Tweaking the Three Tier System? Don’t count on it
USA | Smaller wine, beer and spirits producers hope that President Biden’s executive order will make it easier to reach consumers, not least by allowing direct-to-consumer shipping across state borders, which is still illegal in most states.
On 9 July 2021, President Biden issued Executive Order 14036, titled “Promoting Competition in the American Economy.” It focuses on barriers to competition created by consolidation in many industries. The 13-page document contains two directives about the beer, wine and spirits industries, which have sparked debate about the Three Tier System, that has governed alcohol distribution since the repeal of Prohibition in 1933.
The Washington Post newspaper, on 3 September, ran a story on the more than 450 public comments, submitted to the US Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) on barriers to competition in the beer, wine and spirits industries.
Tweaking, not razing the Three Tier System
The dominant theme was that consolidation in the middle of the Three Tier System – producer, distributor, retailer – is choking competition by making it difficult for small producers to get their products to market.
Per the Washington Post, there were few, if any, calls for scrapping the Three Tier System. Only the National Association of Wine Retailers said that, by circumventing the middle tier, retailers would be able to buy directly from producers and ship directly to customers.
The TTB has a lot to ponder from these submissions. Of course, wholesaler groups argue that the current system has worked well and fostered growth in the number of new breweries, wineries and distilleries.
Observers argue that any proposals by the TTB will likely be opposed by wholesalers and anti-alcohol activists. They fear that easing the sale of beer, wine or spirits will increase public health problems. Besides, the TTB cannot revise the rules, as alcohol distribution is governed by state laws.
Too many vested interests
One commentator wrote: “As a consumer/wine collector, I decided against submitting a comment to the TTB as a waste of time. While their intent may be good, the reality is that the Feds are hamstrung by the 21st Amendment’s grant of regulatory power over alcohol distribution to the states, combined with the Supreme Court’s reluctance to invoke the Commerce Clause against protectionist laws, that restrain interstate commerce on behalf of rent-seeking, politically powerful in-state interests. Apart from some glacial-pace moves by individual states, this is unlikely to change in the foreseeable future.”
