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Kosar and Dieterle on the Meaning of the Tennessee Wine SCOTUS Case

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As we noted last week, the Supreme Court struck an important blow for freedom in its Tennessee Wine v. Thomas decision, which held that Tennessee’s requirement that liquor store owners be residents of the state was unconstitutional. R Street’s Jarrett Dieterle and Kevin Kosar explain in a piece for USA Today how the implications of this decision could be far reaching, especially when it comes to direct-to-consumer alcohol shipping:

Just after the 100th anniversary of Prohibition’s start — and over 85 years since its repeal — Americans could be forgiven for assuming that government remains blissfully removed from their cocktail glass. Unfortunately across the country, states and local governments still enforce a bevy of outdated and oftentimes downright silly alcohol laws. While these laws have proved notoriously difficult to get rid of, a new Supreme Court decision issued could spell the end for a broad swath of cronyist and antiquated booze rules — and perhaps be the first step toward a more national alcohol marketplace…

The court’s holding might seem limited to the unique circumstances of Tennessee’s law, but it has the potential to be a game changer in the world of booze. The biggest change could involve the shipment and transportation of alcohol.

Unlike just about every other product on the market today — nearly all of which can arrive at your door in two days — direct-to-consumer alcohol shipping is incredibly limited. While a previous Supreme Court case allowed wineries to ship their bottles to consumers in neighboring states, very few states allow out-of-state retail stores — not to mention breweries and distilleries — to engage in interstate shipments.

Under the logic of the court’s holding in Tennessee Wine, however, allowing in-state shipments of alcohol while forbidding out-of-state shipments violates the Constitution. If more of these laws are challenged accordingly, it could mean that a Michigander could soon be able to have her favorite Vermont beer shop send IPAs directly to her door…

Read the whole piece here.

R Street's Jarrett Dieterle Featured on Reason TV

R Street’s Jarrett Dieterle was featured in a video by Reason TV about the dumbest alcohol laws in America. He discussed both recent successful reforms, such as allowing Native Americans to distill on tribal lands and the recent Supreme Court decision in Tennessee Wine, as well as antiquated laws that still remain on the books. You can watch the video here:

Facebook Continues to Ban All Alcohol Sales

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Legendary whiskey writer Chuck Cowdery recently posted about Facebook’s ongoing policy to clarify its ban on alcohol sales through its site:

Yesterday, all or most of the myriad whiskey pages on Facebook received a letter stating, in part, "While we allow people to talk about alcohol products we will not allow people to sell or purchase these regulated products on our site. This has always been true in places like Marketplace and Commerce posts in groups, but we will now extend this to organic content…

None of this is new. Except in Kentucky and a few other places, the secondary market for alcohol is illegal, and in those few places where it is legal it is restricted.

The state beverage alcohol agencies that are supposed to enforce these laws rarely do, but they will lean on companies such as Facebook, eBay and Craig's List to get them to clamp down on the peer-to-peer commerce that takes place on their platforms…

(Read Cowdery’s full post here).

As Cowdery mentions, some states, like Kentucky, have recently made moves to liberalize their policies on secondary sales, but otherwise these types of sales are illegal across the country. Both Cowdery and R Street’s Kevin Kosar have written previously about why legalizing the secondary booze market could be beneficial.

SEC Football Stadiums Now Can Serve Alcohol

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Last year, R Street’s Marc Hyden called for the SEC to loosen its restrictions on allowing colleges in its conference to serve alcohol at football games. Hyden noted that other NCAA schools already allowed alcohol sales and that it only made sense for the SEC to follow suit:

There are many reasons [some] oppose permitting alcohol in the SEC’s stadiums, but none of them are good.

The most frequent justifications are promoting public safety and protecting the attendees’ general well-being. After all, we can’t have increased crime or fans getting sick and passing out. (University of Georgia fans probably wish they had slept through the title game, but I digress.)

While increased alcohol consumption can sometimes exacerbate tense situations, a 2016 study found no increased criminal activity when college stadiums serve alcohol to general attendees. There is reason to believe, however, that alcohol-related crime may even decrease in certain locales with alcohol sales when paired with other policies, as was the case at West Virginia University. Further, permitting general alcohol sales in collegiate arenas might actually offer a public health benefit.

(Read Hyden’s full piece here.)

This past week, according to Bleacher Report, the SEC finally heeded this call and announced that it will allow individual schools within the conference decide whether they want to serve alcohol at games:

SEC Commissioner Greg Sankey announced Friday the conference is set to lift its ban on stadiumwide alcohol sales Aug. 1.

"Schools will have autonomy," Sankey told reporters. "This now an opportunity for institutions to make responsible and appropriate decisions [about alcohol]."

More here.


American Whiskey Gets a Partial Tariff Reprieve

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The Trump Administration’s ongoing tariff wars have roiled the American drinks industry, hurting producers of both beer and whiskey. Canada and Mexico’s retaliatory whiskey tariffs were recently lifted, but as the Chicago Tribune reports, producers are still concerned about European markets:

American whiskey producers feeling the pain from the Trump administration's trade disputes have gotten a shot of relief with an agreement that will end retaliatory tariffs that Canada and Mexico slapped on whiskey and other U.S. products.

The whiskey industry hailed the arrangement to ease trade tensions among the North American allies and said it hopes it's the first of several rounds of good news on the trade front. Distillers have suffered shrinking exports since the last half of 2018 due to tariffs in some key markets.

President Donald Trump last Friday lifted import taxes on Canadian and Mexican steel and aluminum and delayed auto tariffs that would have hurt Japan and Europe. In return, the Canadians and Mexicans agreed to scrap their retaliatory tariffs on U.S. goods, including American whiskey.

But U.S. whiskey makers still face significant trade hurdles in the European Union, the industry's biggest export market…

Read more here.

Congress Tries (Again) to Allow the Post Office to Ship Alcohol

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Shipping alcohol is notoriously complicated in modern day America. This is especially odd given that, uh, everything else in the universe seems to be a mere 2-day-shipment away. While private carriers and individuals states have complicated rules around alcohol shipping, the United States Postal Service forbids it from being shipped at all. A determined member of Congress is trying once again to fix this anachronistic ban:

The USPS Shipping Equity Act (H.R. 2517) was introduced by Congresswoman Jackie Speier (D-CA). She said the bill would end the Prohibition-era restriction that prohibits the Postal Service from shipping alcohol.

“In 2016, California was America’s top destination for the direct shipment of wine, yet consumers and manufacturers are prohibited from using the U.S. Postal Service to ship or deliver these everyday products,” Speier said…

This is not the first time Speier has made this effort. In fact, it’s not the third.

Her bill was last introduced in 2017 but failed to advance. It was also introduced in the two sessions of Congress prior to 2017. She obviously really wants to see the Postal Service start shipping alcohol, but there historically has been little interest in Congress to pass such a law. Maybe the fourth time is the charm?…

Read more at FedSmith.com.

Why Are Dry Counties Still a Thing?

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We focus a lot here at DrinksReform.org on the many, many inane alcohol laws around the country. But we shouldn’t lose focus of perhaps the most absurd, no-way-this-is-true-in-2019 alcohol rule of them all: There’s still places in America where it is straight up illegal to have booze. Drinks writer Wayne Curtis has a fun piece for The Daily Beast on dry countries:

The population of Beaver County, Oklahoma, is 5,315 and deeply divided. In a vote last year to determine whether alcohol sales should be made legal—it’s been a dry county for more than a century—the wets initially prevailed, voting in legal liquor by a scant five votes. But then the provisional ballots were tallied. And…the prohibitionists carried the day. So Beaver County remains alcohol-free. It is the last and only county in Oklahoma where you can’t buy a legal drink…

“Dry counties” exist as a sort feral anachronism—like phone booths and video stores. They appeared in response to perceived social or economic need, and when those needs dissipated, they were left behind, like flotsam from a flood nobody remembers. We are a nation that’s pretty good at building laws, and pretty lousy at dismantling them.

And so dry counties persist—today an estimated 18 million people are unable to buy a legal drink where they live. Mostly these persist in the south, and a map of dry counties overlaid with one of the Bible Belt, not surprisingly, shows considerable overlap. (Although the penchant for dryness fades as you get closer to the Gulf of Mexico.) The states with the most dry counties are Kentucky, Arkansas and Tennessee. Fact: you can still get arrested for possession of alcohol in some dry counties, as a 69-year-old man in Culliman, Alabama, learned recently…

Read more here.


Congressional bill would eliminate excise tax on Kombucha

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Kombucha traditionally has small amounts of alcohol in it, which can make it a tricky case for federal excise taxes on alcohol if it rises above 0.5% alcohol by volume. A U.S. Senator recently introduced legislation to help protect the drink from these taxes, according to Bend Bulletin:

A measure in Congress would help kombucha manufacturers by eliminating excise taxes on their products that contain more than 0.5% alcohol.

The bill, introduced by U.S. Sen. Ron Wyden, D-Oregon, raises the limit on alcohol by volume for kombucha to 1.25% and makes the product exempt from excise taxes imposed on alcoholic beverages like beer…

Kombucha is a fermented product, created when sugar and yeast are combined. When kombucha is not kept cold, it continues to ferment, raising the alcohol level above 0.5% and making it subject to the excise tax, said Amelia Winslow, director of project management at Kombucha Brewers International, a nonprofit trade association.

“Commercial kombucha producers work hard to control their processes to achieve compliance,” Winslow said. “However, if there are gaps in the cold chain during distribution, authentic kombucha, which is a living food, can go slightly above this 0.5%.”

It doesn’t make sense to tax kombucha for exceeding that threshold, Winslow said…

Read more here.

Where Did All The Bars and Taverns Go?

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This post was written by R Street Institute President Eli Lehrer.

Growing up in Chicago, I saw bars as a neighborhood institutions. Some served hot dogs or pizza puffs, but most were pure drinking places. As an adult, I’ve lived in Virginia, which requires all establishments with liquor licenses to have kitchens and derive at least 45 percent of sales from food and thus has no bars per se. Washington, D.C., where I’ve worked for 21 years now has a “tavern license” for places that want to emphasize drinks. But few exist. The Washingtonian magazine’s list of the Best Bars in Washington, D.C.includes only five District-located places that are bars without significant food menus. Indeed, many of the best known “bar” hangouts in the city like the Front Page and Union Pub have extensive menus. So, why?

Many obvious reasons don’t survive scrutiny. High D.C. rents can’t stop taverns alone since they thrive in places with even higher rents like San Francisco. Food produces another revenue and potential profit stream, of course, but that’s so everywhere. The non-family demographics of the city are similar to those of Manhattan, much of the Bay Area, Chicago’s North side, Seattle and dozens of other places with thriving bar scenes. And the idea that young professionals don’t like bars per se seems incorrect: alcohol use tends to decrease with age and people without families have more time to hang out at bars after work.

Instead, transience, immigration patterns and institutions seem to explain the District’s lack of bars. First transience. More  than 60 percent of the population of the District was born elsewhere and that percentage has risen in recent years. Only places with big retirement communities have as many transplants. Strong neighborhood institutions like taverns which must differentiate by vibe rather than menu (serving beer requires little skill and simple cocktails are hard to differentiate) aren’t going to thrive in places where people move.

The nature of immigration also matters. While D.C. did once attracted many people from Ireland, home to the world’s best-known pub culture, the city’s historic Irish neighborhood, Swampoodle now exists only in a park’s name. Modern D.C. attracts relatively few immigrants and the group of new arrivals most prominent as hospitality entrepreneurs--Ethiopians--come from a country with a large Muslim population and thus little bar culture.

Finally, the District’s unique Advisory Neighborhood Commissions (ANCs) present a barrier with their de facto veto over new liquor licenses. This makes taverns’ entire business subject to an additional obstacle. My colleague Nick Zaiac points out that for an ANC member (each of whom represents about 2,000 people) helping to block a bar might add political capital in a way that it wouldn’t for a council member representing a larger district.

Bottom line: D.C.’s culture and its institutions just aren’t friendly to taverns. And this probably isn’t going to change.





Prohibition was Repealed Almost 90 Years Ago, but Congress is Still Praising its Progeny

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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.