Liquor War to the Finish?

New York City is the greatest single liquor market in the U. S. It is also paradise for liquor retailers, whose 40% markup is the country's highest. Ever since New York State legislators passed the Feld-Crawford Act (1935) New York City has also been No. 1 test tube for price-fixing laws. Under the Act (similar to price-fixing laws in 42 other States), prices of all trademarked articles can be price-fixed "vertically" by agreement between manufacturer and retailer.

In five years of Feld-Crawford, hundreds of retail liquor price wars have been nipped in the bud. Under threat of injunction, "chiselers" were forced to get back in line. But last week New York drinkers enjoyed the best price war yet. For the third successive week prices were 30 to 40% below fixed levels. Many New Yorkers, who had often spent $1 tunnel fare to buy their liquor in New Jersey, bought around the corner, rubbed elbows with Jerseyites buying in Manhattan. Fearing the price war might end any minute, they sent sales sky high.

But the war did not--and may never--stop. Reasons: 1) The distillers, who never lose by retail wars, refused to crack down this time because, having just finished a poor summer, they like the sales boom. 2) The Metropolitan Council of Liquor Package Store Associations, usually quick to pounce on price cutters, suddenly discovered their guns were jammed and someone had stolen their badge.

Soon after Repeal, licensed New York retailers formed the Council, whose 900 members are 80% of the city's stores, half all those in the State. Already semi-monopolies because of State licensing laws, councilmen saw a chance to make real money when the Feld-Crawford Act was passed. Negotiating with the distillers, they obtained a uniform 40% retail markup, a 4 to 20% discount for large purchases besides. Under this scheme Council members could buy $1 liquor from the distiller for as little as 80-c-, resell it for $1.40, while their operating costs averaged less than 20-c- a bottle. When the distillers suggested a smaller margin, the Council said "no," even talked about 50%.

Among the "chiselers" to take advantage of this frozen price situation was a midtown Manhattan shop, Quality House. Last spring, selling well under list, it was haled to court. The store's attorney was slight, fast-talking Charles W. Newmark, formerly an aide of Gangbuster Tom Dewey. He began looking for an angle. On May 23 he found it, rocked the Council on its heels by charging restraint of trade. "By threatening to boycott distillers' brands," said he, "[the Council has] compelled and coerced distillers and distributors to adopt this agreed-upon markup of 40%." This was "horizontal" price-fixing, "in direct violation of Feld-Crawford Law. The public, of course, is the victim."

Next month, Newmark's angle became a crowbar. The Federal Trade Commission took it up, aimed it straight at the Council's entire 40% machine. Councilmen denied the charges, wailed: "It is the distillers who establish resale prices."

Last week, badly scared, the Council ran for cover. It dropped its charges against Quality House (and two other stores), let them sell at any price they wished. To low-price retailers (like Macy's), who have fought price-fixing for five years, this was cheerful news--a big hole in the armor of all price-fixing theorists. To New York State legislators it looked as though a major operation would have to be done on the battered Feld-Crawford Act.

It also suggested changes to legislators in other price-fixing States--Ohio, for example, where price-fixed Maxwell House Coffee costs about 31-c- (instead of 24-c- elsewhere). Meanwhile New Yorkers, not suspecting what they had started, continued storming cut-rate liquor stores.

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