In the June
2011 issue of the Michigan Beer and Wine Wholesalers Association (MBWWA) newsletter,
President Michael Lashbrook reaffirmed his organization’s endorsement of the
Community Alcohol Regulatory Effectiveness (CARE) Act of 2011, which would
strip away the protections alcoholic products currently have under federal law
against discriminatory state-based regulations. Lashbrook said the CARE Act
simply “reaffirms that alcohol is different from other consumer products and
should continue to be regulated by the states.” In reality, wholesalers in
Michigan and around the nation are trying to protect their regional monopolies
on alcohol distribution by preventing consumers from purchasing beer, wine, or
spirits in a free and competitive market.
It’s time for consumers to push back. However, it won’t be
easy, as the MBWWA, like alcohol wholesalers across the country, has long gone
to great lengths to protect its monopoly. To see just how far, consider its
reaction to the U.S. Supreme Court’s 2005 ruling, Granholm v. Heald, which declared
Michigan’s alcohol laws “discriminatory,” and said that if state regulations allowed
in-state retailers to ship directly to consumers, then it would have to allow
out-of-state retailers and vineyards to do the same.
The wholesalers, rather than try to seek new growth
opportunities in direct shipping, decided to squelch any new competition. In
late 2008, Michigan lawmakers
rushed through the Legislature a MBWWA-endorsed bill (House Bill 6644) banning
direct-to-consumer shipping of wine within the state. Legislators in Michigan,
who collectively received almost $600,000
in campaign donations from MBWWA in 2008, introduced, voted on and
enrolled the measure in a mere five
legislative days. Before the shipping ban, retail liquor shops in Michigan,
all of whom purchased their inventory from MBWWA members, could legally sell
and ship those products directly to consumers. Rather than lose their monopoly
control over the beer and wine market in Michigan, the MBWWA worked to end
direct sales for everyone.
MBWWA
President Michael Lashbrook said his group supported the shipping ban out
of a desire to “stop dangerous products from reaching consumers and alcohol
from falling into the hands of minors.”
As an industry, wholesalers — that is, middlemen — are protected
by regulation. Under the mandatory three-tier distribution system, alcoholic
beverage producers — vineyards, brewers, and distillers — may not sell their
products directly to retailers and consumers.
That arrangement, the result of political compromises related
to the repeal of Prohibition, for years has given the wholesalers the power to
determine which products were sold in stores or on tap in their area. It also
made it nearly impossible for consumers to get their hands on the particular
brands not carried by the wholesalers.
Today, Prohibition is long gone, and the mandatory three-tier
system makes less sense than ever. Consumers can go online and order groceries
from a store down the street or a pair of shoes from halfway around the world
and have all of it delivered to their front door. Yet, in many states, consumers
who wish to purchase a special bottle of wine have to physically walk into a
store or onto a vineyard. Such restrictions exist not to protect consumers, but
wholesalers who see direct shipping as a threat to their profits, and therefore
lobby state legislators to ban on direct-to-consumer shipping.
In his commentary Lashbrook scoffed at those opposing
the CARE Act, in particular suppliers whom he said, “have designs on shifting
regulation back to the federal level where they believe they can have more influence
and control.” This rationale is laughable from an organization that has a long
history of influencing regulation.
Beer and wine wholesalers comprise one of the
nation’s most powerful lobbies, giving huge amounts of money to political
campaigns. Since 2000, the National Beer Wholesalers Association has given
more than $5.6
million in federal campaign donations, while the Wine and Spirits
Wholesalers of America has given almost
$10 million during that same period.
Wholesalers are especially powerful at the state
level. Take Texas as one example. In 2001, wholesalers in the state spent nearly
$1 million in a successful effort to stop a bill that would have allowed
residents to order wine online and have it shipped to their homes. And this
year, the Wholesale
Beer Distributors of Texas helped kill a bill that would have allowed craft
breweries in the state to sell small amounts of beer to their visitors. The
group also gave
hundreds of thousands of dollars to Gov. Rick Perry’s reelection campaign, paying thousands of
dollars for tickets to his invitation-only
events, contributing to a political environment where any bill seeking to
liberate distribution has an uphill battle. In 2007, the state’s Sunset
Advisory Commission said the alcohol distribution system in Texas “no
longer serves the public interest and protects the wholesale distributors.”
Wholesalers’ lobbying investments have paid off. When the
CARE Act was introduced in the previous Congress (H.R. 5034
) it garnered more than 150 co-sponsors, including five current U.S. House members
from Michigan: Democrats John Dingell, Dale Kildee and Gary Peters; plus
Republicans Thad McCotter and Candice Miller. Though this version failed to
pass, wholesalers are likely to up the ante on their lobbying to fend off
threats to their privileged positions.
Since the Granholm decision,
several states have legalized the direct shipping of wine to consumers from
both in and out-of-state suppliers. Currently, only 13 completely prohibit
direct shipping. If the CARE Act becomes law, many states likely will reverse
the progress they have made since 2005. Worse, if wholesalers had their way, we
would go back to the way things were prior to 2005, with states discriminating
against out-of-state sellers, leaving consumers with only the options that
state government and the Wholesalers allow.
~~~~~
Michelle Minton is director of
insurance studies for the Competitive Enterprise
Institute.
~~~~~
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