324 LIQUOR CORP., DBA YORKSHIRE WINE & SPIRITS, APPELLANT V. EDWARD J. MCLAUGHLIN, ET AL. No. 84-2022 In the Supreme Court of the United States October Term, 1985 On Appeal from the Court of Appeals of New York Brief for the United States as Amicus Curiae TABLE OF CONTENTS Question Presented Interest of the United States Statement Discussion Conclusion QUESTIONS PRESENTED 1. Whether New York State's Alcoholic Beverage Control Law Section 101-bb (McKinney 1970 & Supp. 1986) is inconsistent with the Sherman Act. 2. If so, whether the state action doctrine immunizes the statutory scheme from Sherman Act challenge. 3. Whether the statute is immune from Sherman Act challenge because Section 2 of the Twenty-first Amendment supersedes Congress's powers under the Commerce Clause with respect to this form of state regulation intoxicating liquors. INTEREST OF THE UNITED STATES This brief is submitted in response to the Court's invitation to the Solicitor General to express the views of the United States. STATEMENT 1. Section 101-b(3) of the New York Alcoholic Beverage Control Law (ABC Law) (N.Y. Alco. Bev. Cont. Law (McKinney 1970) (hereinafter all references are to 1970 & Supp. 1986)) regulates wholesale liquor pricing (J.S. App. 67A). It requires manufacturers and wholesalers to file monthly schedules containing their prices, per case and per bottle, for every item sold to retailers (ibid.). /1/ The statute does not prescribe any particular wholesale prices; it simply requires that prices be posted monthly and adhered to during the following month (id. at 6A-7A). ABC Law Section 101-bb(2) governs retail liquor prices (J.S. App. 64A-65A). It prohibits retailers from selling any item at less than "cost," and defines "cost" as the wholesale "bottle price" listed in the wholesaler's monthly price schedule at the time the retail sale is made, plus a 12% mark-up (ibid.). /2/ The statute does not require the bottle price listed in the wholesaler's schedule to bear any direct relation to the case price, at which retailers generally purchase (id. at 18A). /3/ Pursuant to statute, /4/ however, the State Liquor Authority (SLA) promulgated Rule 16.4(e), which provides a formula for computing a bottle price (N.Y. Admin. Code tit. IX, Section 65.4(e) (1986); J.S. App. 70A). That formula requires the bottle price to bear a direct relation to the case price (ibid.). /5/ The posted "legal" price is a ceiling, or a maximum, price (J.S. App. 7A). Once a schedule of "legal" prices is filed, the statute prohibits a wholesaler from raising its prices above that posted legal price in succeeding months, except to reflect increases in its suppliers' prices, and requires reductions to reflect any reductions in a wholesaler's costs. /6/ Wholesalers need not always charge the legal price, however; they may reduce -- or "post-off" -- prices as a temporary "sale" (ibid.). "Post-off" prices must appear on the monthly price schedules and become the effective prices charged to all customers during that month. See J.S. App. 87A, 88A; see also id. at 7A. When a wholesaler temporarily posts-off the case price of an item, it is not required to reduce the bottle price for that item as well. Under New York SLA Bulletin 471 (June 29, 1973) (J.S. App. 71A), a wholesaler offering a post-off price has the option of (1) not reducing the bottle price at all (in which case the "legal" bottle price remains the basis for the 12% mark-up), (2) reducing the bottle price to correspond to the reduced case price, or (3) reducing the bottle price by a lesser amount. /7/ Thus, Bulletin 471 permits wholesalers to determine whether and to what extent their post-off case prices to retailers may be reflected in reduced retail prices. See J.S. App. 5A. /8/ 2. Appellant, a retail liquor store in New York, was found guilty by the SLA of violating ABC Law Section 101-bb by selling liquor at a price lower than the statutorily defined cost (J.S. App. 4A). Appellant sought to annul the determination on the ground, inter alia, that Section 101-bb constitutes a resale price maintenance scheme inconsistent with the federal antitrust laws (J.S. App. 5A). /9/ The SLA argued that the statutory scheme does not violate the Sherman Act because the minimum mark-up price provisions do not compel concerted anticompetitive activity. It further argued that the statute is immune from Sherman Act challenge under the "state action" doctrine (see Parker v. Brown, 317 U.S. 341 (1943)) and under the Twenty-first Amendment. J.S. App. 5A. 3. The New York Court of Appeals first focused on the SLA's claims that the statute is immune from Sherman Act challenge under Parker v. Brown, supra. The court rejected the asserted state action defense, finding that here, as in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), there was insufficient active state supervision of the resale price maintenance system for it to constitute "state action." J.S. App. 9A-10A. The court concluded, however, that the statute was shielded from antitrust challenge by the Twenty-first Amendment, because "the state interest in protecting retailers which underlies (the ABC Law) is of sufficient magnitude to override the federal policy expres(s)ed in the antitrust laws" (J.S. App. 17A). Finally, the court concluded that, in any event, the statute did not violate the Sherman Act because "the state policy of regulating prices to protect consumers and maintain extensive retail outlets is consistent with the federal statutes." Ibid. Judge Jasen filed a separate opinion, concurring in the majority's conclusions that the New York statute is consistent with the federal antitrust laws and that it is shielded by the Twenty-first Amendment, but disagreeing with the majority's holding that the statute does not qualify for the state action defense (J.S. App. 19A). One judge dissented. Judge Kaye would have rejected the Twenty-first Amendment defense on the ground that the state policies asserted in defense of the liquor regulation -- promotion of temperance and maintenance of an orderly market for alcoholic beverages -- lacked a substantial basis. J.S. App. 26A-27A. Judge Kaye also would have invalidated the statute as violative of the Sherman Act. He reasoned that "(e)ven if the pricing scheme could be upheld as furthering a State policy to protect small retailers against unfair competition, it goes well beyond, and by fixing minimum resale prices effectively and unnecessarily forecloses all competition." Id. at 27A (emphasis in original). DISCUSSION The New York Court of Appeals was correct in relying on California Retail Liquor Dealers Ass'n v. Midcal Aluminum, supra, to conclude that the state action defense does not bar application of the Sherman Act, 15 U.S.C. 1 et seq. The court's conclusions that the statutory scheme is consistent with the Sherman Act and that the Twenty-first Amendment shields it from challenge are plainly incorrect under Midcal, however. 1. The "threshold question" is whether New York's pricing plan for liquor is inconsistent with the Sherman Act (Midcal, 445 U.S. at 102). Although the court below did not address this issue at length, it cited as support for its holding with respect to the Twenty-first Amendment its conclusion that "the state policy of regulating prices to protect consumers and maintain extensive retail outlets is consistent with the federal (antitrust) statutes" (J.S. App. 17A). The court apparently based that conclusion on its belief that "stabilizing the retail market and protecting the economic position of small liquor retailers" (id. at 15A) are precompetitive goals consistent with the federal antitrust laws. But protecting small retailers against large volume retailers does not necessarily serve the interests of consumers. As this Court has emphasized, the purpose of the antitrust laws is "'the protection of competition, not competitors.'" Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (citation omitted; emphasis in original). Moreover, the state court's conclusion that New York's "system of price maintenance" (J.S. App. 10A) is consistent with the Sherman Act misapprehends this Court's Midcal holding. In Midcal, the Court ruled that a statutory system requiring wine producers and wholesalers to file fair trade contracts or schedules that establish binding resale prices "plainly constitutes resale price maintenance in violation of the Sherman Act." 445 U.S. at 99, 103. New York's retail liquor pricing scheme is not materially different from the system condemned in Midcal: New York wholesalers post prices that determine their customers' minimum resale prices. As the responsible New York legislative committee explained when Section 101-bb(2) of New York's ABC Law was amended in 1971, the amendment established a system of "resale price maintenance enforced by the State." N.Y. Senate Excise Comm., Final Report 16-17 (1971) (hereinafter cited as Final Report). Appellees characterize New York's statutory scheme as a minimum percentage markup requirement, arguing that wholesalers merely set their own prices, which have "no impact on retail prices except as flow from the operation of the statutorily mandated minimum 12 percent mark-up on retail prices" (Mot. to Dis. or Aff. 9). Thus, they contend the wholesalers do not engage in an illegal contract, combination or conspiracy (id. at 7-9). /10/ This contention ignores the discretion afforded wholesalers under the New York scheme. /11/ Wholesalers may charge a "post-off" price lower than the "legal" case price and determine the extent to which that reduction in price will be reflected in the minimum retail price. /12/ Whenever they choose to offer a post-off price lower than the legal price, wholesalers hold the power to determine whether the statutorily mandated 12% markup must be applied to a bottle price reflecting the actual wholesale price or some greater amount. Thus, New York does not have a simple percentage markup statute, as appellees contend. /13/ Like the producers and wholesalers in Midcal, New York liquor wholesalers dictate the prices charged by retailers. See Midcal, 445 U.S. at 103. They do so at the command of the state, and not as a result of a private agreement between wholesaler and retailer, but that fact does not distinguish this case from Midcal, where the private parties acted under similar compulsion. /14/ Accordingly, the conclusion of the court below that New York's "minimum pricing" arrangement (J.S. App. 6A) is consistent with the federal antitrust laws is squarely in conflict with this Court's Midcal decision. 2. The Court of Appeals of New York properly concluded that the resale price maintenance scheme required by Section 101-bb does not constitute state action under Parker v. Brown, supra. In Midcal this Court enunciated two standards for antitrust immunity under the state action doctrine. "First, the challenged restraint must be 'one clearly articulated and affirmatively expressed as state policy'; second, the policy must be 'actively supervised' by the State itself." 445 U.S. at 105 (citation omitted). /15/ The Court concluded that the first test was satisfied because the California statute clearly indicated a purpose to permit resale price maintenance (ibid.). The second standard was not met, however, because "(t)he State simply authorizes pricesetting and enforces the prices established by private parties. The State neither establishes prices nor reviews the reasonableness of the price schedules * * *. The State does not monitor market conditions or engage in any 'pointed re-examination' of the program." Id. at 105-106 (footnote omitted). The New York statute in this case is indistinguishable from the California statute for purposes of state action analysis. The New York statute meets the first Midcal test because it plainly evidences a legislative policy in favor of resale price maintenance. J.S. App. 10A. But the second test is not satisfied for, as the state court observed, "(l)iquor prices are set by the wholesalers and the State has no power to change the prices or review their reasonableness" (ibid.). /16/ As we have noted (see pages 3-4, supra), the wholesaler has unsupervised discretion to determine whether the retailer's cost shall be computed on the basis of a "post-off" price at which the wholesaler actually sells to the retailer, the higher "legal" price, or a price in between, as well as unfettered discretion to set its legal price initially and to adjust it thereafter within certain limits. Thus, wholesalers can elect to guarantee retailers profit margins significantly in excess of 12%. /17/ When a state chooses to displace competition, it must replace it with adequate regulation. See City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 413 (1978) (opinion of Brennan, J.); Town of Hallie v. City of Eau Claire, No. 82-1832 (Mar. 27, 1985), slip op. 4, 9. New York's decision to allow wholesalers broad, unsupervised discretaion over retail prices removes this scheme from the realm of state action. /18/ 3. The Court of Appeals of New York misapplied controlling precedent of this Court in concluding that New York's price-posting statute is shielded by the Twenty-first Amendment (J.S. App. 11A-17A). a. Section 1 of the Twenty-first Amendment repealed prohibition; Section 2 gave the states power to regulate or prohibit entirely the importation and use of intoxicating liquor within their borders. Section 2 did not entirely repeal the Commerce Clause with respect to state liquor regulation; it simply created an exception to the normal operation of that clause by reserving to the states power to impose certain burdens on interstate commerce in intoxicating liquor. Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 330-332 (1963); Capital Cities Cable, Inc. v. Crisp, No. 82-1795 (June 18, 1984), slip op. 19-20. "'Both the Twenty-first Amendment and the Commerce Clause are parts of the same Constitution. Like other provisions of the Constitution, each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case.'" Midcal, 445 U.S. at 109 (quoting Hostetter, 377 U.S. at 332). When state regulation of the liquor industry conflicts with federal law grounded in the commerce power, the question is "whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies." Capital Cities, slip op. 21; accord, Bacchus Imports, Ltd. v. Dias, No. 82-1565 (June 29, 1984), slip op. 11-12. The Twenty-first Amendment "grants the States virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system" (Midcal, 445 U.S. at 110). Although it grants the states "substantial discretion to establish other liquor regulations, those controls may be subject to the federal commerce power in appropriate situations" (ibid.). Accordingly, in Midcal, the Court balanced the State's interest in maintaining resale prices of alcoholic beverages against the policies of the Sherman Act. It concluded that, in this context, California's interests in promoting temperance and protecting small retailers against predatory pricing by large retailers did not outweigh the substantial federal interest embodied in the antitrust laws. 445 U.S. at 110-114. /19/ b. As in Midcal, New York's interest in maintaining a system of resale price maintenance, an interest outside the core of the Twenty-first Amendment, must be balanced against the federal interest in the enforcement of the antitrust laws. The Court of Appeals of New York concluded that the state interest should prevail, relying on this Court's caveat in Midcal that "(w)e need not consider whether the legitimate state interests in temperance and the protection of small retailers ever could prevail against the undoubted federal interest in a competitive economy." 445 U.S. at 113-114. The court below emphasized that in Midcal this Court relied on the California courts' conclusion that the State's interest in protecting small retailers was not advanced by the resale price maintenance program. See 445 U.S. at 112-113. On the other hand, it believed, the history of New York's provision "demonstrates New York's commitment to protect its small retailers and the investigative determinations upon which the statutes intended to do so are premised." J.S. App. 15A. /20/ The court below, however, did not make any finding that Section 101-bb effectively serves the purpose of protecting either small retailers or consumers. /21/ Nor would the history upon which it relied justify such a conclusion. The court cited the state Senate Excise Committee Report, which found that between 1964 and 1971 (when the statute simply prohibited sales "below cost") the number of retail stores declined. That same report also noted, however, that during that period many "small retailers" gained substantially in sales volume and market share to become "large retailers." Final Report 3, 12-13. And although the Excise Committee concluded that action was required to preserve small retailers, the court below cited nothing in the report to indicate that the current system would be likely to accomplish that purpose. In light of the evidence cited by the California Supreme Court and this Court in Midcal concerning the adverse correlation between the growth of small retail stores and "fair trade" laws, /22/ it cannot lightly be assumed that a system of resale price maintenance would have such an effect. The court below viewed the New York system of retail price controls as a remedy for predatory pricing by a few large volume outlets that threatened to drive small retailers out of business, consolidate control of the market, and then "dictate" prices, to the ultimate injury of consumers (J.S. App. 15A). This statutory scheme goes far beyond anything reasonably necessary to eliminate predatory pricing, however. Section 101-bb on its face prohibits a retailer from pricing "below cost," but the statute defines "cost" in an artificial manner. It bases the retailer's "cost" on a bottle price that may have no relation to the case price that the retailer actually pays: the wholesaler need not reduce the "legal" bottle price to reflect a "post-off" case price, and the resale price must be based on the wholesale price at the time of the retail sale -- a price which does not necessarily reflect the cost of the actual purchase from the wholesaler. See pages 2-4, supra. Thus, the scheme goes far beyond the prohibition of actual below cost pricing, and precludes competitive nonpredatory pricing as well. The relation of this statute to the State's asserted purpose of protecting small retailers from predation is at best tenuous. Such an unsubstantial state interest cannot "prevail against the undoubted federal interest is a competitive economy." Midcal, 445 U.S. at 114. CONCLUSION Probable jurisdiction should be noted. Because the decision of the court below is manifestly inconsistent with Midcal, the Court may wish to consider summary reversal. Respectfully submitted. CHARLES FRIED Solicitor General DOUGLAS H. GINSBURG Assistant Attorney General W. STEPHEN CANNON Deputy Assistant Attorney General CATHERINE G. O'SULLIVAN ANDREA LIMMER Attorneys FEBRUARY 1986 /1/ The schedule must be filed with the State Liquor Authority (SLA) by the fifth day of the month preceding the month in which the schedule is to take effect (ABC Law Section 101-b(4); J.S. App. 68A). The SLA must make all schedules available for inspection by other wholesalers as well as the general public (id. at 68A-69A). Wholesalers have three days after inspection to amend their schedules to meet (but not beat) the prices of competing wholesalers (id. at 68A). /2/ The retailer's cost under Section 101-bb(2), therefore, does not necessarily reflect the wholesale price at which the retailer purchased the liquor. /3/ In some cases retailers may be able to obtain a 2% volume discount (ABC Law Section 101-b(2)(b); J.S. App. 67A). /4/ See ABC Law Section 101-b(4); J.S. App. 69A. /5/ For cases of 48 bottles or less, for example, the bottle price must be computed by adding $1.92 to the case price and dividing by the number of bottles in the case (J.S. App. 70A). /6/ ABC Law Section 101-b(3)(b); J.S. App. 68A. /7/ Rule 16.4(e) establishes a formula for computing "bottle prices" (see note 5, supra) and states that "(v)ariations will not be permitted without approval of the (State Liquor) (A)uthority." N.Y. Admin. Code tit. IX, Section 65.4(e) (Supp. 1986); J.S. App. 70A. Rule 16.4 does not make any express allowance for "post-off" prices, but it allows the State Liquor Authority to approve variations in the Rule 16.4 formula. Thus, although Bulletin 471 appears to conflict with Rule 16.4 by authorizing bottle prices that have no direct relationship to the case price, it may be viewed as the requisite SLA "approval" for deviations from Rule 16.4. See R.71. This Court need not reconcile Rule 16.4 and Bulletin 471, in any event. The New York Court of Appeals did not discuss Rule 16.4 or its relationship to Bulletin 471. The court did conclude, however, that Bulletin 471 is consistent with the statute since Section 101-b(3) does not "mandate any price ratio between scheduled case and bottle prices" (J.S. App. 18A). This Court must accept that interpretation of the statute by the highest state court when ruling on the constitutional challenge presented here. Landmark Communications, Inc. v. Virginia, 435 U.S. 829, 837 n.9 (1978); Kingsley International Pictures Corp. v. Regents, 360 U.S. 684, 688 (1959); California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 111-112 (1980). /8/ The sample schedules in the record (J.S. App. 87A-88A) indicate that the bottle prices for some post-off items are reduced to the full extent permitted by the Rule 16.4 formula. For many other items, however, the wholesaler has posted a bottle price that does not reflect at all or reflects only part of the reduction in the case price. /9/ Appellant also contended that the SLA exceeded its authority in promulgating Rule 16.4 and in issuing Bulletin 471 (J.S. App. 5A). /10/ Appellees also attempt to distinguish the New York scheme from the California statute in Midcal on the ground that the California price posting scheme had a horizontal price effect. (Mot. to Dis. or Aff. 8-9). The Court in Midcal noted that the effect of the statute was to fix prices horizontally at the wholesale level because all wholesalers in a trading area were bound by a price schedule filed by one wholesaler. The Court found a Sherman Act violation based on the resale price maintenance portion of the statute alone, however, emphasizing that the wine producer dictated its customers' minimum resale prices. 445 U.S. at 102-103. /11/ Even if appellees' characterization of the scheme were accurate, there would still be resale price maintenance, because retailers would be precluded from setting their prices independently. The scheme might then constitute "state action" (see pages 9-12, infra). /12/ In addition, wholesalers that charge post-off prices can set their legal case prices purely with a view to their effect on retail prices. Wholesalers do not enjoy that freedom under pure minimum markup statutes, which allow the wholesaler to affect retail prices only by changing its own wholesale price. New York wholesalers have complete freedom in setting the legal case price on their first posting. Thereafter, they have the freedom to lower the legal price or to increase it to reflect increases in their own cost of obtaining liquor from the distiller. /13/ Compare Morgan v. Division of Liquor Control, 664 F.2d 353 (2d Cir. 1981), aff'g Serlin Wine & Spirit Merchants, Inc. v. Healy, 512 F. Supp. 936 (D. Conn. 1981), on which appellees rely (see Mot. to Dis. or Aff. 8). Morgan involved a Connecticut liquor pricing statute that prescribed specific minimum markups, based on "actual costs" (or "bottle prices" that are statutorily defined to reflect actual costs, see 664 F.2d at 355; Conn. Gen. Stat. Ann. Section 30-1(7) (West Supp. 1985)), at both the wholesale and retail levels. The statute did not authorize wholesalers to set resale prices; the state legislature itself performed this activity through specific statutory formulae. /14/ The California statute permitted wine producers to set prices through a fair trade contract but required wholesalers to post a resale price schedule if the producer failed to do so (Midcal, 445 U.S. at 99). See also Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982) (Midcal involved a "statute (that facially) conflicted with the Sherman Act because it mandated resale price maintenance" (emphasis in original)). /15/ In its most recent decisions the Court has reaffirmed the applicability of the Midcal standard to cases involving private conduct authorized or compelled by a state. In Southern Motor Carriers Rate Conference, Inc. v. United States, No. 82-1922 (Mar. 27, 1985), slip op. 8, the Court noted, "(t)he circumstances in which Parker immunity is available to private parties, and to state agencies or officials regulating the conduct of private parties, are defined most specifically by our decision in (Midcal)." See also Town of Hallie v. City of Eau Claire, No. 82-1832 (Mar. 27, 1985), slip op. 4 n.3 (although Midcal involved an action against a state agency, it required the same analysis as cases involving state regulation of private anticompetitive acts). /16/ Appellees point to Judge Jasen's concurrence, which emphasized the SLA's issuance of Bulletin 471 and its ability to authorize wholesale price increases in special cases as indications that the SLA "monitor(s) market conditions" (Mot. to Dis. or Aff. 10; J.S. App. 24A-26A). The concurrence also relied on periodic legislative debates on liquor pricing to demonstrate a "pointed reexamination" of the state's policies (J.S. App. 24A). Even if these sporadic activities constituted "monitoring" or "pointed reexamination" of the resale price maintenance program in operation (rather than just of the state's policy), that alone would not suffice to immunize a statutory scheme that delegates to private parties the authority to make pricing decisions without supervision. See Midcal (445 U.S. at 105-106) noting that the state "neither establishes prices nor reviews the reasonableness of the price schedules; nor does it regulate the terms of fair trade contracts." /17/ Indeed, wholesalers compete for sales to retailers by advertising guaranteed extra profit margins that may exceed 30% (J.S. App. 82A-86A, 100A-101A). /18/ Appellees' reliance (Mot. to Dis. or Aff. 9-10) on this Court's decision in Hoover v. Ronwin, No. 82-1474 (May 14, 1984), is misplaced. In that case the Court reaffirmed that when the anticompetitive conduct is that of the State itself, acting as sovereign, it is immune from Sherman Act challenge. Ronwin, slip op. 14 & n.24; Parker v. Brown, 317 U.S. at 350-351; Community Communications Co. v. City of Boulder, 455 U.S. 40, 52-56 (1982). In Ronwin, as in Bates v. State Bar, 433 U.S. 350 (1977), an unsuccessful bar applicant challenged the denial of his admission as anticompetitive. This Court concluded that, since the Arizona Supreme Court itself made the ultimate decision whether to grant or deny bar admission to a candidate, the conduct at issue was the conduct of the State itself. Ronwin, slip op. 20 n.33; see also Bates, 433 U.S. at 359-361. Ronwin reemphasized, however, that the Midcal test governs private conduct undertaken pursuant to state authorization or discretion. Ronwin, slip op. 9, 20 n.33. /19/ Similarly, in Capital Cities, this Court held invalid an Oklahoma statute requiring cable braodcasters to delete liquor advertisements from out-of-state programs transmitted to Oklahoma subscribers. The Court acknowledged Oklahoma's legitimate interest in promoting temperance and accepted its judgment that restrictions on liquor advertising promoted that interest, but concluded that the State's interest was less substantial than the federal interest in the availability of cable services (slip op. 22-23). Thus, the Court held that "when, as here, a state regulation squarely conflicts with the accomplishment and execution of the full purposes of federal law, and the state's central power under the Twenty-first Amendment of regulating the times, places, and manner under which liquor may be imported and sold is not directly implicated, the balance between state and federal power tips decisively in favor of the federal law, and enforcement of the state statute is barred by the Supremacy Clause." Slip op. 23 (footnote omitted). /20/ In recommending the 12% mark-up amendment to Section 101-bb in 1971, the Senate Excise Committee identified a central purpose of the legislation as "the promotion of temperance" (Final Report 18, 35; ABC Law Section 101-bb(1)). The court below did not explicitly rely on that state interest in this case. Addressing the interest in consumer pricing, however, the court noted (J.S. App. 16A n.2) that when Section 101-bb was first enacted in 1964 as a simple prohibition of below-cost pricing, the Moreland Commission had concluded that the assumed correlation between high liquor prices and temperance did not exist. But in 1971, when Section 101-bb was amended, the Senate Excise Committee did voice concern that per capita consumption of liquor had increased substantially since 1964, as liquor prices had decreased. The Committee did not conclude that low prices necessarily led to increased consumption, but it did conclude that "even if (state policies) do not serve to arrest the rising tide of consumption of alcohol, at least (they should) make no contribution thereto," and that "an all out emphasis on low liquor prices" would not "assist in influencing drinking habits." Final Report 15. The committee's report did not suggest that a resale price maintenance scheme would promote temperance, however. Rather, as the court below implicitly found, it was retailer protection alone that prompted the legislation, particularly the 12% markup amendment in 1971. Final Report 30, 37. /21/ The court concluded generally that if consumers are "to be protected from inflated prices and to enjoy the benefits to be derived from market competition, then the regulatory provisions in section 101-bb and related sections best serve that purpose" (J.S. App. 15A-16A (emphasis added; footnote omitted)). The "consumer protection" goal of eliminating the price discrimination suffered by New York residents emphasized by the appellate court is not served by the price-posting section, however, but by ABC Law Section 101-b(3)(d), requiring the manufacturer to affirm that its wholesale prices are no higher than those it charges in other states (J.S. App. 6A). Neither that section nor other "related" sections of New York's ABC Law are at issue in this case. Cf. Brown-Forman Distillers Corp. v. New York Liquor Authority, prob. juris, noted, No. 84-2030 (Oct. 7, 1985). /22/ Midcal (445 U.S. at 113, citing S. Rep. 94-466, 94th Cong. 1st Sess. 3 (1975)), which indicated that "states with fair trade laws had a 55 percent higher rate of firm failures than free trade states, and the rate of growth of small retail stores in free trade states between 1956 and 1972 was 32 per cent higher than in states with fair trade laws."