An End to Out-of-State Beer?

by Michelle Minton on November 8, 2010 · 1 comment

in Nanny State, Personal Liberty, Regulation

Would you be steamed if you couldn’t buy Anchor Steam (of San Francisco, CA), or go into a flying rage without Flying Dog (of Maryland)? Would you go bonkers without Brooklyn beer (of NY)? Well, if you care about craft beer, you should be worried about the CARE Act, currently under consideration by the U.S. Congress. The proposal could put your favorite out-of-state brew off the menu.

Over the last 20 or 30 years, the United States has seen a massive increase in the number of microbreweries in the last decade. Your choices at a bar are no longer between the four or five most popular brews in the country (Bud, Busch, or Miller); many bars pride themselves on offering a wide variety of on-tap beers from smaller producers and stocking bottles from around the country.

That could soon come to a grinding halt.

Dogfish, Bells, Daschutes, Full Sail, Clipper City, Brooklyn Brewery, Stone, and Rogue are some of the brews that might have a harder time turning a profit and getting widespread distribution for their products if Congress passes a bill giving states the authority to discriminate against out-of-state producers of liquor, wine, and beer. The current iteration of such a proposal is the “CARE” Act of 2010, currently under consideration in the U.S. House of Representatives.  As described here, H.R. 5034, the Comprehensive Alcohol Regulatory Effectiveness Act of 2010 would:

Allow states to ignore the Commerce Clause of the United States Constitution, as well as a number of other federal laws — including anti-trust laws.  States could then impose a host of protectionist regulations that impede interstate commerce to serve special interests within their states.  These regulations could impede direct shipping of wine to consumers, create a patchwork of labeling and product formulation mandates, impose discriminatory tax policies, and more.

The CARE Act is a response to a Supreme Court decision, Granholm v. Heald, in which the Court ruled that states could not pass laws that discriminate between in-state and out-of-state wineries in violation of the Commerce Clause of the Constitution. While the ruling was specifically about wine, it should apply to all types of alcohol.

If the CARE Act or a similar bill passes, allowing state regulators to discriminate between in and out-of-state producers, it could potentially bar out-of-state beers, ensuring a captive market for home-state breweries. Not only would this eliminate certain beers from the market, but also it would likely increase the price of those out-of-state brews that could make it in as they’d likely pay a fee (aka a tax) for the privilege of competing with in-state breweries, vineyards, or distilleries. It would also mean an end to online sales of alcohol.

As noted by Rick Gideon over at Mutineer Magazine, it isn’t just beer that’s at stake. Wine and liquor have just as much to lose.

Small wineries are especially susceptible to this legislation, which could potentially take away their ability to offer wine clubs and other direct-to-consumer services. These channels allow them to service their patrons better than they might be able to through the traditional distribution system.

This bill also has liquor producers campaigning against passage. Some allege that states might alter definitions of certain spirits, such as Kentucky Bourbon, and even dilute some styles. They’re also concerned about states requiring particular labeling standards, and regulating how brands are allowed to advertise.

So, who is backing this push? The biggest push has come, unsurprisingly, from beer distributors — those folks who act as middlemen between producers of alcohol, like breweries, vineyards, and distilleries and retailers, such as your corner liquor or grocery store. As Gideon notes:

The National Beer Wholesalers Association is lobbying heavily in favor of the bill and has already contributed to the coffers of bill cosponsors. The NBWA claims they’re only trying to ensure states have better control in defending their alcohol laws, but bill critics claim that the NBWA is only trying to limit competition. Jonathan Yarowsky, lobbyist for the Beer Institute, states that brewers believe the bill “would lead to a protectionist and anti-competitive system that would hurt consumers.”

While the bill is still in committee and has no companion legislation in Senate, lover of beer, wine, spirits, and liberty ought to keep a close eye on this one.

Free Market Underdog November 10, 2010 at 6:50 am

Does the U.S. Congress have any regard whatsoever for the Constitution?!? As usual, it's the large corporations that get special treatment, and the small companies that get an unfair playing field.

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