Virginia and Maryland alcohol-enforcement agents have conceded defeat to the District in their battle of the bottle, suspending their surveillance of out-of-state consumers at D.C. liquor stores.

The decision followed enactment of permanent legislation by the D.C. City Council banning the practice. The bill, passed in May, took effect July 25 after a period of congressional review.

The Virginia Alcohol Beverage Control Board said yesterday it suspended surveillance operations on the bill's effective date. A spokesman for the Maryland Comptroller of the Treasury's office said it halted the practice Saturday.

Officials of both liquor authorities said no decision has been reached about whether to challenge the new law in court.

For years, revenue agents in both states have arrested consumers who bought more than a fixed amount of liquor and transported it out of the District, where liquor prices traditionally are cheaper and the selection better. The Maryland legal limit is one quart, the Virginia ceiling one gallon.

The states complained they lost millions of dollars in annual tax revenues because of liquor purchasing in the District, particularly during the holidays. D.C. officials and liquor store operators accused state alcohol agents of harassing customers.

Maryland and Virginia took the District to court last December in an attempt to block emergency legislation passed by the city to outlaw the surveillance during Christmas and New Year's. Lawyers for the states argued that the measure amounted to economic protectionism.

A federal judge refused a request for a temporary restraining order, but later threw out the emergency measure on grounds that the District should pass permanent legislation, subject to congressional approval, if it wanted the surveillance stopped.

"It was our position all along that we would comply with the law" if the District enacted a proper measure, said Marvin Bond, a spokesman for the Maryland comptroller general.

Bond said that Maryland, which began surveillance in 1954, has largely succeeded in eliminating "bulk traffic" -- people with pickup trucks -- and "transfer traffic" involving the resale of liquor to retailers in Maryland.

Over the years, Bond said, agents also arrested between 5,000 and 6,000 consumers, "with a grand total of maybe two repeaters. Once people are stopped [by agents] they tend to become educated."

Virginia authorities have said they were losing up to $14 million a year in revenues from Northern Virginia customers buying in the District.