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Controversial "State-Based Alcohol Regulation" Bill Will Undermine Longstanding Framework of Alcohol Control (H.R. 5034)

May 2, 2010 08:00 PM

Below is a letter the Distilled Spirits Council sent Monday to members of Congress urging legislators not to co-sponsor H.R. 5034, legislation supported by the wholesale tier that would severely undermine the longstanding framework of alcohol control merely to benefit one tier of the industry.

Dear Member of Congress:
For over 75 years, the beverage alcohol industry has been effectively regulated at the federal, state and local level. We are therefore deeply concerned that legislation introduced with support from the beer wholesalers (H.R. 5034) would destroy this careful balance.  For good reason, the beverage alcohol industry is sharply divided over the merits of this controversial and ill-conceived proposal.  Distilled spirits, wine and beer companies are strongly opposed to the legislation and we urge you not to co-sponsor the bill.
We recognize and support states’ rights to regulate beverage alcohol pursuant to the Twenty-First Amendment and remain equally strong in our support of the three-tier system, but we question why any legislation so fraught with unintended consequences is needed to change the current system.
If enacted, H.R. 5034 would strip away the protections of the Commerce Clause requiring even-handed, non-discriminatory treatment of business practices.  The bill also would effectively exempt state laws relating to alcohol from all federal laws, such as the federal antitrust statutes, the Federal Alcohol Administration Act, the Food, Drug, and Cosmetic Act, and other important laws.  These laws provide critical consumer protections and prohibit price-fixing and other anti-competitive behavior.
This bill is so far-reaching that, while perhaps unintended, it could lead to a multitude of negative consequences:
•         Each state could set their own labeling and formulation requirements so that a product sold in one state may end up significantly different from the same brand sold in a neighboring state.  This could lead to different formulations across the country greatly impeding interstate commerce.
•         A state could alter the longstanding Federal standards for Bourbon, a distinctive product of the United States, thereby obliterating 200 years of carefully crafted production quality and American heritage.
•         Beverage alcohol produced in one state could be given a tax advantage over products from other states even though the Supreme Court previously has ruled that such laws are unconstitutional.
•         A state also would be free to enact discriminatory laws, for example, by only allowing in-state products to have Sunday sales, tastings and other consumer convenience measures.
Proponents of this legislation have said it would not lead to consumer confusion or a dysfunctional system.  These proponents are clearly wrong.  Careful reviews by legal experts conclude that this legislation would severely undercut the current regulatory balance merely to satisfy one part of the industry.
The bill would impose a virtually insurmountable burden of proof upon anyone who challenges a discriminatory or arbitrary state law creating a barrier for responsible businesses to operate in that state.
This bill also has been characterized by some advocates as “no big deal,” but it is in fact a big deal.  The current system regulates who can produce, import and distribute beverage alcohol products in this country; ensures that those products meet all requirements of food safety; provides uniform information for all consumers in this country; and does not discriminate between in-state and out-state industry members to achieve these goals.  In our view, enacting new federal legislation is completely unnecessary.
Claims that a supposed threat of “deregulation” is endangering our states’ abilities to control the sale and distribution of beverage alcohol lacks any credibility in light of over 4,000 alcohol-related laws currently in force among the 50 states.  Decades of Supreme Court decisions enforcing the Commerce Clause and the 21st Amendment have actually strengthened the balance between state and federal oversight and have not led to the “deregulation” of alcohol at the state level.
While it is true that there are commercial legal disputes regarding discriminatory and protectionist laws that exist in certain states, we believe these cases are best decided by the courts and that Constitutional protections should not be voided for special interest purposes.
Please call us if you have questions about these issues, and please give careful scrutiny to any requests to support H.R. 5034.
Mark Gorman
David Culver                                    
Michele Famiglietti

Office of Government Relations
Distilled Spirits Council of the United States
1250 I Street, NW – Suite 400
Washington, DC  20005
(202) 682-8879

CONTACT: Public Affairs Telephone: 202-682-8840 SCROLLER Y Publication Name: Publication Author:


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