3 Tier System Replaced by Wholesaler Protection System
On December 5, 1933 the 21st Amendment to the U.S Constitution was fully ratified. Commonsense, along with the effects of the Great Depression, finally put an end to constitutionally endorsed prohibition on the sale of alcohol in the United States and the most radical reaction to a social problem ever attempted in this country. However, the greatest legacy of Repeal is not the re-balancing of commonsense that came with the reintroduction of capitalism to to the alcohol sector of the marketplace, but rather long-term installation of the three-tier system and the market-inhibiting and diminishment of entrepreneurial possibilities that came with it and still reside with us today.
The 3-tier system was put in place in nearly every state following repeal in order to assure that producers,
wholesaler, and retailer were kept separate where ownership was concerned. Given the experience of pre-Prohibition marketing practices it was assumed that unless a strict separation was imposed between the three tiers of the marketplace, then the inevitable vertical integration of the alcohol business would result in extreme marketing practices that in turn would lead to the kind of excessive consumption that was instrumental in leading to Prohibition. Without separation of the tiers, it was assumed, large producers would exert excessive control over retailers and taverns, forcing them to either only sell their products or to sell them in ways that encouraged excessive consumption.
This separation of the tiers was the primary reason for state legislators turning to the three tier system after Repeal. And the fact is, it made sense as long the market remained as it was in 1933 and your goal was to reign in excessive marketing practices that resulted from vertical integration of the wine industry.
Of course the world is different now than in 1933.
Tomorrow, 76 years after Repeal, seven and a half decades after repeal, three-quarters of a century after repeal, you no longer have simply a "Three Tier System" (TTS). That system has morphed into a market diminishing, protectionist, amalgam of laws better described as "The Wholesaler Protection System" (WPS).
Somehow the goal of preventing vertical integration between the tiers morphed into the goal of assuring wholesalers receive a cut of every bottle of alcohol sold, whether they need be brought into the transaction or not. Yes, the current WPS prevents vertical integration by continuing to prohibit common ownership between the tiers. But you have to ask yourself if the legislators who crafted the creation of the three tier system in 1933, legislators born in the 19th century, legislators who could not imagine a logistics system that would allow the shipment of wine from producer or retailer to consumer, would have ever imagined there would ever be a market for the direct shipping of wine? The question is rhetorical.
There is nothing about the remaining prohibitions on direct shipment from wineries to consumers in 13 states or the prohibitions on direct shipments from wine merchants to consumers in 37 states that advances the primary goal of the three tier system to prevent vertical integration of the three tier system.
As for the claim that the three tier system prevents minors from getting their hand on alcohol, anyone with limited access to the logical processes of the mind or the ability to look over statistics will tell you that there is no relationship between preventing minors from accessing alcohol and preventing the vertical integration of the producer, wholesale and retail tiers of the alcohol distribution system.
Repeal is an important moment. And I can't think of a better day to have celebration. But for wine lovers and for craft beer lovers, it might be a day to keep in mind that the amazing expansion of craft products that has occurred over the past 20 years, an expansion that clearly could not have happened without repeal, is an expansion that can't be taken advantage of as long as the original Three Tier System has morphed into the Wholesaler Protection System.