The CARE Act and the Absurd Claim of “incredible” Consumer Choice

Posted by Tom Wark on Jul 27, 2011

It's notable that as alcohol wholesalers and their advocates defend the three tier system and attempts to prevent any changes or reforms to that system, we see less and less reference to the system's ability to prevent minors from obtaining alcohol. When the direct shipping debate took off in the early 1990s and up until about 3 years ago. we heard wholesalers and their advocates regularly claim that allowing any changes to the three tier system would result in minors having more access to alcohol. This is rarely heard today in defense of this system.

We rarely hear this defense any more because it has been thoroughly debunked by facts, reports and common sense.

However, the new mantra of the anti-reform advocates is this: THE THREE TIER SYSTEM PROVIDES CONSUMERS WITH INCREDIBLE CHOICE.

This claim requires serious debunking for the same reaosn the "minors defense" required it: It's just not true.

Twice, recently, Beer Marketer Insights, an industry e-newsletter has responded to reports on wholesalers' actions by noting that the three tier system provides consumers with great choice.

In response to the release by the Specialty Wine Retailers Association of their report, "Toward Alcohol Domination" that outlined the enormous amounts wholesalers spend on campaign contributions and lobbying, Beer Marketer Insights wrote:

"SWRA never deals with key counterpoint that Americans have incredible choice of beer, wine, liquor under current system."

In response to a devastating report issued by the Competitive Enterprise Institute on Monday entitled, "A CARE-less Rush to Regulate Alcohol", Beer Marketer Insights wrote:

"Not much new here, other than Madison spin, and CEI like others ignores fact that consumers have tons of choice under current system."

There is a fundamental problem with this view:

Where consumer choice in alcohol is concerned, the only familiar system of alcohol distribution that provides less choice to consumers than the three tier system is Prohibition.

Under the three tier system that Beer Insights and wholesalers defend, the only choices that are available to consumers in any given state are those products that wholesalers choose to import into their state and provide to retailers and restaurants. Under this system, it is not the producer that decides whether to make their products available, but whether the wholesaler decides to make it available.

The extent to which any given market has "tons of choice" or "incredible choice" of products has to be wieghed against the number of products that exist in the United States. The products that any set of wholesalers provide in any given state represents only a tiny percentage of what is available in the American marketplace.

If there is "incredible" or "tons" of choice of alcohol products in any state, it exists only because both producers and retailers across the country are allowed to direct ship products into that state legally. Thirty-eight states allow wine producers to ship products into their states. Only 14 states allow out of state retailers to ship in wine.

If you compare what alcohol products were available to consumers in any given state in 1934 when the three tier system was invented after Prohibition with what is available now, then yes, you have "incredible" choice. But such a comparison is academic and not very useful for an understanding of the current American marketplace.

The claim that American have "incredible" or "tons of" choice is every bit as incorrect as the claim that direct shipping would lead to minors getting their hands on more alcohol. Yet this claim is being used daily to make the case for passing the CARE Act (H.R. 1161) as well as defending the wholesalers' position that no reform ought to come to the three tier system or consumer access rights.

This claim must be debunked at every turn not only for the sake of truthfulness but for the sake of consumers, who ought to have the right to access a well-regulated American marketplace for alcohol that gives them a clear choice of products.