Total Wine Set to Fight Suspension from State Alcohol Commission

February 10, 2017
By

By Seth Daniel

Though they have been open in Everett less than one year, already the Total Wine and More store in the Gateway Mall is staring down a suspension – and perhaps more – of their package store licenses by the state Alcoholic Beverages Control Commission (ABCC).

The crime: they’re giving deals that are too good.

And the company is ready to fight Massachusetts on the alleged violation of state price controls on liquor.

On Jan. 18, after several hearings at the state level in December, the ABCC notified Total Wine that its Everett and Natick locations would be suspended for eight days for violating a long-time state law that says no license holder can sell alcohol at a price below its invoiced cost. Of the eight-day suspension, two were to be served and the remaining six would be held over.

The suspension is to take place on Wednesday, March 15, and Thursday, March 16. The store could resume regular licensed business on Friday, March 17.

However, unlike many liquor operators, Total Wine has decided to fight the state’s minimum pricing controls on liquor, something the nationwide chain has also done in Connecticut.

On Monday, Jan. 30, the company filed a lawsuit regarding their suspension in Suffolk Superior Court – saying they disagreed with the findings and that they also disagreed with other investigations that are currently ongoing between Total Wine and the ABCC, investigations the suit said could bring even larger suspensions.

The decisions rendered by the ABCC were premised on investigators’ misinterpretation of the Regulations of the ABCC,” read a statement from Ed Cooper, vice president of public affairs. “Additionally, these decisions were based on an incorrect and artificial calculation of Total Wine’s actual cost to purchase various alcohol products at issue. These decisions will unnecessarily and artificially raise prices for consumers in Massachusetts.

“The result of the ABCC’s decision will be higher prices for consumers,” continued Cooper. “We have urged the ABCC to reconsider its decision and properly educate investigators on factoring cumulative quantity discounts for all retailers. In the meantime, we have sought and obtained a stay of the ABCC’s decision in Superior Court while we attempt to resolve this issue through the judicial system.”

Most every other product in the state can be sold at below cost, as it is seen as the prerogative of the business owner to price items. However, when it comes to liquor, minimum pricing heavily regulates those prices that can be charged. That is due to regulators saying they want to protect smaller liquor operators and also that they want to prevent large-scale drinking they fear might happen with easy availability of cheap booze.

The situation began in May 2016, the same month the store opened in Everett’s Gateway Mall after careful deliberation from the City Council and the City’s License Board.

Anonymous complaints, which the ABCC and Total Wine believe to be smaller liquor store competitors, tipped off the ABCC that Total Wine was selling below cost.

Investigators visited the store and requested official payment invoices from local suppliers New Horizon and Martignetti.

According to ABCC investigators, the invoices showed that Total Wine was selling Smirnoff Vodka, Bacardi Rum, Dewars Scotch, Skyy Vodka, New Amsterdam Vodka, Captain Morgan’s Spiced Rum, Absolut Vodka, and Jameson Irish Whiskey below cost.

The alleged violations range from New Amsterdam selling for $13.99 with an invoiced cost of $17.99, to Absolut Vodka being sold for $24.99 and invoiced for $25.99.

“Based on the evidence, the Commission finds the Licensee violated (the regulation),” wrote Elizabeth Lashway and Kathleen McNally of the ABCC.

The key to the situation involves a sentence at the end of the state law, which indicates ‘cost’ is defined as net cost appearing on the invoice for said alcoholic beverage.

Total Wine argued that it often takes delivery, pays for the produce at regular cost, but later gets significant volume discounts from the supplier. Regulators interpret the state law as reading that a liquor operator cannot begin charging the lower prices until those discounts are received from the operator. Once those discounts are received, and it if then renders the cost below the price, the store can then, and only then, begin charging the lower price.

“ABCC investigators incorrectly based their calculations of the products’ wholesale cost per bottle on a standard of ‘invoiced cost on delivery’ – disregarding the cumulative quantity discount, which is typically reflected on separate invoices,” Cooper also said. “Those additional invoices were provided to the ABCC. There is no such ‘invoiced cost on delivery’ standard named or contemplated in (the regulations)…The retail price of all products for sale by Total Wine & More are above wholesale cost, and consistent with ABCC regulations.”

It seems like a game of semantics, and it all goes back to the new trend of larger operators like Total Wine entering the Massachusetts market, which has long been dominated by smaller package stores.

A change in the law in 2011 is likely the precursor to the new nationwide operators and supermarkets moving into the market. That law allowed supermarkets to have more package store licenses statewide, and also eased restrictions on the numbers of licensed outlets a company can have statewide.

The Total Wine lawsuit is just now in the beginning stages of its review by the Superior Court.