01-4304 Eby-Brown Co., LLC v. Harsdorf

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“The state of Wisconsin permissibly could have concluded that licensed wholesalers of tobacco, as opposed to wholesalers of other products, should not be allowed to deduct trade discounts when they determine their ‘cost[s] to wholesaler.’ Compare, Wis. Stat. sec. 100.30(2)(c)1.b. with Wis. Stat. sec. 100.30(2)(c)2. Given the relatively small profit margins that exist for wholesalers of tobacco (resulting in an extremely competitive sales price offered to retailers), the state of Wisconsin could have concluded that trade discounts constitute a way for predatory wholesalers in the industry to artificially depress their prices for short periods to steer business away from other wholesalers. Similarly, the distinction that the state has drawn between licensed tobacco wholesalers, who are not allowed to deduct trade discounts when they determine their ‘cost to wholesaler,’ and unlicensed tobacco wholesalers (‘jobbers’) seems rational. Licensed wholesalers have primary contact with cigarette manufacturers. They could conceivably use trade discounts to temporarily deflate prices and increase demand for the cigarettes that they (and not the smaller ‘jobbers’) sell to retailers. Jobbers are not authorized to affix stamps to cigarette packages and do not generally purchase cigarettes directly from the manufacturers. This is because ‘jobbers’ can only sell cigarettes that are affixed with revenue stamps. As a result, jobbers generally must acquire cigarettes from licensed wholesalers before selling them to retailers. Therefore, jobbers almost uniformly lack the means to use trade discounts to artificially deflate their ‘cost to wholesaler.'”

Affirmed.

Appeal from the United States District Court for the Western District of Wisconsin, Crabb, J., Flaum, J.