Tennessee's Liquor License Residency Requirement Heads to SCOTUS

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Tennessee law requires owners of retail liquor licenses to have resided in the state for multiple years before being able to obtain a license. A court case challenging this residency requirement has been working its way through the court system for several years, and last week the U.S. Supreme Court agreed to hear the case. Shanken Daily News reports:

The Supreme Court of the United States has agreed to take on the case involving Total Wine & More’s entry into the Tennessee market, which the Tennessee Wine and Spirits Retailers Association (TWSRA) is fighting on the grounds that Total hasn’t fulfilled the state’s residency requirements. Total Wine asserts that Tennessee’s residency requirement is discriminatory against out-of-state residents and therefore in violation of the Constitution’s Dormant Commerce Clause.

Under Tennessee law, corporations and other business entities may not obtain a retail liquor license unless every director, officer, and shareholder of the business has been a Tennessee resident for at least nine years. Total Wine challenged the law successfully on Commerce Clause grounds in both federal district and appeals courts, and noted in its brief to the Supreme Court that Tennessee’s own attorney general “twice opined that this residency statute violated the Dormant Commerce Clause and could not be enforced.” In the meantime, Total was granted a license by the Tennessee Alcoholic Beverage Commission and opened its first store in Knoxville earlier this summer...

Read the rest here.

New Jersey Slaps New Rules on Craft Breweries

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Last week, the New Jersey Division of Alcohol Beverage Control issued a “special ruling” that imposes a bevy of limits and restrictions on craft breweries in the Garden State. NJ.com details the changes:

Say goodbye to weekly trivia nights, food truck Fridays and Eagles on the TV at your local craft brewery.

A new ruling issued by the state cracks down on what brewery owners will be allowed to do and now requires them to obtain special permits from the state — a decision that the craft beer supporters in New Jersey say will severely set back the burgeoning industry. However, restaurant and bar advocates say the rules will put brewery owners more in line with others in the alcohol industry.

The “special ruling” issued Monday by the New Jersey Division of Alcohol Beverage Control will affect the 88 limited breweries that are now operating in the state — many of which have opened since the state relaxed some of its laws in 2012 — as well as the 23 operations who have applications pending…

Some of the changes breweries are facing include the following:

  • Breweries can now only hold 25 “special events,” such as paint and sip nights, trivia nights, live televised sporting events and live music nights.

  • Breweries are limited to 12 special permits a year to sell products off the brewery premises such as festivals, athletic events, and other civic events.

  • Breweries are limited to 52 private parties (birthdays, weddings, anniversaries) a year.

  • They must electronically notify the ABC 10 days prior to holding the event

The breweries did gain the ability to sell items such as water, soda, pre-packaged crackers, chips, nuts and other similar snacks.

Customers can still bring in their own food, but the brewery can no longer have restaurant menus available, or coordinate with other vendors, such as food trucks, to provide food…”

Read more here.

A New Challenge to Florida's Wall of Separation Law

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Early last year, Florida lawmakers tried to repeal an antiquated state law requiring any grocery or chain store wishing to sell distilled spirits to do so in a separate retail location away from other products. The so-called “Whiskey and Wheaties” reform bill passed the state legislature, only to be vetoed by Gov. Rick Scott. R Street testified in favor of the reform bill and wrote several op-eds on the issue (here and here). Large retailers such as Wal-Mart and Target have now initiated an administrative challenge in an effort to get the law overturned:

Target and Walmart are heading to court to get an administrative law judge to give them what Gov. Rick Scott wouldn’t: The ability to sell whiskey and Wheaties in the same store. 

The big-box retailers late Monday filed an administrative challenge against the state’s Division of Alcoholic Beverages And Tobacco (ABT).

At issue: The state’s obscure, 24-year-old “Restaurant Rule,” which restricts eateries and other businesses that have ‘consumption on premises’ liquor licenses from selling anything other than items “customarily sold in a restaurant.” The plaintiffs say the rule is “not supported by logic or necessary facts.”

For over eight decades, Florida law — enacted after Prohibition — has required retailers to sell hard liquor in a separate store, though beer and wine can be sold in grocery aisles…

Read the rest here.


Maryland Booze Laws Task Force 2.0

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As covered previously, Maryland convened a task force last year—led by outspoken state comptroller Peter Franchot—that recommended an ambitious package of reforms to the state’s outdated and anticompetitive alcohol laws. Given Franchot’s outspoken nature, the recommendations created a bit of a firestorm in Annapolis, and even led resistant state legislators to float the idea of stripping Franchot’s office of its power to oversee alcohol regulation in the state. Now, rather than adopting the recommendation’s of Franchot’s task force, Maryland has convened a new one:

A new task force is reviewing alcohol regulations in Maryland, and the members are looking at everything from production and sales to the impact of alcohol on public health.

But mainly, they'll be looking at whether it's the Office of the Comptroller that should continue regulating the industry and enforcing liquor laws.

The Task Force to Study State Alcohol Regulation, Enforcement, Safety and Public Health results from legislation passed by the Maryland General Assembly this year. It includes legislators, designees of the state Health Department and Maryland State Police and representatives of the Licensed Beverage Association, Mothers Against Drunk Driving, the medical community, manufacturers, wineries and craft brewers, local law enforcement and members of the public…

Read more here.


R Street's Jarrett Dieterle Interviewed About Illinois Beer Reform

  IL Gov. Bruce Rauner

IL Gov. Bruce Rauner

Illinois recently enacted legislation allowing breweries in the state to offer products from outside alcohol producers, such as other nearby cideries or breweries. R Street’s Jarrett Dieterle was interviewed by the Heartland Institute about the law:

C. Jarrett Dieterle, a senior fellow with the R Street Institute, says the previous requirement was derived from an outmoded, government-mandated scheme of alcohol transport and sales.

“It all is derivative of the three-tiered system of alcohol distribution," Dieterle said. “There are different manifestations of the three-tiered system, but the general idea is that producers—the brewers and distillers of the world—produce the alcohol and then the distributers distribute it, and then the retailers sell it in stores, restaurants, taprooms, or pubs. The Illinois law was a vestige of that system, in a particularly stringent form, where basically the brewers had to go through a distributer to sell their own beer in their own taproom.”…

More freedom of distribution means more choices for consumers, Dieterle says.

“If you go to a brewery and all they can sell is beer, a gluten-free person can’t drink there, but if they’re allowed to sell cider from a cidery down the road, then it creates a better experience and helps the brewery and the cidery,” Dieterle said. “It’s a beneficial arrangement where the biggest winner is the consumer.”…

The whole article is available here.

Alcohol Abuse Disorders Continue to Decline

The results from the 2017 National Survey on Drug Use and Health were recently released, and while the lion’s share of media coverage concentrated on the survey’s opioid findings, the results also show a variety of interesting trends regarding alcohol.

First, the number of minors who consumed alcohol continued to stay below levels from the early 2000s. In 2002, around 17 percent of respondents age 12-17 reported having alcohol at least once in the previous month, compared to just below 10 percent in 2017 (see red line in graph below).

Even more encouragingly, the prevalence of alcohol abuse disorder (AUD) continued its long-term decline. AUD is defined under the DSM-IV classification system, and is meant to capture those with alcohol dependence or abuse.

For all Americans age 12 and older, the percentage of individuals with alcohol disorders has dropped from 7.7 percent of the population in 2002 to 5.3 percent in 2017—an over 30 percent decline. For minors the news was even better, with rates of AUD dropping by almost 70% in recent years (from 5.9 percent of 12-17 year olds in 2002, to 1.8 percent in 2017). Achieving a sub-2 percent rate among young children is a particularly eye-catching and encouraging number for a country of 300 million. Finally, in the 17-25 year range—which includes the college-age demographic—there’s been an over 40% decline in AUD rates.

Our ethos for R Street’s alcohol policy program has long been to favor rational alcoholic beverage policies that respect individual freedom, free enterprise, and the public well-being. We take the public well-being part of this equation seriously, which is why it’s encouraging to see alcohol abuse disorders continue to fall to new lows.

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.