Fake Whiskey and the Secondary Booze Market

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The Robb Report has a feature article on the uptick in counterfeit booze and how to spot fake spirits. Among other things, the piece discusses the lack of a legalized secondary booze market and the role this plays in driving counterfeit booze sales:

Both Simpson and Graham-Yooll urge that the best way for collectors to protect themselves is by going through reputable auction sites or brokers, who often guarantee their sales and reimburse buyers in the case of fraud. That’s more difficult in the States, however, where there is almost no legitimate market for rare whiskey sales. The so-called three-tier system under U.S. law prohibits private alcohol sales, requiring that a distributor act as a middleman between brands and customers. A few auction houses, such as Skinner in Boston and Hart Davis Hart in Chicago, sell a few hundred bottles of bourbon between them, and some businesses such as Soutirage, a “fine and rare wine retail and lifestyle company,” aid clients in sourcing whiskies at a premium.

Most sales, however, take place in an Internet underground through sites like Craigslist or closed Facebook groups, where members post pictures of bottles and hold auctions in the comments or trade bottles with one another. “The vast majority of sales that happen in the United States are not legal,” says Josh Feldman, a whiskey blogger at the Coopered Tot. “In the absence of legal avenues, there is a vibrant, illegal secondary market. That helps create the environment in which counterfeits can thrive.” …

Read the whole piece here.

Whiskey writer Chuck Cowdery and R Street’s Kevin Kosar have written about the benefits of freeing up secondary booze markets (here and here)..

Trump Hotel keeps its liquor license — and that’s as it should be

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As covered last week, a recent attempt to yank the liquor license from the Trump Hotel in Washington, D.C. has failed (for now). Although Trump’s opponents will surely be disappointed, R Street’s Jarrett Dieterle and Jonathan Haggerty wrote a piece for the Washington Post discussing why using “good moral character” laws to strip liquor licenses is a bad idea:

What do the president of the United States and an ex-convict from Michigan have in common? They’ve both been involved in legal disputes with the government over their fitness to hold a license.

President Trump — or rather, his hotel, the Trump International Hotel in Washington — holds a license that allows it to legally sell liquor. The Michigan man, Mike Grennan, sought to obtain a license to become a homebuilding contractor. Both situations demonstrate the potentially pernicious effects of so-called “good moral character” clauses in state and local licensing laws.

In June, a group of religious leaders and former judges filed a complaint with D.C.’s Alcoholic Beverage Control Board arguing that Trump — and thus, the Trump Hotel — was unfit to hold a liquor license. Their claim is based on the “good moral character” provision in the District’s licensing law, which requires owners of drinking establishments to be of sound moral character to serve alcoholic beverages…

While Trump’s detractors may be disappointed by the decision, there is good reason to celebrate it. Good-moral-character clauses are notoriously vague, which makes them ripe for abuse by local government officials. The D.C. law does not define “good character,” according to Alcoholic Beverage Control Board spokesman Max Bluestein, and some states, including Michigan, do so using ambiguous terms, such as, “[T]he propensity on the part of the person to serve the public in the licensed area in a fair, honest, and open manner.”

Such open-ended language allows officials to use good-moral-character clauses in improper ways, such as targeting political enemies or, even worse, blocking well-meaning citizens from obtaining employment. This is because licensing boards around the country can, and often do, interpret good-moral-character clauses to mean that anyone with a prior criminal conviction is automatically disqualified from holding a license — regardless of the prior offense’s relation to the nature of the job the applicant is seeking…

Read the whole article here.

Cold Beer Sales Unlikely to Come to Indiana Anytime Soon

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Over the last several years, pressure has grown for Indiana lawmakers to repeal the state’s notorious “warm beer law,” which prohibits gas stations and convenience stores from selling refrigerated beer. According to the Indianapolis Star, however, state legislators are unlikely to take up reform in the coming year:

Don't expect Indiana lawmakers to expand cold beer sales or allow happy hours next year. 

As a committee finishes a two-year project to recommend updates to the state's alcohol laws, it's clear splashy changes are off the table — at least for now.

That comes as no surprise. After finally voting to expand Sunday sales earlier this year, lawmakers signaled they were going to take a more conservative approach in the 2019 session…

Read more here.

Beer and Wine (But Not Liquor) Now Allowed on Military Bases

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Recently, the U.S. military started allowing wine and beer to be sold on military bases, and now distilled spirits companies are asking why they’re being treated any differently. The Wall Street Journal reports:

Spirits companies have fought for decades to convince consumers and regulators that liquor should be treated the same as beer and wine. Now they’re taking on the U.S. military.

The Defense Department this summer began allowing military commissaries—the equivalent of grocery stores on bases—to sell beer and wine for the first time but not vodka, whiskey and other types of liquor. The ruling sparked an outcry among spirits makers who have since lobbied lawmakers to ensure their products can be sold in commissaries, too…

The whole article can be found here. R Street’s Jarrett Dieterle and Arthur Rizer have previously argued that soldiers should also be allowed to drink starting at age 18.

It's time to privatize North Carolina liquor sales

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After a recent audit uncovered millions in wasted money by North Carolina’s government-run liquor stores, new calls for privatizing alcohol sales in the Tarheel State have arisen. The president of the N.C. Retail Merchants Association recently made the case in The News & Observer:

In 1937, after the repeal of prohibition laws, the N.C. General Assembly established a monopoly system for North Carolina and the sale of spiritous liquors. Now, more than 80 years later, the Alcoholic Beverage Control Commission still does exactly that – controls alcoholic beverages in North Carolina.

They not only determine what brands of alcoholic beverages may be sold, maintain the state ABC warehouse for the distribution of liquor, regulate the sale of wine and beer, and issue permits for wineries, breweries, wholesalers, and retailers but they also, with total exclusivity, sell liquor by the bottle.

Simply put, the system hasn’t modernized with the times nor does it meet the needs and wants of today’s consumers.

North Carolina is only one of eight states that controls both the wholesale and retail sale of liquor and the only state where the stores are run by 168 local ABC Boards in individual cities and towns...

Read more here.

Trump Hotel Liquor License Safe (For Now)

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Recently, a petition was submitted to the D.C. Alcoholic Beverage Control Board to revoke the liquor license of the Trump Hotel in Washington, D.C. The petition was based on the requirement that license holders must exhibit “good moral character,” a standard which the petitioners argued President Donald Trump had not lived up to. Politico reports that the petition was rejected (for now):

Citing a technicality, a Washington, D.C., board on Wednesday refused to review a liquor license held by Trump International Hotel to determine whether the building's owner, President Donald Trump, meets the "good character" test required to serve alcohol in the city.

The Alcoholic Beverage Control Board questioned the timing of a complaint against the hotel, saying a character review couldn't be conducted until the hotel applies to renew its license in March.

The decision was unanimous, with two members of the seven-member board not in attendance.

A lawyer for the complainants said they would appeal…

Read the rest here.

(The use of good moral character clauses has an interesting and troubling history in the occupational licensing context, as R Street’s Jonathan Haggerty has previously written about).

Oklahoma preps for freeing the drinks

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In 3 weeks, a bevy of alcohol reforms will go into effect in Oklahoma, including allowing grocery stores to sell wine and higher-alcohol beer. According to OKCFox.com, stores are busy preparing for the big day:

We're just three weeks away from new liquor laws going into effect in Oklahoma. The Oklahoma Alcoholic Beverage Laws Enforcement Commission (ABLE) is working overtime to get alcohol licenses to businesses across the state, as grocery stores and gas stations prepare to sell wine and high point beer.

Homeland grocery store on Classen and NW 18th has already stocked shelves with wine in anticipation of the big day. There is a sign letting customers know they can't buy it yet.

Many businesses are letting their 3.2 beer sell out so they're not stuck with low point inventory come October 1st.

"There’s been a lot of places that are completely empty," said Cindy Jones, manager of 50 EZ Shop. "We’ve just been selling out and not buying any."

Businesses have to apply for a retail license through the ABLE Commission to sell strong beer or wine. They also have to apply for employee licenses for those who make the transactions.

Read more here.

Will California Start Requiring Wineries to Install Ethanol Emission Controls?

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The production of wine can cause small amounts of ethanol emissions, which recently sparked a court case and settlement in California between the Wine Institute and local regulators. Wine Business has the full story:

Smaller and medium-size wineries may be required to install new ethanol emission controls on indoor, closed-top tanks 30,000 gallons or less, according to a settlement reached this summer between air district officials in Santa Barbara County and Wine Institute.

The settlement signed in June stems from an appeal Wine Institute filed in October 2017 over a Santa Barbara County Air Pollution Control District’s decision to issue a permit to Santa Maria custom-crush facility that wanted to crush and ferment more grapes, according to district filings…

The determination affecting closed, indoor tanks of up to 30,000 gallons is now posted on the California Air Resource Board’s clearinghouse. This means other air districts may use it as a basis to require other wineries of a similar type to install ethanol emission controls, explained Wine Institute general counsel Tracy Genesen…

Read the rest here.

Alcohol Producers Benefit From Being Able to Sell Each Other's Products

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Many states restrict the ability of craft alcohol producers to sell products from their competitors. While this may seem counterintuitive, many producers benefit from reciprocity laws, as the Seven Fifty Daily explains:

A few years after New Mexico’s reciprocity law was enacted, winegrowers and small brewers have enthusiastically embraced the legislation. Today, at more than 50 winery tasting rooms and brewery taprooms, producers are selling each other’s wares. So you can drink a frothy brew in a winery tasting room, or a glass of wine in a taproom. This liberalization of the sale of alcohol is giving small producers a leg up, with increased sales and revenue streams that extend beyond the tasting room.

New York led the charge for this type of legislation in 2012 with its farm producer license, which allows farm-based producers of all alcoholic beverages to sell beer, wine, cider, and spirits with a single license. The move was championed by New York governor Andrew Cuomo, and the economic impact for craft beverage producers in New York has been substantial, with more than 500 new craft businesses having opened since 2012. “New York has great agriculture,” says Jennifer Smith, who represents the New York Cider Association and the New York State Distillers Guild. “There’s incredible growth in job creation and crop utilization as a result of this legislation. This ties together expressions of place, jobs, and good old-fashioned economic gains.”

New Mexico’s reciprocity law, passed in 2015, allows all New Mexico producers of beer, as well as wine and cider producers who use at least 50 percent New Mexico–grown ingredients, may self-distribute and sell any other New Mexico–made beers, wines, and ciders from their tasting rooms. Chris Goblet, the executive director of New Mexico Wines, who chaired the economic development committee responsible for developing the legislation, says, “I just thought, Wouldn’t it be easy if a local manufacturer could sell to another local manufacturer? We could have true reciprocity.”...

Read the rest here.

New California Bill Would Make Life Easier on Craft Distillers

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Under California law, craft distillers face restrictions on being able to sell their products directly to on-site customers. According to SF Weekly, a new bill seeks to fix this problem:

A whole lot of legislation pours out of Sacramento in the final days of August, and one bill takes a shot at the very curious regulations that cover California’s small-batch, craft spirit distilleries. Alcohol and spirit distillers like Alameda’s St. George Spirits and Menlo Park’s Rocket Vodka are treated much differently than wineries, beer breweries, and large-scale liquor producers.

In a bizarre legal stipulation, distilleries can only sell you their craft liquors if they have a tasting room, and after you’ve already participated in a tasting. If the craft distillery does not have a tasting room, they cannot sell you booze at all, and must rely on their distributor for sales.

State senator Nancy Skinner (D-Berkeley) is on the verge of changing that, with a bill that just passed both houses of the California legislature on its next-to-last day of eligibility for the year. Skinner’s SB 1164, nicknamed the“Craft Distiller Op-pour-tunity” Act, would allow all 82 of California’s craft distillers to sell directly to consumers even if they do not have a tasting room...

Read the rest here.