MORE WINE COMING: A Memphis photo of a Kroger aisle there gives an idea of expansion coming to wine selections in Little Rock stores under new law.
Federal Judge Brian Millerhas
denied a request for a preliminary injunction in a lawsuit by retail liquor stores
attempting to block a state law taking effect Thursday that allows permitted grocery stores
to sell all types of wine
, not just Arkansas and so-called small batch wines.
Here's his order.
The judge also dismissed the liquor store claims of a U.S. constitutional equal protection violation — that is, that differences in regulation for liquor stores and grocery stores were unfair.
The state Alcoholic Beverage Control Board
has more than 200 applications for grocery store wine sales under the 2017 law. It was a product of some dickering between grocery stores and so-called county line liquor stores. Those liquor stores went along with the new law in return for a promise that retail grocers wouldn't continue a county-by-county effort to vote "dry" counties wet and thus open them to competition to liquor stores perched at their borders — such as the Conway County liquor stores that do huge business with people from "dry" Faulkner County.
Liquor stores say they already are harmed by beer sales in grocery stores, often marked lower than liquor store beer, and that expanded wine sales hold the same peril to them.
Miller said the key question on the injunction was whether the alleged inequities were so great the liquor stores were likely to prevail on the merits at trial. He said they did not demonstrate a likelihood of success.
He specifically rejected a claim that the new law was in conflict with an earlier law generally restricting the number of permits to distribute wine, spirits or malt liquor. The more recent specific statute prevails, he said. He wrote: "Act 508 leaves no doubt that the legislature intended to change Arkansas law to permit grocery stores to sell wine."
He also rejected an argument that the law was limited to a single grocery store, rather than a number in a chain. He said "the plain language of Act 508 demonstrates that
multiple, distinct locations of chain grocery stores are not prohibited from obtaining permits to sell wine" without regard to common ownership. He noted that each store must order wine individually, not as part of a chain order.
In rejecting the equal protection argument, the judge said legislatures are accorded great "deference" on economic issues and business regulation.
To prevail, plaintiffs must show that the difference in treatment given to the classes is not rationally related to any legitimate governmental interest.
But the judge noted that differences in regulation
stem in part from different merchandise. Grocery stores won't sell spirits. Furthermore, a grocery store may realize no more than 20 percent of revenue from alcohol sales, where a retail liquor store can receive virtually all its revenue from that source. He wrote:
Even if retail liquor stores and grocery stores are similarly situated, the record indicates there is a rational relationship between Act 508 and a legitimate governmental interest. Act 508, in part, is intended to raise revenue for the state. See Ark. Code Ann. §3-5-1802(e) (“One hundred percent (100%) of the fee shall be paid into the Arkansas Wine Grants Fund.”). As Director Casteel testified, the collection of grocery store wine permit fees raises money that has been appropriated by the Arkansas legislature to support Arkansas wine production and tourism. (“All the money goes to the Wine Grants Fund.”). This, in turn, directly supports agriculture and tourism across the state. Moreover, the legislature may have rationally concluded that grocery stores, which may not sell liquor and which may sell other, non-alcohol-related items, need not be regulated as stringently as liquor stores, which may sell liquor and which may not sell other non-alcohol-related items.
The judge sent the case back to Pulaski Circuit Court, where it was originally filed. The ABC Board will meet on pending permit applications Wednesday, ABC Director Mary Robin Casteel confirms.
owner of 107 Liquor in Sherwood,
a lead plaintiff in the suit, said lawyers were reviewing the situation, but "it's not looking good." He said the suit was "kind of our last ditch effort to create a level playing field." He said he expected the ABC to approve permits Wednesday, as it is required to do, and for grocery stores to begin wine sales Thursday. Some liquor stores, depending on proximity to new wine outlets, will feel the pain worse than others, he said.
In Arkansas's hyper-regulated environment, the change might produce some price competition on popular wines, but I can also see where more outlets might actually reduce wine options. Liquor stores that have built strong wine businesses with broader
choice might be damaged competitively and less able to invest in broader offerings. Time will tell.
Crow agreed with my prediction that, in time, the retail chains would be back with a plan to add liquor and spirits to their offerings, as chain stores in many other states already do.