The Reyes Beverage Group’s recent acquisition of Gold Coast in Florida highlighted a trend that anyone in the beer business already knows. Beer wholesalers are getting bigger. When you include Anheuser-Busch InBev branches, the top two beer wholesalers now control roughly 10% of the beer market. This is in stark contrast to the past, when there were a lot more beer wholesalers who were on average much smaller. In 1970, there were more than 6,000 beer wholesalers, who shipped on average around 20,000 barrels. Today, the average is closer to 150,000 barrels, and the largest beer wholesalers can ship almost 10 million barrels a year (that’s larger than all but three suppliers in the U.S.).

At the same time, the average brewer today looks nothing like the brewing industry in the 1970s. We’ve just eclipsed 3,200 breweries in the country, the vast majority of which are tiny. Although the two largest US brewers are still the dominant players in the industry (brewer or wholesaler), the median packaging brewer (taking out all brewpubs) now brews less than 1,000 barrels a year, and the mean small packaging brewer is less than 6,000 barrels.

This means that current industry dynamics and market power relationships are markedly different than they were in the past. This matters, since many beer regulations were crafted in an era when brewers were big and wholesalers were small.

The types of laws where this power shift matters most are franchise laws. Franchise laws were not an original feature of the three-tier system, but rather were written in the 1970s when large brewers began to dominate their smaller wholesalers. This meant that typical contract laws weren’t enough to protect distributors, who were at a decided power disadvantage, and protections to level the playing field and ensure consumer choice made sense. Consequently, regulators rethought the beer market. Beer franchise laws, which were a special privilege for beer wholesalers above and beyond general franchise laws, leveled the economic playing field and allowed smaller wholesalers to operate without fear of larger brewers abusing their more powerful market position.

Today’s beer market calls for a similar rethink on how to address market power imbalances between large beer wholesalers and small brewers. Although the vast majority of brewer-wholesaler relationships are positive, in limited cases wholesalers may sit on craft brewer brands, neglecting them while not allowing them to move to another wholesaler. In these cases, small brewers have limited recourse. Although most states allow the ability to terminate with cause, in reality small brewers do not have the resources to engage in litigious solutions. So what should regulators do?

Although this is a state-by-state issue that may have multiple solutions, one of the simplest would be to enact what are known as franchise law “carve outs” that allow brewers who are a small % of a wholesaler’s portfolio to move their brands. A law of this type was recently passed in New York. This would allow brewers who feel they are not getting the best opportunity for market access to move to another wholesaler.

One objection to these types of carve-outs is that franchise laws are also designed to protect investments made by wholesalers in trucks, warehouses, etc. An easy solution to this problem is to require any brands that wish to move to pay fair market value for the brands that move. That allows wholesalers to gain any return on their investment.

In many states, some small brewers do have an alternative method for market access in the form of self-distribution. These rules allow brewers (typically below a certain barrelage threshold) to act as their own distributor. Self-distribution laws, however, are not a panacea. For one, out of state brewers often have no ability to self-distribute, as self-distribution often requires a manufacturing license in state. That means an out of state brewer who sells 1,000 barrels in the state can’t self-distribute, even if an in-state brewer who sells 1,000 barrels can. Secondly, the ability to self-distribute often disappears at a certain level, creating a “donut hold” where brewers may be too large to self-distribute but not large enough to effectively bargain with more powerful beer wholesalers.

Reforms like franchise law carve outs, therefore, are not about conferring special advantages for small brewers, but rather reformulating a set of rules designed to balance the playing field back in line with market realities. This is why regulators introduced beer franchise laws in the first place, and why today they should revisit them.

As highlighted in the classic Toward Liquor Control, alcohol regulation should “be a wise blend of accepted principle and courageous experiment, a judicious balance between the traditional and experience of the past and the adventure and promise of the future.” Although the vast majority of the three-tier system continues to provide an excellent balance between consumer choice, social responsibility, and economic growth, regulators should never forego opportunities to improve the system, thereby buttressing it for the future. Franchise law carve outs are one limited area where “recognizing the adventure and promise of the future” by returning to the original three-tier framework makes sense. Doing so could strengthen a system that benefits all of the tiers.