Mass. at 792, 375
N.E.2d at 297)

Limiting the number of retail outlets controlled by one
person ensures more effective enforcement of the State’s
liquor control program. The retail owner is more likely
to directly oversee operations where three stores are the
maximum, and the threat of a license revocation or sus-
pension is likely to present a more serious sanction to the
small business as compared to the chain store or super-
market. Similarly, control of market concentration and
retail store ownership interests can be critical in prevent-
ing the misuse of economic power and in obtaining the
benefits of competition. It is, for example, not unusual
for public policy to impose limits on the number of regu-
lated entities one person may control. See 47 C.F.R.
§ 73.3555 (Federal Communications Commission national
multiple ownership rules for television stations); T. Krat-
tenmaker & L. Powe, Regulating Broadcast Programming
94-96 (1994). See also U.S. Dept. of Justice & Federal
Trade Commission, Joint Horizontal Merger Guidelines

§ 2.0 (1992).5

5 This Court also has upheld simlar restrictions outside the field
of liquor control against Sherman Act and Due Process challenges.
E.g., New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96
(1978) (location of new automobile dealerships); Exxon Corp. v.
Governor of Maryland, 487 U.S. 117 (1978) (ownership interest
in retail service stations), reh’g denied sub nom. Shell Oil Co. v.
Governor of Maryland, 439 U.S. 884 (1978); North Dakota State
Bd. of Pharmacy v. Snyder’s Drug Stores, Inc., 414 U.S. 156 (1973)
(ownership interest in pharmacies). See also Boston Neighborhood
Taxi Ass’n v. Dept. of Public Utilities, 410 Mass. 686, 575 N.E.2d
52 (1991) (limit on number of taxi licenses).

a4

Thus, when faced with a challenge to state regulation
of the number and location of retail liquor stores, the
lower courts have upheld such restrictions under the 21st
Amendment. In Simms v. Farris, 657 F. Supp. 119 (E.D.
Ky. 1987), aff'd per curiam, 840 F.2d 18 (6th Cir. 1988),
the court upheld a limitation of the number and location
of retail liquor stores in rural areas under the 2lIst
Amendment because, as the District Court reasoned, the
restriction was designed “to facilitate the ease of policing”
compliance with state liquor regulations. 657 F. Supp. at
124. On review, the Sixth Circuit was more direct, up-
holding this “attempt by Kentucky to regulate the sale
and use of liquor within its borders” because the State’s
authority was being applied “to control the distribution
and use of intoxicating. beverages.” 840 F.2d at 18.
Accord Prices Corner Liquors, Inc. v. Delaware Alcoholic
Beverage Control Commission, 705 A.2d 571, 576 (Del.
S.Ct. 1998) (upholding more restrictive locational re-
quirements for off-premises retail liquor stores in unin-
corporated areas).

Similarly, Massachusetts’ limit on the number of retail
liquor stores that one person may control is justified by
its policy of control over all aspects of the distribution
of alcoholic beverages. By restricting that number to no
more than three stores, the State has imposed a direct
limit on the market power exercised by any-retail store.

15

. CONCLUSION

For the foregoing reasons, the Petition for a Writ of
Certiorari should be denied.

Respectfully submitted,

ERNEST GELLHORN
Counsel of Record
ANN G. WEYMOUTH
Suite 100 ; .
2907 Normanstone Lane, N.W.
Washington, DC 20008-2725
March 30, 2000 (202) 319-7104

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_0684%3A2. Public record. Not legal advice.