Leading Civil Rights, Activist Groups Urge Congress to Help Protect State and Local Liquor Laws NWASHINGTON – Today, leading civil rights and activist groups released a letter to House Judiciary Committee Chairman John Conyers (D-MI) announcing their support of passage of H.R. 5034, the Comprehensive Alcohol Regulatory Effectiveness (CARE) Act of 2010. The groups included the League of United Latin American Citizens, A. Philip Randolph Institute, National Congress of Black Women, National Coalition of Latino Clergy and Christian Leaders, National Association for Equal Opportunity in Higher Education, Afro-Latino Development Alliance, Healthy Kinder, Inc, Labor Council for Latin American Advancement, League of Rural Voters, and MANA, A National Latina Organization. The letter comes in the midst of a nationwide effort by big liquor and retail corporations to get rid of local and state liquor laws that regulate the sale of alcohol in local communities throughout the country. Authors of the letter cited how deregulation would mean easier access by youth and teenagers to alcohol. Studies show that eliminating these laws would result in a dramatic uptick in underage drinking, drunk-driving accidents, public disorder and alcohol-related diseases. The entirety of the letter can be found here: June 21, 2010 The Honorable John Conyers, Jr. U.S. House of Representatives 2426 Rayburn House Office Building Washington, DC 20515 Dear Chairman Conyers, We write in support of H.R. 5034, The Comprehensive Alcohol Regulatory Effectiveness (CARE) Act of 2010. This bill would make certain that states and localities can continue to protect children from the dangers of alcohol. Numerous studies show that limitations on alcohol sales protect the lives and health of teens and minors. In countries such as the United Kingdom where the sale of alcohol has been deregulated, there has been a substantial increase in youth health and safety problems. But, in an effort to enlarge their bottom-line profits, the foreign-owned liquor and retail corporations have launched a nationwide campaign to deregulate the sale of alcohol much in the same way the UK has done. These corporations are pursuing their strategy by filing a wave of well-financed lawsuits against state governments aimed at effectively repealing state and local alcohol regulations that limit their freedom to sell alcohol, and that also protect children, teens and local community standards with respect to alcohol. Opinion polling has demonstrated that the public as well as Democrats and Republicans in Congress agree that local communities know best how to curb the risks of alcohol-related dangerous behavior, including drunk driving, binge drinking and crime. By stripping state and local governments of the power to effectively regulate alcohol sales, the foreign-owned breweries and big retailers are putting our communities and our children at risk. Without these laws, shopping malls, department stores and discount retail outlets could effectively transform into bars, providing teens easier access to alcohol at almost any hour of the day. As in the U.K., the deregulation of alcohol would foment public disorder and violence, spark underage drinking, increase drunk-driving accidents, and cause a dangerous spike in alcohol-related disease. Mr. Chairman, you have a long history of leadership in championing measures protecting the safety and well being of children. We ask that you build on that legacy by favorably reporting H.R. 5034, The Comprehensive Alcohol Regulatory Effectiveness (CARE) Act of 2010, to the full House for swift passage. Sincerely, A. Philip Randolph Institute Afro-Latino Development Alliance Healthy Kinder, Inc Labor Council for Latin American Advancement League of Rural Voters League of United Latin American Citizens MANA, A National Latina Organization National Association for Equal Opportunity in Higher Education National Coalition of Latino Clergy and Christian Leaders National Congress of Black Women Illinois Beverage Retailers Urge Congress to Support HR 5034 Source: Law Media Jul 23rd July 20, 2010 The Honorable John Conyers United States House of Representatives Committee on the Judiciary 2138 Rayburn House Office Building Washington, DC 20515 Dear Chairman Conyers: This letter is in response to the recent letter sent to you signed by the Distilled Spirits Council of the U.S. (DISCUS), Wine Institute, Beer Institute, Brewers Association, and Wine America opposing HR 5034, the CARE Act. These organizations represent only suppliers (manufacturers) whose members have been in the forefront of attacking the three-tier system, while claiming to be interested in "preserving the effectiveness of the existing state-based alcohol regulatory system". AB-InBev and SAB MillerCoors are global giants that currently produce 80% of all the beer sold in the US, and they want to remove any and all state legal barriers to further their goal of complete market dominance. The various laws, rules, and controls were put into place specifically designed to keep alcohol producers from controlling and dominating the retail marketplace. Of course they would judge any restrictions on them as "discriminatory and anti-competitive". The spirits industry (DISCUS) is also dominated by two global giants-Diageo and Pernod-Ricard. Between them they produce 60% of all the spirits sold in the US. They also own a large segment of the wine business. They join with the brewers because they, as producers, also covet the distribution tier of the industry. They can charge any price, deliver when they feel like it, and create any credit terms that suit them.* The wine industry producers' goals are basically the same as the spirits (DISCUS) industry's position for similar reasons. These multinational enterprises have no understanding of the unique history of alcohol regulation in the United States with state and local laws and regulations determining how states and communities choose to sell and regulate alcohol. They would prefer an "old world" or third world environment where they deal with little or no government requirements. These enterprises chose to enter the United States and conduct business. They had an obligation through due diligence to understand how the alcohol industry operates in the US. They should be required to comply with laws and not be allowed to change how the alcohol business operates to meet their international business plan. In 2005, the US Supreme Court, in the case of Granholm vs. Heald, ruled that the states could not discriminate against out-of-state wineries. Thus, any laws for small in-state wineries must apply equally to small out-of-state producers. The court also recognized the value of the existing three-tier regulatory system. Various states began adjusting their laws to comply with the Granholm decision which set off a series of lawsuits because the wineries expect that all the state laws should be the same-that the Granholm decision under the commerce clause of the US Constitution trumps the 21st. Amendment establishing the state's rights to alcohol control. This is in direct opposition "to preserve the effectiveness of the existing state-based alcohol regulatory system". Their letter makes reference to "retailers at the competitive disadvantage". What retailers? The retailers they are referencing are the Specialty Wine Retailers Association (SWRA), Tom Wark, Executive Director. They are the on-line retailers (approximately 80% in California), who in the words of Mr. Wark want to create "alcohol anarchy."** They have decided that they have the same rights as the wineries as stated in Granholm, even though the Granholm decision never mentions nor discusses retailers. Analogy: I once attended a logic seminar. The first example of faulty logic was "a dog is an animal, a cat is an animal; therefore, a dog is a cat." Applying the same logic: a retail liquor store can sell to a consumer, a winery can sell to a consumer; therefore, a retail liquor store is a winery. Obviously this is not true. The SWRA and Tom Wark have been very active in disseminating misinformation to on-line customers, and the wine press has bought into this misinformation. They have obviously engaged the alcohol producers whose interest is deregulation. In Exhibit A of the aforesaid letter, they state that the current system of alcohol beverage regulation in the US provides a proven and effective balance between states and federal government, etc. This is what they are saying to you while at the very same time attempting to create "alcohol anarchy." AB-InBev, the world's largest brewer, is suing the State of Illinois because ABI was denied a distributor license. And they say they support the three-tier system? I am representing the view of the overwhelming number of "bricks and mortar" independently-owned retailers in America, numbering nearly 100,000 locations, employing at least one million employees, and who sell about 40% of all the alcohol beverages sold in the US.*** HR 5034 is merely an attempt to keep the discussion within the boundaries of logic, effective regulation, efficient tax collection, enforcement of underage drinking laws, temperance, and within the scope of the Granholm vs. Heald Supreme Court decision. The opposition of HR 5034 has focused on presenting the beer, wine, and spirits wholesalers as only interested in their profits. The opponents fail to neither recognize, nor even consider, the impact on job losses at wholesale and retail, states and local communities' ability to identify and collect tax revenues, local philanthropic participation by wholesalers, and "bricks and mortar" retailers. (Exhibit B) In a recent response I received from an oenophile journalist in San Obispo County, California, she referred to "underage drinking is a ruse," and said, "if the three-tier system dies, it's because it serves no purpose in living." Another egocentric person responded that "he should have the right to buy his $40 Pinot Noir wherever and however he chooses." These opponents to HR 5034 seem to all be either interested in their profit or their personal pleasures with absolutely no regard for the fact that alcohol is a "mind-altering drug." To be an alcohol purveyor at any level is a privilege, not a right, and with that privilege includes social responsibility. All the arguments put forth by the opponents to HR 5034 are totally devoid of any social responsibility. This process of attempting to deregulate the alcohol industry began as an attempt to aid small artisan wineries grow and succeed by helping them reach the retail market but has morphed into an attempt to deregulate the entire alcohol industry by the global conglomerates and the SWRA. The SWRA, spearheaded by Tom Wark's propaganda, has been directed at the American-owned and operated wholesale distributors whose very position was dictated by the predominantly foreign-owned brand owners (suppliers and manufacturers). To place blame on the wholesale distributors is tantamount to blaming the US Postal Service because your bank raised your interest rate or called in your bank loan. "Don't blame the messenger." The devastating effect of deregulation or lax regulation is best evidenced by the ultimate result of the savings and loan failures, the airline meltdown, the Wall Street collapse, the recent bank failures, and of course the most current being the BP Gulf of Mexico debacle and all its long-term consequences. We must resist their outrageous attempt to destroy all alcohol regulation (alcohol anarchy). HR 5034 was created in the attempt to limit the scope of the Granholm decision to the subject of small artisan wineries' market access on a state-by-state basis, recognizing the state's rights pertaining to alcohol within the authority granted by the 21st Amendment to the US Constitution. The disingenuous group of entities who have signed the letter (¶2 - Exhibit A), plus the SWRA, is trying to confuse the issue. One might say, "mixing apples and oranges and coming up with fruit salad." We strongly support HR 5034 and respectfully ask you to also vigorously defend alcohol regulation by supporting this important legislation. Thank you for your consideration, Jerry Rosen Executive Director/Legislative Liaison Adjunct Professor - Roosevelt University National Organization on Fetal Alcohol Syndrome (NOFAS), Board of Directors of Illinois Chapter <<2010-07-01 - Ltr Sorini to Conyers and Smith re H R 5034.pdf>> <<DISCUS letter to NCSLA opposing HR 5034 6-18-10 (5).pdf>> <<WGA - Ltr Oppose HR 5034 CARE Act001.pdf>> Liquor wholesalers cash in on sobriety rules By: Timothy P. Carney Examiner Columnist July 14, 2010 Congressmen in both parties are rallying behind alcohol legislation they say is needed to protect our youth from binge drinking and public drunkenness. They call it the CARE Act. Any time politicians start talking this way, it's time to ask: "Who's getting rich off of this regulation?"The answer in this case: beer, wine and liquor wholesalers. The history of liquor regulation is a history of regulatory robbery. In 17th century England, "large distillers of alcoholic beverages actually favored an excise on their producers because of its prejudice in favor of efficient production," according to historian Thomas Slaughter. In 20th century America, one leading prohibitionist was Coca-Cola's founder. Liquor control laws provide the setting for an explanatory fable, created by economist Bruce Yandle, about regulatory robbery. It's called "The Baptist and the Bootlegger." The bootlegger's business depends on strict alcohol regulation that creates demand for illegal booze. While the bootlegger funds the prohibitionist politician's election, the local Baptist minister goes on stage for campaign rallies. Regulation protects special-interest profit, but it's touted as a public good. Today, with the CARE Act, the "bootleggers" are the wholesalers. The bill creates new legal hurdles to protect state liquor-control laws from constitutional challenges. The bill's 124 co-sponsors cite public health and sobriety as the reason to defend state liquor laws. But the state laws most threatened by lawsuits happen to guarantee wholesaler profits. For instance, in most states it is illegal for brewers and distillers to sell their beer and liquor directly to a retailer -- forget about selling directly to consumers. Alcohol wholesalers are not household names, but they're big business. Southern Wine & Spirits controls 19 percent of the market and grossed $8.5 billion last year. The industry's two lobby groups, the National Beer Wholesalers Association and the Wine & Spirits Wholesalers of America, each spent more than $1 million on federal lobbying in 2009. Their clout at the state level is even greater. These companies buy from the producers (such as MillerCoors or Diageo) and sell to the retailers (such as your corner store, or Costco). It's called the three-tier system, and it makes economic sense: Producers don't have to keep track of what liquor stores are opening and closing, or stocking what drinks, and retailers can effectively order from a catalogue instead of calling around. Many industries have three-tier systems voluntarily. But alcohol wholesalers enjoy bigger margins than other wholesalers. Liquor producers -- who oppose the CARE Act -- point to the wholesalers' return on equity, a measure commonly used by investors. Across the wholesale industry -- shoes, food, cars, etc. -- the average ROE is 11 percent. For beer wholesalers it's 18 percent, and for liquor wholesalers, 20 percent. In other industries, wholesalers need to make sure they are delivering real value, because if they're not, they'll be discarded as unnecessary middlemen. In a free market, if wholesalers squeeze producers too much or overcharge retailers, the producers and retailers might circumvent the wholesalers. Wholesalers survive only as long as the convenience they provide is worth the cut they take from producers and retailers. Unless, of course, circumventing wholesalers is illegal. Then the middleman's cut can grow without fear of being frozen out. It's regulatory robbery by the wholesalers. You can see why the NBWA and the WSWA go to the mat defending the laws that mandate this three-tier system. They have a legitimate argument, too: Since Prohibition ended, states have set their own alcohol policy, and that's what the Constitution prescribes. A 2005 Supreme Court ruling, Granholm v. Heald, liberalized laws about direct shipping of wine, but only so far -- states weren't allowed to discriminate between in-state and out-of-state wine, but they were still free to prohibit direct wine shipping altogether if they wished. "What we don't want is single federal judges determining policy," WSWA President Craig Wolf told me. "It should be the legislature dealing with these things."On the state level, wholesalers jealously guard the laws requiring the three-tier system. "The free market rules should not apply to alcohol" the way they do to other goods, Wolf said. The industry justifies these rules as public-health measures and as a way to protect producers from big-box stores (particularly Costco) with the purchasing power to drive down prices just as Wal-Mart drives down prices on shoes. The wholesalers' arguments -- especially on federalism -- have some merit, but it's another case of big business using big government for profit. Timothy P. Carney, The Examiner's lobbying editor, can be reached at tcarney@washingtonexaminer.com. He writes an op-ed column that appears on Friday. DISCUS letter to NCSLA opposing HR 5034 6-18-10 WGA - Ltr Oppose HR 5034 CARE 2010-07-01 - Ltr Sorini to Conyers and Smith re H R 5034