Why Independent Retailers Should Support H.R. 5034

Spring 2010

More than 25 states have been sued over the past 10 years regarding their authority to regulate alcohol and maintain a licensed system of alcohol controls. These lawsuits have been brought by private interests that would like to deregulate the state-based system of alcohol regulation by dismantling the license system through litigation. In fact, the stated objective by one of the leaders of this effort is to bring about alcohol "anarchy,” while another has voiced his intent to “keep suing” states until they reach this goal. The National Beer Wholesalers Association (NBWA) has been proud to work with the America’s Beverage Licensees (ABL) in responding to these litigation threats.

Recently, the ongoing legal challenges threatening states’ authority to regulate alcohol has caught the attention of lawmakers on Capitol Hill. NBWA was pleased that the Courts and Competition Policy Subcommittee of the House Judiciary Committee held a hearing on March 18, 2010, regarding “Legal Issues Concerning State Alcohol Regulation.” The hearing featured testimony from a wide range of sources – including a state regulator, a former regulator, a state’s solicitor general and constitutional expert, an antitrust professor, a beer industry member as well as several members of Congress. There was a robust discussion about the issues related to alcohol deregulation and the problems resulting from continuing litigation against the states. A number of members of Congress expressed a desire to explore federal legislation to address the important balance between effective state-based regulation and competition which would mitigate the litigation threat facing states.

Just about a month after the hearing, on April 15, 2010, a bipartisan group of four members of Congress introduced H.R. 5034, the Comprehensive Alcohol Regulatory Effectiveness Act of 2010 or “CARE Act.” This legislation which seeks to reaffirm state-based alcohol regulation was introduced in the U.S. House of Representatives by Rep. Bill Delahunt (D-MA), Rep. Howard Coble (R-NC), Rep. Mike Quigley (D-IL) and Rep. Jason Chaffetz (R-UT).

The CARE Act aims to clarify congressional intent that states have primary authority to regulate alcohol; prevent the additional erosion of state-based alcohol regulation through the expansion of the 2005 Granholm v. Heald decision; and clarify that state alcohol laws are presumed to be valid and that plaintiffs should have the burden of proof. At the same time, the legislation preserves state laws that allow direct-to-consumer shipments of wine by specifically prohibiting facial discrimination against out-of-state producers.

The bill would also help states fight litigation by virtual retailers that seek to render licenses meaningless by their attempts to secure the right to sell alcohol to the public without having to follow the same laws as brick and mortar retailers. Much has been said about the disorderly market in the United Kingdom and its implications on society, but one aspect that merits specific attention is the impact on alcohol retailers. The U.K.’s deregulated marketplace that relies solely on high taxes to control the product has devastated small independent operators of alcohol establishments. With nearly 80 percent of alcohol sold through four retailers, there is no level playing field between independent retailers and large, international chain retailers and six pubs a day close. H.R. 5034 will prevent the same thing from happening in the United States by preserving a regulated industry and protecting the level playing fields that exist in each state.

Beer distributors have been meeting face-to-face with their elected officials and telling them firsthand about the need for Congress to help prevent the erosion of the states’ ability to regulate alcohol by clarifying its intent that states have the primary authority to regulate alcohol and reaffirming its commitment to effective state-based regulation which promotes responsible consumption and maintains an orderly market. Specifically, members of NBWA expressed their support for H.R. 5034 and asked their members of Congress to join as an ally in preserving the time-tested system of state-based regulation by cosponsoring the bill.

As long-time supporters of state-based alcohol regulation and a three-tier system that ensures an orderly market and maintains conditions that help small businesses like those of ABL members grow, independent retailers and beer distributors are strong allies in working to preserve the world’s best system for regulating alcohol.

Just as NBWA looks forward to continuing a successful partnership with ABL, NBWA will continue outreach to Congress, regulators, attorneys generals, state legislators and others in order to protect the U.S. system of state-based regulation that has balanced the public’s interest in effective regulation with the consumer’s desire for choice and variety for more than 75 years.

###

National Beer Wholesalers Association President & CEO Craig Purser provides industry commentary each quarter for ABL Insider, a publication of American Beverage Licensees (ABL), a national trade association for retail alcohol beverage license holders across the United States. Each column provides insight on issues of concern to beer distributors, their retail partners and others in the alcohol beverage industry. To learn more about ABL Insider, please visit http://ablusa.org/news/abl-insider.