03/28/2008 02:45 am ET | Updated May 25, 2011

Costco Starts A Barroom Brawl

One of the perceived social ills inspiring Prohibition was the owning of bars by brewers. To the Anti-Saloon League and like-minded groups, this arrangement promoted alcoholism. They made the case so effectively that, even after Prohibition was lifted in 1933, most states insisted on keeping alcohol makers far away from alcohol sellers. The favored solution: a three-tier distribution system requiring manufacturers to sell to wholesalers, and wholesalers to sell to retailers.

That structure is still in place in most states today. But a closely watched federal court case filed in Seattle is now challenging the three-tier regime as outdated and anticompetitive. In 2006 Issaquah (Wash.)-based club store Costco Wholesale (COST) won an antitrust lawsuit challenging its home state's three-level arrangement. The state then appealed, arguing that the 21st Amendment ending Prohibition gave states the authority over alcohol regulation.

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