Bar Wars
Is the Indiana General Assembly attempting to pass a bill that would create an illegal and possible unconstitutional monopoly when it comes to alcohol sales in the state? It depends on who you ask. A coalition of alcohol-related businesses say “yes” others say it’s a way to protect Hoosier jobs.
Under current Indiana law, alcohol is sold and distributed through a three-tier system of suppliers, wholesalers and retailers. Suppliers are companies like Jack Daniels or Anheuser-Busch InBev. Wholesalers are companies like National Wine and Spirits. Retailers are your local bar or liquor store. Because of laws dating back to the end of prohibition, a supplier can’t sell directly to a retailer; they can only sell to a wholesaler who then sells to a retailer.
The largest wholesale distributor in the state is National Wine and Spirits which controls between 60-70% of the wholesale market. However there are other companies that want to get in on the action and have been talking to suppliers about picking up their business and distributing their product. And that’s where the controversy starts.
This week lawmakers are slated to hear in committee HB 1191. The legislation would, among other things, require a wholesaler who gets a contract with a supplier to pay the previous holder of that contract “fair market value” for the rights to distribute alcohol within the state. In other words if a supplier has an agreement with one wholesaler, another wholesaler comes along and offers a better deal, the second wholesaler must reimburse the first wholesaler for any money it will lose because of the new contract.
Critics say not only does the legislation prohibit a supplier from contracting with a second wholesaler, but it could also create a virtual monopoly for a wholesaler. Unless a second wholesaler can meet their price for breaking the contract, the first wholesaler is guaranteed the supplier’s business and that would lead to higher prices for the consumer because now the wholesaler can raise prices with no fear of repercussion. Supporters of the measure will argue that such a bill is needed to protect jobs. They say if a wholesaler has invested the time and money in building a business, they should not have to suffer a loss simply because a supplier wants a better deal.
This is all very similar to what happened in my home state of Illinois more than 10 years ago. Illinois has a similar alcohol distribution system to Indiana. Back then lawmakers passed a bill prohibiting a supplier from canceling, failing to renew or terminating an alcohol agreement with a wholesaler without “good cause”. The legislation led to a more than 20% increase in the price of alcohol and things got so bad a federal judge put an injunction on the law saying it violated both the Commerce and Contract Clauses of the U.S. Constitution. Illinois lawmakers eventually had to repeal the law. Similar laws have been repealed, vetoed or declared unconstitutional in Arizona, Texas, Massachusetts and Nebraska.
There has been a fierce battle taking place behind the scenes at the General Assembly with thousands of dollars being spent and virtually every lobbyist who is available being gobbled up for this fight. It’s unclear what the outcome of the measure will be. I frankly have a hard time seeing how it would stand up to Constitutional muster if it passes. It is one thing for two parties to have a clause in a contract where if one commits a breech, the breeching party pays damages. It’s an entirely different matter when the government steps in and mandates the winner of an agreement reimburse the loser.
HB 1191 is scheduled to be heard on Wednesday in the House Policy Committee.
January 24th, 2010 at 2:35 pm
Another case of legalized extortion.
January 24th, 2010 at 2:55 pm
Personally, do not have a horse in this race from standpoint of purchasing alcohol in any form, but the whole “protection” system is absolutely asinine and as stated in no way meets legal standards. “Protect jobs”—what do people think happens when actions help “create” jobs in one segment (such as vehicles) that are seeking to assist other firms in the same product line. Where is any justification to protect the investment or jobs in one monopolistic venture while denying entry or growth by another firm. The whole area of prohibition era laws—no Sunday sales, no cold beverage sales, etc. etc. is bogus. Bet lots of money being spent to “convince” legislators on this one. Perhaps with the new court ruling on corporate/organizations spending on advertisement to “educate and convince” us dummies it should be a boon to advertising outlets but nothing in it for us.
January 24th, 2010 at 6:31 pm
Why should a monopoly to insure overpricing of one product be any different than an overpriced, substandard, monopolistic excuse for education?
To quote Governor Palin (pg 386, Going Rogue), “The role of government is not to perfect us but to protect us- to protect our inalienable rights.”
Overpriced liquor is a perfect metaphor for the disconnection of a single party which goes by two names…
January 24th, 2010 at 7:24 pm
I am ambivalent, but a distributor once explained it to me this way, and it made sense:
From the standpoint of manufacturers of any product:
What manufacturer doesn't get to choose who sells his product? IN Indiana, for the most part, liquor manufacturers choose who sells their product. This is, to some, unfair.
Abdul, this has been going on for decades. Back in the 70s, beer distributors tried to fend off cross-county beer sales. Teamsters got involved. Truck terminals were bombed. Seriously.
A bigger travesty: the 7-11s in the state became quasi “groceries” by offering a broader array of products, so they could sell alcohol. Because groceries were allowed to sell alcohol.
Underneath all this, is the citizen-inspired legislation which has local boards determining, to a large degree, who gets permits and who doesn't. Lots of manipulation among petitioners for “neighborhood support.” Prime example: the bar in the Center trustee's building.
Which should never have happened.
Lots of big checks being written on this one, huh? How about the Gang of 150 spend a little more time on property tax reform?
And then go home.
Oh Lord help us Dave from being subjected to Palin quotes on anything beyond the most basic issues. Yikes. Has it come to that?
January 24th, 2010 at 8:02 pm
To some of us, there's nothing more basic to our freedom as Americans than our God-given, inalienable rights.
But since it obviously makes you feel better about your pseudo-intellectual prowess to criticize Sarah Palin, then have at it!
January 24th, 2010 at 10:12 pm
Indiana has chapters of outdated and silly liquor/tobacco laws. What we really need to do is a mass-repeal of all those outdated laws.
January 25th, 2010 at 12:27 am
Dave wins. TA loses. Quoting sensible thoughts does not reflexively make the original utterer a target. If the idea is good the idea is good. Remember, TA is but a semi-skilled sort. Anyone who brags about reading Scalia's opinions, being mesmorized by them, but failing to agree with any of them-that person has problems. Government schools are a monopoly in any manner in which you would care to define the term realistically. High prices, inferior products, crowd out competition, be stagnant, employ too many people and too much overhead, wind up being a cost rather than a boon to society. Not to mention the parasites like the ISTA-an economically criminal parasite and maybe even a criminal one in some respects yet to be seen….
January 25th, 2010 at 2:14 am
You are a fool. 7-11s started selling groceries cause they make so little on fuel. The majority of convenience stores don't sell beer because they can't sell it cold.
January 25th, 2010 at 6:32 am
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January 25th, 2010 at 10:16 am
Let's see…the GA is considering legislation that may be unconstitutional.
Legislators do this all of the time! These bottom-feeders write these laws, KNOWING that they might be unconstitutional, or knowing flat-out that they ARE unconstitutional.
They then sit back and wait to see if they are challenged. If not, then all the better.
If they are, they can certainly hope that a LiaR will somehow 'find' a loophole or exception, or CREATE one, to make the legislation 'constitutional'.
Happens all of the time.
Let's see….inventory tax being phased-out beginning in 2002. Then GA puts an amendment out there to 'legitimize' what they have been illegally doing for years.
How about an extremely specific funding scheme for public schools that explicitly permits property taxation of corporations, but NOT of private homes, yet government uses force to extract taxes from homeowners to support public schools.
There are a a lot of examples of government intrusion into our Bill of Rights.
The REAL problem is that there is no penalty to these scum sucking bottom-feeders for proposing or enacting such legislation that they KNOW or SUSPECT is unconstitutional.
Until We the People force those elected reprobates to specifically cite the Constitutional authorities they are relying upon to enact any legislation, and until We the People demand very tough penalties for any and all legislators that PROPOSE or PASS unconstitutional legislation, we will continue to be boned by these bottom-feeders.
January 25th, 2010 at 10:42 am
I guess I had that coming. But some of you ought to try reading or listening to opinion-makers who disagree with you. It sometimes alters your perception. It doesn't mean I have problems, Pascal–far form it. Far. I also lamented the use of anything Palin to justify any view on this subject. I'll stand by that. The woman is at least shallow. I'll grant you that she's popular. I hope she has a Fox gig for the rest of her life.
But you've missed my central point. Pick any product you buy (no, not God-given rights to beer…geeeesh. Calm down already). Who decides how that product gets to your favorite store? In almost every case, it's the manufacturer. I think this legislation seeks to protect that right. I haven't read it, but I've seen (reportedly) similar bills in the past. And it's not just unlicensed goods (milk, cars, video games). Ask the gun manufacturers who sells their product. It's probably the most-regulated product in America, and they get to choose who sells their product.
I thought most of you were free-marketeers? A little consistency, huh? Or, better yet, explain to us logically, without God-given references, why liquor manufacturers should not be able to determine who sells their product.
I'll wait over————here. Hopeful, but not too much. Pascal–read the campaign finance SCOTUS decision? Good stuff.
January 25th, 2010 at 11:43 am
“read the campaign finance SCOTUS decision? Good stuff.” — I'm still wondering how a piece of paper can become a human being, and receive the same rights as a human being.
“When, in the course of HUMAN events, it becomes necessary for one PEOPLE…”, “…laws of nature and of nature's God entitle them,”
“…that all MEN are created equal, that they are endowed by THEIR Creator with certain unalienable rights, that among these are LIFE, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among MEN, deriving their just powers from the consent of the GOVERNED.”
Yeah, I just cannot see how an ARTIFICIAL CREATURE OF THE STATE can have the same rights as MEN. Governments were not created by CORPORATIONS, they are created by human beings, and We the PEOPLE decide to relinquish some of OUR AUTHORITY over to government.
SCROTUS has it wrong on this one.
January 25th, 2010 at 1:17 pm
I tend to agree with you Aires, but the ruling is fascinating reading. It is a close call.
Kennedy wrote for the majority.
I got a copy of the liquor legislation about which Abdul wrote, and read it. It's sloppy writing, won't survive a court challenge, and iI will be amended, heavily, so it's best to wait and see how it comes out of committee.
Except for utilities, there is no lobby more entrenched in legislators' pockets than liquor and casinos. It's been that way since the 70s. Remember the Beer Baron battles? The beer distributors, breweries and the other side virtually owned 30-40 legislators each.
And by “own,” I mean exactly that. Bought and bossed.
I like how the various parties try to make this an argument about consumers. It isn't, and never was. It is about the manufacturers getting to determine who sells their product. it jsut happens to be a product that's heavily-licensed.
And therein lies the problem for most folks.
It will be interesting to watch. But again, can't they just fix the budget and property taxes, and go home?
January 25th, 2010 at 2:27 pm
Interesting: Abdul now wants to talk about the Constitution when it comes to alcohol, but not address it when it comes to property taxes.
January 25th, 2010 at 2:33 pm
Sammy, there are other blogs
January 25th, 2010 at 3:24 pm
It is better to read Bork on First Amendment than a fractured decision by what are, essentially, nitwits especially the author of the opinion. Of course, John McCain only ever got his name on one bill and the SC just trashed it-justifying real conservatives passing on his candidacy and allowing the affirmative action president to show us how well affirmative action works in practice. If you really want to dig into First Amendment Church State stands pick up Hamburger and see how Masons and KKK sorts deformed our law. I don't recall where I read it, but Hitler referred to FDR as “…that old Mason”.
And, I don't think your distributor friend did you any favors with his one sided explain. Jim Davis had to go to court to get the ability to purchase wine directly from vineyards(creator of Garfield, the cat) and I don't know that he won that basic right but any public policy concerned with the welfare of consumers would allow that practice.
January 25th, 2010 at 5:13 pm
There's some sense in the idea that when individuals organize themselves, even in the form of a corporation, they likewise have First Amendment protections.
We endure the hateful rants of the KKK & other fascists posing as “environmentalists” (not to mention the public cost for route closures, etc.), as a matter of free albeit offensive speech.
Corporations, while “guilty” of a profit motive, are prohibited from noncompetitive, monopolistic entrenchment, unlike the governmental malpractice of “public school corporations;” one of too many, unionized protection racquets.
January 25th, 2010 at 7:04 pm
There's sense in the idea that corporations can become human beings? Seriously?
Wow. Extrapilate that through the various statutes of our government, and it's a donneybrook.
At best.
January 26th, 2010 at 12:14 am
Several owners of well run local companies, with 50-400 employees, have cut their workforces by 20-50% during the past year. These private sector, free market folks, are eager to present an opposition to fixed market fascists & public employee unions.
January 26th, 2010 at 1:49 am
“But again, can't they just fix the budget and property taxes, and go home?”
I'm with you on this !!!!!
January 27th, 2010 at 4:50 pm
For those of you talking about monopoly supporting overpriced liquor this bill is in place to STOP that from happening. Southern Wine & Spirits is a huge wholesaler in the country. They are trying to come in and collapse an Indiana business that employs alot of people. Southern uses regional warehouses (out of state) and the state would lose alot of tax revenue (truck plates, taxes, fuel). Southern also once established would RAISE prices. Do some research on them. They are akin to Walmart without the “Save Money” part.
I like my local liquor store to and allowing grocery/convience stores cold beer would most likely out numerous out of business. I like the selection they carry.