A New (Modern) Framework for Regulating Alcohol

The American system of alcohol regulations is not merely broken, it has become a parody of the idea of control.

What once was supposed to be a post-Prohibition system of regulations to assure the country did not fall back into a free-for-all alcohol market has morphed over the years into a chaotic collection of regulations and laws based on the what the highest bidder wants, on the principle of rent-seeking by the most powerful and politically connected entities in the market and a complicated framework of laws used and amended primarily to attract or maintain the flow of campaign contributions.

One of the best examples of this are the many gatherings or regulators and members of the trade that happen at conventions and symposium throughout the year. The very serious agendas at these gatherings bring together state regulators, members of the industry, association directors and lawmakers.

What’s fascinating, however, is that at these gatherings nearly every panel or seminar is based on the notion of how to apply current law and regulations to a changing economic reality. Almost never is the focus, how should the law and regulations change to accommodate the changing economic and technological reality. It’s a gross disservice to the industry and a pretty pointed indication that the people who produce these conclaves are more concerned with how to make the system work for them than how the regulatory system can work for people of the states they regulate.

And so it begs the question, what principles should govern an early 21st-century alcohol regulatory system? What philosophies should drive laws that attempt to regulate the sale and consumption of alcohol nearly 100 years after Prohibition? In what way has technology and new consumer demand made obsolete the principles that drove the creation of the alcohol regulatory system that was created in the 1930s and largely remains in place today?

Like the post-Prohibition efforts to create a new regulatory paradigm for alcohol, a 21st-century effort to create a framework for alcohol regulation must take into account the failures of the current system. But in addition, that new framework ought to account for modern technologies and their current developmental trajectories, consumer expectations, and the inherent danger to person and community of abuse of alcohol.

Given this, I’d argue that any new regulatory system is best that has the following principles as its foundation:

-Encourage Moderate, Safe Consumption 
-Encourage Competitiveness 
-Generate Revenue
-Encourage Innovation

Built upon these basic principles for alcohol regulations we must have a more detailed set of regulatory conventions that naturally follow from the above principles.

-Strong regulations and laws that deter and punish over consumption

-Producers’ choose their path to market without any regulatory or legal mandates determining that path

-A consumer-centered marketplace requires that intrastate and interstate barriers to market should be avoided.

-Laws and regulations governing the relationship between different actors (producers, wholesalers, retailers) within the industry always avoid dictating terms and length of the contract.

-Strict and simply regulations ought to govern the collection and remittance of taxes 

Clearly, the above set of principles and conventions are designed to avoid protectionist laws, regulations that pick winners, innovation-thwarting legal codes, and today’s anti-consumer consequences of long-discredited regulatory strategies motivated by rent-seeking strategies. They are a reaction to the failures of a present day regulatory system created to manage a society and technology that long ago vanished.

I’m not sure what else a newly designed system of alcohol regulation could be but this. While we can see the short-term trajectory of a society, the marketplace, and technology, we cannot see their long-term development. This was the case too with policymakers to set about to re-regulate alcohol in the 1930s after Prohibition ended.

While some states have recently undertaken a complete review of the laws and regulations governing the sale and distribution of alcohol, it is entirely unlikely that they will result in any truly significant reform. What’s more likely is that the current regulatory system for alcohol will be changed piecemeal and incrementally as one element or another of the old system becomes so burdensome and out-of-date and stifling of commerce and innovation that a change is forced upon policymakers.

One Response

  1. Tania Sheppard - April 12, 2017

    Great article, thanks for sharing and articulating so well. I just attended the GGRA Annual Conference, and there was some talk on this topic in a number of instances. The one that stands out is how hard it is to acquire a liquor license, especially for smaller bars that want to open in the neighborhoods of SF, and how regulations should change to further accommodate the (attempted) growing economy.

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