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Eby-Brown Co., LLC v. Wisconsin Dept. of Agriculture

July 08, 2002

EBY-BROWN COMPANY, LLC, PLAINTIFF-APPELLANT,
v.
WISCONSIN DEPARTMENT OF AGRICULTURE, TRADE AND CONSUMER PROTECTION AND ITS SECRETARY, JAMES HARSDORF, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Western District of Wisconsin. No. 3:00-C-0718-C--Barbara B. Crabb, Chief Judge.

Before Flaum, Chief Judge, and Bauer, and Ripple, Circuit Judges.

The opinion of the court was delivered by: Flaum, Chief Judge.

As amended August 12, 2002. Petition for rehearing denied.

EBY-BROWN COMPANY, LLC, PLAINTIFF-APPELLANT,
v.
WISCONSIN DEPARTMENT OF AGRICULTURE, TRADE AND CONSUMER PROTECTION AND ITS SECRETARY, JAMES HARSDORF, DEFENDANTS-APPELLEES.

Appeal from the United States District Court for the Western District of Wisconsin. No. 3:00-C-0718-C--Barbara B. Crabb, Chief Judge.

Before Flaum, Chief Judge, and Bauer, and Ripple, Circuit Judges.

The opinion of the court was delivered by: Flaum, Chief Judge.

ARGUED MAY 15, 2002

The appellant, Eby-Brown Company LLC ("Eby-Brown"), a distributor of tobacco products in the state of Wisconsin, appeals the district court's grant of summary judgment against it. According to Eby-Brown, a Wisconsin statute that prohibits unfair pricing violates the equal protection, due process, and commerce clauses of the Constitution. For the reasons stated below, we affirm the district court's decision.

I. BACKGROUND

Eby-Brown is a wholesale distributor of tobacco products, food items and sundries. It sells its products to individual retailers, such as gas stations, convenience stores and larger retail establishments. Eby-Brown claims that tobacco products form an important part of its business with these entities, such that if Eby-Brown's tobacco prices are more competitive than other wholesale distributors, it will gain the lion's share of the food item and sundry business.

Wisconsin statutes recognize two distinct types of cigarette wholesalers: permit holders and jobbers. *fn1 A permit holder is licensed to affix revenue stamps upon cigarette packages. Wis. Stat. § 139.30(3). Jobbers are not permitted to affix such stamps and must instead purchase stamped products from permit holders. Wis. Stat. § 139.30(6). Eby-Brown is a permit holder. The state of Wisconsin also makes a distinction between "retailers" and "multiple retailers." Under statutory definitions, a "retailer" is any person who acquires stamped cigarettes with the intent to sell them to consumers. A "multiple-retailer" is any person who acquires stamped cigarettes and "stores . . . and sells them to consumers through 10 or more retail outlets which he or she owns and operates within or without this state." Wis. Stat. § 139.30(8). Eby-Brown markets cigarettes to both "retailers" and "multi-retailers."

Eby-Brown, and indeed all wholesalers doing business in Wisconsin, are subject to that state's Unfair Sales Act ("Act"). Wis. Stat. § 100.30. The stated policy behind the Act is to disallow "[t]he practice of selling certain items of merchandise below cost in order to attract patronage . . ." because such conduct "diverts business from dealers who maintain a fair price policy." Wis. Stat. § 100.30(1). In essence, the Act prohibits retailers and wholesalers from selling products below the minimum price defined by the statute, which the Act refers to as the "the cost to wholesaler." In determining the minimum price at which they may sell products, wholesalers may not deduct any rebates given to them by manufacturers for the payments they made in cash *fn2 or any other manufacturer's discount.

The Act also creates distinctions between general wholesalers and those entities that sell tobacco (and in certain circumstances liquor and gasoline). For example, licensed cigarette wholesalers, like Eby-Brown, who are permitted to affix stamps to cigarette packages, are not permitted to deduct any trade discount from their "cost to wholesaler" figure. Wis. Stat. § 100.30(2)(c)1.b. Other wholesalers, including those wholesalers of tobacco that are not authorized to affix revenue stamps, are permitted to deduct trade discounts from their "cost to wholesaler" figure. *fn3 Additionally, all tobacco wholesalers must include a mark-up for the "cost[s] of doing business." Id. *fn4 Generally, this ...


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