Written by R Street’s Jarrett Dieterle and cross-posted from R Street Institute.
At a time when confidence in Congress—and really all of Washington, D.C.—remains at an all-time low, congressional representatives seem more determined than ever to make Americans cynical. Perhaps nothing illustrates this more than a recent resolution concerning alcohol regulation that several legislators recently introduced. The resolution, which is ultimately toothless, seeks to “recognize … 85 years of successful State-based alcohol regulation.” Not only is the resolution a complete waste of time, it also fundamentally misunderstands the role regulation has played in the modern evolution of the alcohol industry.
As far as one can divine from its fluffy language, the resolution appears to operate primarily as a cheerleading vehicle for the three-tiered system of alcohol regulation. The system, which traces its heritage to the immediate aftermath of Prohibition, requires that each link in the alcohol distribution chain—producers, wholesalers and retailers—remain legally separate entities.
This mandate may seem unremarkable at first blush, but its importance cannot be overstated. Consider that everyday conveniences such as Apple Stores—in which Apple acts as both the producer and retailer of its goods in stores nationwide—are impossible in the alcohol space. The three-tiered system also lies at the heart of many antiquated and nonsensical alcohol laws that remain on our books today. For instance, notoriously silly laws like Indiana’s warm beer law (which forbids gas stations from selling refrigerated beer) and laws prohibiting the shipment of spirits to consumers are vestiges of the three-tiered system that have never been cleared away.
The theory behind the three-tiered system, as the congressional resolution itself notes, is to prevent vertical integration in alcohol markets. In other words, the aim is to thwart large producers from exercising direct control over distribution in a way that could lead to monopoly behavior. While fears about monopolies are hardly unsurprising—after all, several 2020 presidential candidates have already claimed they want to “make antitrust cool again”—these concerns are totally unsubstantiated in the modern alcohol marketplace.
We live in an unprecedented time in modern history when it comes to what we drink. The array of different spirits, beers, wines and ciders is seemingly endless—and only grows by the day. Consumers are also becoming more locally focused and selective, meaning that the chances of a few large industry players cornering the drinks market are less realistic than ever. Simply put, consumers want more options, not fewer. Such a fragmented marketplace makes monopolistic behavior tricky, if not impossible.
Instead of waxing poetic about the supposed virtues of an anachronistic system of regulation, politicians should be focusing on how to modernize and overhaul alcohol laws across the board. Some laws surrounding alcohol are certainly necessary—no one wants to legalize driving under the influence, for example—but the vast majority of alcohol rules have no connection to health and safety. Citizens are not made safer by laws that prohibit the sale of cold beer in gas stations or forbid them from having booze shipped to their door. (After all, if we can find a way to send prescriptions via mail, we can do the same for alcohol.)
To be fair, politicians frequently spend much of their time grandstanding. But if they’re going to do so, they should at least grandstand for something that makes sense.
C. Jarrett Dieterle is the director of commercial freedom at R Street Institute and the editor of DrinksReform.org.