Wine Reforms, State Power and Blackmailers
The battled over H.R. 5034, the bill in Congress being pushed exclusively by beer and wine middlemen, has resulted in some misconceptions and misunderstandings regarding the state of alcohol regulation in America, the meaning of the Constitution and just who is pushing for change.
DEREGULATION vs. REFORM
Wholesalers have been consistent in their messaging over the past year or so. They argue that elements of the American alcohol industry want to "deregulate" the sale and distribution of alcohol and have wanted to do so for many years. Why the state-mandated middlemen would offer up such blatant lies such as this is understandable. "Deregulation" where alcohol is concerned is a scary idea. It suggest a free-for-all in the sale and distribution of alcohol.
But of course no one is suggesting that the sale of alcohol be "deregulated". Even in Washington State, where Initiative 1100 would create major changes, deregulation isn't the issue. Nor do the calls to allow direct shipment of wine to consumers amount to "Deregulation".
What we are talking about here is REFORM. And the basic structure of the American alcohol regulatory system is in desperate need of reform. That basic structure was created 75 years ago when Prohibition ended. A few things have changed since then. Not the least of these changes are Americans enthusiastically adopting wine, the monumental increase in the number of wines in the American marketplace, the revolution in logistics and shipping, the emergence of instant communications and information distribution via the Internet, and the monumental consolidation at the state-mandated wholesale tier of the alcohol industry. Wholesalers act as though nothing has changed since 1933.
Wholesalers, who are the state-mandated bottleneck in the distribution system, conspire to assure that no reform occurs and call any changes "deregulation" as a way to scare and dupe the lawmakers that oversee alcohol regulations in the states and at the federal level. Personally, I don't think lawmakers are as stupid as the wholesalers give them credit for being by asking them to believe that simple, small reforms amount to "deregulation". I think lawmakers understand perfectly that wholesalers are trading in hyperbole in order to protect their own financial interests.
Simple reforms to the state-based alcohol regulatory systems are necessary in order to promote entrepreneurship, innovation, consumer access to products and to assure states are able to collect all the alcohol taxes they have a right to. But deregulation? No one wants it.
STATE vs. FEDERAL POWER
Another misconception and misunderstanding that has been promoted in the midst of the HR 5034 battle is the degree of power states supposedly have with regard to alcohol regulations. Again, the wholesalers would have us believe that the states were given carte blanche control over alcohol regulations as a result of the 21st Amendment.
The history of the 21st Amendment that ended Prohibition is very complex. The meaning of the 2nd paragraph of this amendment is mixed up with earlier laws and acts of Congress. But what is absolutely clear is that the 21st Amendment does not trump the rest of the U.S. Constitution. According to the wholesalers' interpretation of the 21st Amendment, a state has the power to prohibit women, African-Americans and senior citizens from owning liquor stores just as they have the power to discriminate against out-of-state businesses because, they argue, the 21st Amendment gave the states total and complete control over the sale and distribution of alcohol.
This is of course absolutely incorrect. The 21st Amendment did nothing of the sort. The 21st Amendment did two things: 1) End national Prohibition and 2) gives those states that sought to remain dry the constitutional right to protect that decision.
With HR 5034, wholesalers have attempted to convince Congress that it was always the intent of Congress going back decades to allow the states to do whatever they want with regard to alcohol. HR 5034 would in fact allow states far more power to regulate alcohol to the point of actually stripping parts of the industry of their vital protection from discrimination under the Commerce Clause of the Constitution—a move so radical that it has only happened one other time in the history of the United States when the Insurance industry was stripped of its Constitutional protection against discrimination by the states in interstate commerce.
BLACKMAILERS vs. BLACKMAILERS
None other than the president of the Wine & Spirit Wholesalers Association, Craig Wolf, has recently argued that the various lawsuits that have challenged discriminatory alcohol regulations in different states amount to blackmail on the part of the litigants. In a recent interview with Kane's Beverage News, Wolf argued those filing lawsuits against states are "blackmailing" them by virtue of the fact that if the litigants win, the states have to pay legal fees to the winners so wouldn't it just be easier to cave in to what those suing the state want and avoid potentially paying millions in legal fees.
What this means, of course, is that Wolf's own wholesaler members are Blackmailers. Wholesalers, like vintners, brewers and retailers, have challenged state laws they didn't like or found burdensome or discriminatory, and have sued states where residency requirements keep wholesalers from opening up new branches in those states. Interestingly, when Wolf and the Beer Wholesalers argue that these lawsuits are terrible and hurting the states, they never mention that their own members have sued states too.
1. It's "Reform", Not Deregulation
2. The Power of States to Regulate Alcohol is Not Unlimited
3. Wholesalers Are Blackmailers Too.