The Brewers Association developed position statements on the following issues:

• H.R. 5034
• Brewery Direct to Customer Sales
• Alcohol Content in Beer
• Self Distribution
• Franchise Laws/Access to Market
• Independent Wholesalers
• Excise Taxes
• Underage Drinking & Driving Under the Influence

H.R. 5034

The Brewers Association (BA) opposes H.R. 5034 and its lack of protection for the legitimate concerns of America’s smaller brewers.

H.R. 5034 was introduced in April 2010 on behalf of beer wholesalers’ concerns. As currently drafted, H.R. 5034 would amount to an abandonment of Congressional authority over interstate commerce in alcohol beverages. It will undermine existing federal authority over taxation, product composition, labeling, advertising, and importation of goods from other nations. These are issues on which national uniformity of regulation is essential and has protected both the public and industry for more than 75 years. H.R. 5034 invites states to enact inconsistent laws that needlessly raise costs and impede small brewers’ efforts to expand into new markets.

Wholesalers have used their political power at the state level to unfairly apply franchise laws to the detriment of America’s small brewers. The BA believes that any changes to the current beer distribution system should provide small brewers with reasonable relief from the impact that state beer franchise laws have on their small businesses and consumer choice in the market. Congress should not provide states with a free hand to enact new and inequitable protection for wholesalers. Similarly, any serious discussion of an equitable distribution system must assure access to market for small brewers, allowing them to distribute beer in order to build a market for small brands.

For the forgoing reasons, the Brewers Association cannot support H.R. 5034 as currently written. The Brewers Association supports the current successful system of state-based regulation and three-tier distribution for alcoholic beverages and welcomes further dialog with the National Beer Wholesalers Assn. and other members of the industry.

HR 5034 Joint Producer Letter

Summary of what H.R. 5034 legislates:

1. Protects state alcohol beverage laws from challenges under the dormant Commerce Clause.¹
2. Imposes the “burden of proof” in a lawsuit on the person or business challenging a state alcohol beverage law under the Commerce Clause and any federal law, such as the antitrust laws, anti-discrimination laws, OSHA requirements and a host of other federal statutes and regulations. (Normally, the burden shifts to the state to justify laws found prima facie discriminatory.)
3. Requires the person or business suing to overturn a law to prove by “clear and convincing evidence” that the law has no effect in achieving legitimate state policy goals.
4. Repeals a portion of the Wilson Act, a late Nineteenth Century federal alcohol beverage law that federal courts have cited for the proposition that a state must regulate alcohol beverages produced in that state and alcohol beverages produced in another state in an even-handed manner.
   

   ---

   ¹The “dormant” Commerce Clause is a legal theory used by federal courts to strike a balance between federal and state regulation. Our Constitution and our entire form of government were designed to ensure free movement of people and goods from state to state and to prevent a state from protecting its economic interests by enacting laws that discriminate against goods and services from another state. Courts have developed a theoretical framework to analyze lawsuits challenging state laws that affect interstate commerce. The dormant Commerce Clause is a part of that framework and it is a concept that limits states from unwarranted interference in interstate commerce.  States still possess significant legal authority to protect the public, and the dormant Commerce Clause is a key part of most federal judicial decisions seeking to balance federal and state concerns.

H.R. 5034 would accomplish the following:

• Effectively restrict the right of consumers and industry members (brewers, winemakers, distillers, importers, wholesalers, retailers, etc.) to challenge unfair state laws or regulations.
• Allow political interests in each state to work with allies in state legislatures and regulatory agencies to impose taxes or regulations on out-of-state businesses that would ordinarily be illegal or unconstitutional.
• Reopen old legal issues, such as onerous pricing regulation, nuisance regulation, reporting requirements, unique state labeling requirements, and other forms of state regulation that are calculated to make entry into a state more difficult and expensive.
• Permit states to restrict advertising and other normal commercial practices that brewers utilize to build regional or national brands.

The threats to American small brewers:

States could enact new laws or amend existing laws to heighten discriminatory treatment of out-of-state brewers (and beer importers) or to limit or ban commercial activities that wholesalers do not like. Examples include:

• Tax preferences for in-state brewers that discriminate against all out-of-state suppliers and place their brands at a competitive disadvantage.
• Pricing regulations (price posting, price affirmation, etc.) with exemptions for in-state brewers.
• Discriminatory exemptions from franchise laws to eliminate opposition from in-state businesses and make it easier for state wholesaler associations to advocate unreasonable laws.
• Restrictions on advertising campaigns that could make it almost impossible to remain on the Internet.
• Residency requirements for company officers or executives that prevent or hinder multi-state brewers, importers, wholesalers and retailers from obtaining licenses.
• Onerous new, state-based product labeling requirements that would impose an unreasonable burden (e.g., requiring a unique UPC Code for a state) on interstate commerce.
• Requirements that brewers establish physical offices in a state in order to do business in that state.

back to top

Brewery Direct to Customer Sales

The Brewers Association (BA) believes the American consumer should have access to the widest range of domestically produced beers made available by licensed breweries.

The BA recognizes that not all beers have adequate sales levels to find distribution on retailers' shelves or wholesalers' warehouses. In such situations, consumers may be willing to go to the brewery premises to find beers not readily available through normal distribution channels.

The success or failure of a beer should depend on consumer demand, rather than on artificial barriers to distribution.

BA supports state laws that respect and enhance consumer choice in the marketplace. BA believes that to provide the greatest ongoing choice for consumers, small brewers should have the right to sell beer directly to qualified consumers.

For Small Packaging Breweries

The ability to sell beer directly to qualified consumers from a packaging/bottling brewery's premise would enhance customer loyalty and help increase sales within the three tier distribution system. Such right is not intended to bypass the three tier distribution.

For Small Brewery-Restaurants/Brewpubs

Granting brewery-restaurants/brewpubs the right to offer closed and sealed containers of their company's on premise brewed beer for off premise consumption is an effective means of engendering brand loyalty and improving customer relations and service. Such capability is not intended to bypass the distribution of bottled, canned or prepackaged beer within the three tier distribution system.

back to top

Alcohol Content in Beer

The Brewers Association (BA) believes the American beer drinker should have access to the widest range of domestically brewed beers made available by licensed breweries. The BA advocates for and supports state laws and regulatory protocols which expand beer drinker choice in the American marketplace. The accessibility of diverse American beer styles should reflect demand for these beers from responsible beer drinkers, and should not be restricted through artificial barriers to market entry.

BA believes that to provide the greatest ongoing choice for American beer drinkers, consistent with historical brewing tradition and beer’s valued role in American food and beverage culture, brewers should have the right to offer beers of varying alcohol content and not be restricted by limits of alcohol by volume (abv) or alcohol by weight (abw). Similarly, American beer drinkers should have the right to the responsible enjoyment of different beer styles with the appropriate alcohol strength without having to pay a different tax based on the alcohol content of the beer.

back to top

Self Distribution

The Brewers Association (BA) believes the American consumer should have access to the widest range of domestically produced beers made available by licensed breweries. The success or failure of a beer should depend on consumer demand, rather than artificial barriers to distribution. The absence of a willing and/or viable wholesaler should not prevent a small brewer's products from reaching a retailer who is willing to sell them.

BA supports state laws that respect and enhance consumer choice in the marketplace. The BA believes that to provide the greatest ongoing choice for consumers, small brewers need the right to act as their own wholesaler and be allowed to distribute to retailers. Such brewers should be subject to all laws and taxes applicable to both brewers and wholesalers.

back to top

Franchise Laws/Access to Market

BA believes that small brewers and wholesalers should be free to establish enforceable contracts between the parties that both parties agree are fair and equitable. Franchise laws were enacted to protect wholesalers from the undue bargaining power of their largest suppliers. Applying those laws to relations between small brewers and wholesalers is unfair and against free market principles.

Where franchise laws exist, the BA believes that any brewer contributing less than 20% of a wholesaler's volume should be exempted from those laws and free to establish a mutually beneficial contract with that wholesaler. Without the leverage inherent in being a large part of a wholesaler's business, a small brewer and wholesaler can negotiate a fair contract at arm's length.

back to top

Independent Wholesalers

The BA supports the independence of wholesalers and believes independent wholesalers are wholesalers who are contractually and economically free to allocate their efforts among the brands they sell without the undue influence of their largest suppliers. Each brand gets the attention it deserves on its own merits in the marketplace.

Positions Adopted by the Brewers Association Board of Directors as of March 30, 2007.

back to top

Excise Taxes

The Brewers Association opposes excise taxes on beer as a matter of public policy. The taxes are paid by small brewers whether or not they are profitable. They are also paid by consumers regardless of income level and are historically very regressive taxes. The total amount of excise taxes paid on beer exceeds the total amount of profit in the brewing industry. Newly proposed excise taxes earmarked to fund substance abuse programs do not recognize the positive and healthful benefits of beer consumption for the vast majority of beer drinkers. Furthermore, there have been billions of dollars of excise taxes already collected that could be used to fund such programs.

back to top

Underage Drinking & Driving Under the Influence

Responsible enjoyment of beer can be part of a healthy lifestyle. The Brewers Association strongly opposes illegal use of our products such as underage drinking and driving while under the influence. We, as brewers, are offended by those who misuse our products. We promote education on responsible enjoyment of craft beer through programs, such as the Savor the Flavor program.

back to top