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West Virginia Wholesalers Take Aim At Newcomer Johnson Bros. In Lawsuit

July 12, 2017

Six West Virginia wine distributors have filed a lawsuit alleging that fellow wholesaler Johnson Brothers Liquor Co. and its West Virginia subsidiary, Mountain State Beverage, have attempted to monopolize wine distribution in the state under the guise of market consolidation.

According to the suit, Mountain State (before and after its 2016 acquisition by Johnson Brothers) used anticompetitive practices to corner over half of the West Virginia market. It accuses Mountain State of “operating at a loss to drive competitors out of business; paying fees and employing other tactics to induce suppliers to refuse to do business with competitors; telling other distributors’ customers that those distributors would soon be driven out of business, to pressure them to end their relationships with those distributors and switch to Mountain State; and putting similar pressure on other distributors’ employees to quit their jobs.”

Further, the suit alleges that after Johnson Bros. took control of Mountain State, it then pushed the remaining competition to sell out to Johnson well below market value. Bailey & Glasser LLP filed the suit on behalf of J.C. Distributing, Wine and Beverage Merchants of West Virginia, Atomic Distributing Company, Beverage Distributors, Inc., Jo’s Globe, Inc. and Martin Distributing Company.

In addition to alleging anticompetitive and monopolistic business practices, the suit asserts that Johnson Bros.’ acquisition of Mountain State violates West Virginia’s prohibition on wine manufacturers owning wine distributors. Johnson owns supplier Prestige Wine & Spirits, whose brands are distributed by Mountain State. Johnson Bros. didn’t respond to a request for comment.

While West Virginia is a control spirits market, its wine category grew by 1.4% to 446,000 nine-liter case last year, according to Impact Databank, making it the second-smallest wine market in the U.S. —Shane English

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