HOUSE MEMORIAL 88

49th legislature - STATE OF NEW MEXICO - first session, 2009

INTRODUCED BY

Jim R. Trujillo

A MEMORIAL

REQUESTING THE INTERIM LEGISLATIVE REVENUE STABILIZATION AND TAX POLICY COMMITTEE TO STUDY THE POSSIBLE NEED FOR CHANGES TO THE WHOLESALE AND RETAIL PRICING STRUCTURE OF ALCOHOLIC BEVERAGES IN ORDER TO ENSURE COMPETITIVE MARKETING AMONG RETAILERS AND TO REGULATE THE PROLIFERATION OF LOW-COST ALCOHOLIC BEVERAGES.

     WHEREAS, in the exercise of the state's police power, the legislature may strictly regulate the sale, service, possession and consumption of alcoholic beverages; and

     WHEREAS, the sale, service, possession and consumption of alcoholic beverages at each level of distribution are regulated in New Mexico; and

     WHEREAS, New Mexico regulates certain trade practices of and between manufacturers, suppliers, wholesalers and retailers of alcoholic beverages to prevent unfair competition; and

     WHEREAS, New Mexico does not regulate the pricing practices between wholesalers and retailers of alcoholic beverages; and

     WHEREAS, wholesalers in New Mexico offer incentives or discounts on alcoholic beverages to retailers who place large-volume orders or have multiple outlets for the sale of alcoholic beverages; and

     WHEREAS, wholesalers do not offer similar incentives or discounts on alcoholic beverages to small-volume and individual retailers, resulting in the sale of alcoholic beverages to small-volume and individual retailers at prices higher than to large-volume or multiple-outlet retailers; and

     WHEREAS, large-volume retailers, due to incentives and discounts on their purchase of alcoholic beverages and their ability to spread profit margin over a large inventory that in many cases includes non-alcoholic beverage products, are able to sell alcoholic beverages to consumers at below cost or at cost or at a lower markup and lower prices per product line than small-volume retailers; and

     WHEREAS, the differential in wholesale pricing structure between large- and small-volume retailers puts small-volume retailers at a competitive disadvantage; and

     WHEREAS, the lower prices offered by large-volume retailers encourages more sales and consumption of alcoholic beverages; and

     WHEREAS, prior to 1966, New Mexico laws did regulate the pricing between wholesalers and retailers by requiring uniform minimum fair trade prices and mandatory minimum markups, but the approach to fair trade represented by those laws was found by the state supreme court, in Drink, Inc. v. Babcock, 77 N.M. 277, 421 P.2d 798 (S. Ct. 1966), to be an inappropriate exercise of the state's police power; and

     WHEREAS, the supreme court, in Drink, Inc. v. Babcock, also held "that the legislature has the power to act on the subject of below-cost sales and their effect on free competition, and may adopt legislation relating to the establishing of prices on alcoholic beverages with the view and purpose of regulating and controlling the liquor business in the interest of the public welfare";

     NOW, THEREFORE, BE IT RESOLVED BY THE HOUSE OF REPRESENTATIVES OF THE STATE OF NEW MEXICO that the interim legislative revenue stabilization and tax policy committee be requested to conduct a study of the wholesale and retail pricing structure of alcoholic beverages in New Mexico, the lack of fair competition in the retail sale of alcoholic beverages and the effects of this unfair competition on the proliferation of alcoholic beverages in New Mexico and to develop recommendations to address those effects; and

     BE IT FURTHER RESOLVED that the committee make specific

recommendations for changes needed in the constitution of New

Mexico, the Liquor Control Act and alcoholic beverage sales regulation and endorse legislation to enact these changes; and

     BE IT FURTHER RESOLVED that copies of this memorial be

transmitted to the chair of the interim legislative revenue stabilization and tax policy committee, the co-chairs of the New Mexico legislative council and the director of the legislative council service.

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