Affiliated Distillers Brands Corp. v. State Liquor Authority
Affiliated Distillers Brands Corp. v. State Liquor Authority
Opinion of the Court
The State Liquor Authority, in June of 1967, disapproved the application of the petitioner, Affiliated Distillers, for a brand label registration for its “ Ancient Age Kentucky Straight Bourbon Whiskey, 86 Proof, 8 Years Old.” The question on this appeal is whether, in so doing, the Authority exceeded the discretion given it by section 107-a of the Alcoholic Beverage Control Law (infra, pp. 36—37) which prohibits the sale of liquor without a brand label ‘ ‘ registered and approved by the authority. ’ ’
In passing on the application, the Authority found nothing wrong or misleading in the label submitted by the petitioner. It withheld its approval—and thereby prevented the petitioner from introducing its eight-year-old bourbon in the New York market—■ solely on the ground that, shortly before the date of the application, the petitioner had withdrawn from sale in New York a sios-year-old bourbon, also 86 proof and also bearing the brand name “ Ancient Age Kentucky Straight Bourbon ”, which continued to be sold in great quantity, and at lower prices than the eight-year liquor, in other parts of the country. The withdrawal of the lower-priced sw-year-old bourbon and the nearly simultaneous proposal to introduce a more costly eh/M-year-old bourbon, similarly labeled except as to age, were characterized by the Authority as being “ designed to circumvent ” the
The petitioner brought this article 78 proceeding to compel the Authority to approve the label for its eight-year-old Ancient Age Whiskey.
On appeal, a divided Appellate Division reversed. It concluded that section 107-a gave the Authority discretion with regard to approving brand label registrations, so as to give effect to the objectives of the other sections of the Alcoholic Beverage Control Law, section 101-b among them, and the court found adequate basis in the record for the Authority’s determination. That action of the Authority, the court also held, was not subject to judicial review. The dissenting justice expressed the view that the statute only permitted the Authority to prevent discrimination in price between sales of like products in New York and in other states but did not empower it to
We turn, first, to section 107-a itself. Subdivision 4 of that section—the part with which we are mainly concerned — states, quite simply, that “ [n]o liquor * * * shall be labeled,
offered or advertised for sale ” unless it is done “ in accordance with ” regulations of the Authority and unless “ the brand or trade name label” affixed to the container of the beverage ‘ ‘ shall have been registered with and approved by the authority and the appropriate fee paid ”.
Under paragraph (a), the functions of the Authority are not — as the petitioner contends •—• purely ministerial. The Authority may, undoubtedly, exercise discretion to refuse to approve a label which would help an applicant to violate any part of the Alcoholic Beverage Control Law. However, and this is decisive, there is nothing in the statute prohibiting the conduct which the Authority freely acknowledges it was trying to prevent— namely, the withdrawal by the petitioner of its six-year-old bourbon from the New York market and the offering, at a higher price, of a similarly named but clearly labeled and concededly different eight-year-old whiskey instead. No matter how worthy the Authority’s objective may seem from the point of view of the consumer, it appears to lack any legal foundation whatever.
Certainly, nothing in the remaining subdivisions of section 107-a itself helps to sustain the administrative action. Subdivision 2, the only other provision having possible relevance, runs counter to the claims of the Authority. Referring to regulations which the Authority is empowered to promulgate, subdivision 2 recites that they “ shall be calculated to prohibit deception of the consumer ”, to provide him with “ adequate
The “affirmation” provisions, paragraphs (d) through (i) of subdivision 3 of section 101-b (L. 1964, ch. 531, § 9), reversed the State’s long-standing policy of discouraging the reduction of liquor prices
In 1964, acting on the recommendations of a Moreland Act Commission and of the Governor, the Legislature repealed the resale price maintenance section of the statute (L. 1964, ch. 531, § 11).
Paragraph (d), the key to the amendments, requires the “ owner ” of a “ brand of liquor ” to include in the monthly schedule of prices it files with the Authority — the filing of the schedules themselves has been mandated since 1942 (§ 101-b, subd. 3, par. [a] [L. 1942* ch. 899, § 1])—a verified ‘ ‘ affirmation * * * that the * * ” price of liquor to wholesalers set forth in such schedule is no higher than the lowest price at
Upon the most cursory reading, it is evident that amended section 101-b is a regulation of prices only and not a regulation of the kinds of liquor products which may or may not be sold in New York. The discrimination at which it is aimed is, manifestly, solely that involved in offering the same product at higher prices in this State than elsewhere. There is not a word in the statute which confers upon the Authority the power to forbid a distiller to withdraw one of its products from sale in New York or to make the offering of one of a distiller’s products a condition to .the approval of a label for a different product. It is true that, if a distiller sells only its more expensive whiskeys in New York, while making a wider selection of its products, including cheaper items, available in other states, it practices a kind of discrimination against the New York consumer. But, quite plainly, the Legislature did not undertake to control this kind of discrimination, nor —• and this is most important:—■ to establish any standards or criteria for doing so. Had such regulation been intended, the draftsman of the statute could readily have found clear and direct language to express the legislative purpose.
Nothing that we have said, of course, implies that a concerted withdrawal of cheaper products by distillers who should be in competition might not violate antitrust laws. (See U. S. Code,
In the present case, however, it is the Authority itself, as already noted, which has determined that the two products are, in fact, different (supra, p. 35). Under these circumstances, it must be concluded that the Authority is not seeking to enforce the policies against price discrimination embodied in section 101-b but is attempting, instead, to enforce an unauthorized policy of its own directed against product discrimination. The Authority may not depart from the directives and standards laid down in the statute and legislate for itself to this extent.
We have left for the last the question—really the threshold question—of ,the reviewability of the Authority’s action under section 107-a because what has been said thus far helps to dispose of it. Since the Authority’s attempted regulation lies, in our opinion, completely beyond the scope of its statutory powers, the court may not be barred from hearing a challenge to the administrative action. As we noted in Matter of Guardian Life Ins. Co. v. Bohlinger (308 N. Y. 174, 183),
‘ ‘ Even where judicial review is proscribed by statute, the courts have the power and the duty to make certain that the administrative official has not acted in excess of the grant of authority given 'him by statute or in disregard of the standard prescribed by the legislature. ’ ’
However, even if the Authority’s action were well within the compass of section 107-a, it would not be immune to judicial review. Section 121 of the Alcoholic Beverage Control Law lists,
In sum, then-—■ since the proposed label for the petitioner’s eight-year-old bourbon was not deceptive or incomplete and since the Authority concedes that six-year-old and eight-year-old bourbons are different products, there was no lawful basis, under section 107-a or section 101-b of the Alcoholic Beverage Control Law —■ or any other provision of statute — for the Authority’s denial of the petitioner’s application for a brand label registration and it should have been granted.
. The petitioner also sought a more general direction to the Authority to “ accept registrations of brands of different ages or proofs or formulas with the same brand name.”
. In an affidavit submitted to the court at Special Term, Donald S. Hostetter, Chairman of the State Liquor Authority, stated that “ in no wise is the Authority saying, nor has it ever been urged, that 6 year old liquor is the same as 8 year old liquor.”
. In full text, paragraph (a) of subdivision 4 of section 107-a reads- as follows: “No liquor, wine or beer shall be labeled, offered or advertised for sale unless in accordance with such regulations and unless the brand or 'trade name label affixed to or imprinted upon the container of such alcoholic beverage shall have been registered with and approved by the' authority and the appropriate fee paid as provided for in this section.”
. Thus, since 1942 it had been illegal to sell liquor to wholesalers or retailers at prices other than those specified in monthly schedules required to be filed by distillers and certain other distributors (Alcoholic Beverage Control Law, § 101-b, subds. 3, 4 [L. 1942, ch. 899, as amd. by L. 1948, ch. 551]).
. The commission reported that New York’s price-fixing policies had no significant .effect on temperance and appeared to benefit only the distillers. The existing law, it was found, resulted in the payment by the New York consumer of sharply higher prices for liquor than were charged elsewhere in the country.
. Paragraph (d) .of subdivision 3 of section 101-b reads, in somewhat greater detail, as follows:
“ There shall be filed ,in connection with and when filed shall be deemed part of the schedule filed for a brand of liquor pursuant to paragraph (a) of this subdivision an affirmation duly verified by the owner of such brand of liquor * * * that the bottle .and case price of liquor to wholesalers set forth in such schedule is no higher than the lowest price at which such item of liquor will be sold by such brand owner * * * [anywhere in the United iStates] * * * at any time during the calendar month for which such a schedule shall be in effect”. (Emphasis supplied.)
. The Authority has, ¡the record indicates, dealt informally with several such eases, in which, for example, the distiller merely changed the proof by a fraction of one percent.
. Note appended to chapter 597 of the Laws of 1968, (Vol. 2, p. 2162), which repealed section 99-a and also amended subdivision 1 of section 424 of the Tax Law.
Dissenting Opinion
There is no disagreement in the court as to the reviewability of the Authority’s action. There is disagreement whether the Authority’s action was arbitrary and capricious.
The issue is not whether the six-year-old and the eight-year-old bourbons were different, but whether the difference, together with other manipulative circumstances, was used by the distiller to evade provisions of law regulating liquor prices. And whether there was such manipulative use of the difference between the two kinds of bourbon is a question exclusively for the Authority to determine if there is any rational basis to support its view.
The Appellate Division majority concluded that there was a rational basis for the Authority’s determination and I agree.
While there is a difference between six and eight-year-old. bourbon it is a difference of limited degree both as to quality and cost of production. A crucial circumstance which makes understandable and rational the action of the Authority is that the distiller’s application for the new eight-year-old label was coupled with its request to withdraw its six-year-old bourbon from the New York market. A further crucial circumstance is that the distiller does not propose to withdraw its six-year-old bourbon in markets outside the State where it also sells eight-year-old bourbon. As stated by the Appellate Division: ‘ ‘ By this mechanism the petitioner could maintain the price of a medium bourbon in New York (eight-year-old) and market a medium age bourbon throughout the country (six-year-old) at any price it saw fit.” (29 A D 2d, p. 360.) In rejecting the distiller’s application the Authority was not seeking to control what was sold but to enforce the price regulation features of the statute (Alcoholic Beverage Control Law, § 101-b, subd. 3, pars. [d]-[i]), at least as they affected medium age bourbon, in which class both the six-year-old and eight-year-old bourbon fall.
The net effect, therefore, of the .distiller’s action, as now approved by this court, is to remove from the New York market
Accordingly, I dissent and vote to affirm the order of the Appellate Division.
Judges Burke, Scjleppi, Bergan, Keating- and Jasen concur with Chief Judge Fuld; Judge Bkeitel dissents and votes to affirm in a separate opinion.
Order reversed, with costs to petitioner in this court and in the Appellate Division, and matter remitted to Supreme Court, New York County, for further proceedings in accordance with the opinion herein.
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