Spitzer’s Liquor Prices
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

Attorney General Spitzer is turning his attention to wholesalers of alcoholic beverages, arguing that they are violating the state’s liquor laws by offering deep discounts and other promotional perks to preferred customers, typically large retailers. The move follows his attacks on companies that delivered mail-order cigarettes to customers and radio stations that accepted gifts from record companies in exchange for spinning certain disks. No business is safe, it appears, if it’s offering a lower price or even just engaging in normal marketing. It seems to preoccupy the attorney general more than, say, Medicaid fraud.
The liquor case centers on a provision in state law that prohibits wholesalers from offering inducements like discounts or gifts to retailers. Wholesalers might offer discounts of as much as 80% to stay in the good graces of a large retailer or, in the case of “tie-ins,” to move a less popular product by making retailers purchase some of the less popular brand in order to receive a discount on a more popular label. As a two-part series in the Buffalo News noted over the summer, such practices appear to be widespread even though they’re illegal in New York.
Defenders of the rules, including smaller retailers that might not qualify for the bulk discounts the wholesalers stand accused of offering, argue that the current laws are good for consumers. The deep discounts generally are not passed on to consumers, in part because the discount ing is illegal and significantly lower retail prices at an establishment would make it too obvious that this is going on. At the same time, all the perks are expensive and their cost gets built in to the prices the wholesaler charges, which are passed on to consumers.
So if consumers are being hurt here, the law is to blame. Absent the prohibition on this kind of “payola,” retailers would have an incentive to pass the discounts on to consumers. Before anyone gets too upset about the “costs” of these promotions being passed along, consider also that the price a consumer pays for most products includes marketing expenses. At least in his crackdown on mail-order cigarettes Mr. Spitzer could argue that he was protecting the state’s coffers from “tax evaders,” though the commerce in question arises from tax competition spurred by the state’s outrageous abuse of excise.
In this case, as in his pursuit of record labels that “pay for play,” Mr. Spitzer is latching on to an antiquated law in an apparent effort to boost his profile. Just as the laws against payola in the radio business were designed to protect consumers in a long-ago time when a handful of radio stations presented the only listening options, the laws Mr. Spitzer seeks to apply here are 1930s-era rules that tried to enshrine vestiges of Prohibition. The practices at issue may technically be illegal. But Mr. Spitzer has prosecutorial discretion and bigger fish to fry. Did we mention Medicaid fraud?