Free America’s Beverage Markets!

Several glasses of different drinks on bright background

It is difficult to understate just how politicized America’s alcoholic beverage markets are. And I say “markets” because the country does not have a single nationwide market. Rather, it has markets far too numerous to count. These markets are the product of various regulatory regimes across federal, state, county and municipal levels of government.

The federal government taxes alcoholic beverages, regulates their production and acts as gatekeeper for proposed new products. Each state has its own regulatory regime; counties and other sub-state governments also have their own sets of policies. I cannot tell you how many times I have heard that neighborhood community advisory boards, whose decisions hold great sway with alcohol licensing authorities, put a bar out of business before it even opened.

To make matters even more confusing, alcohol sales regulations also vary based on the type of beverage (beer versus spirits versus wines); the type of seller (sole proprietor shop versus chain store); and the venue (e.g., tavern versus restaurant versus party boat). It is sufficiently baroque that a “field guide” to state liquor laws has been published, and law firms specialize in alcohol policy.

Some alcoholic beverage sales policies are sensible. Disallowing the retail sale of intoxicating beverages in the wee hours of the morning aims to decrease dangerous behavior by stopping already-intoxicated individuals from buying more alcohol and getting drunker still. Requiring anyone who makes alcoholic beverages to specify a beverage’s alcohol content is truth in labeling.

The sensible policies, sadly, are not the only ones. Myriad regulations bear no relationship to the public good, limit consumer choice and profit the politically well-connected at a cost to the public. Some examples include:

  • In Massachusetts, the Demosthenes Greek-American Democratic Club got hauled before state regulators for buying liquor from…a liquor store. By diktat of the state government, such establishments may only purchase from wholesalers.
  • In many states, a distiller cannot sell his or her product to the public. Folks can visit a distillery and watch the liquor get made, but then must drive to a retail store, which by law had to buy the liquor from a wholesaler. In states where distilleries can sell to their visitors, business owners must apply for a special license and then fill out copious tax and regulatory compliance paperwork.
  • Florida and 15 other states prohibit beer and wine retailers from selling spirits, unless they are willing to open a separate storefront or “dedicated” space.
  • Texas forbids publicly-held companies, like Wal-Mart, from obtaining liquor sales licenses. The Longhorn State also caps any individual or organization from having more than five beverage licenses.
  • Wisconsin and 10 other states have franchise laws that prohibit a retailer from terminating purchase agreements with wholesalers. So if you are a shop owner and tell a bad wholesaler to take a hike, you can be forced to pay damages.
  • Virginia is one of 17 states who operate state-run liquor stores, which sell the brands of drink that the government thinks should be available. The opportunities for corruption are immense. In Alabama, landlords who own the property these state stores operate from lobby against legislation to authorize private liquor stores.

The 21st Amendment to the U.S. Constitution gives states the lion’s share of discretion over their alcoholic beverage regimes. It does not, however, mandate the rampant anti-consumer statutes and regulations that are so common.

States can do better. Legislators should support consumer choice, private enterprise and free markets by clearing out anachronistic and protectionist alcohol regulations and statutes.

Kevin R. Kosar is the author of Whiskey: A Global History.

This op-ed first appeared on the R Street Institute’s Blog.

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