Utah AG, beer and wine makers at odds over legislation

John O'Brien Nov. 8, 2010, 3:32pm


WASHINGTON (Legal Newsline) - Utah Attorney General Mark Shurtleff says confusion over alcohol regulations needs to stop, but beer and wine associations say the pending federal legislation he and alcohol wholesalers are supporting will only serve to make things worse.

The Comprehensive Alcohol Regulation Effectiveness Act would allow states to circumvent the Commerce Clause of the U.S. Constitution when instituting regulations on out-of-state alcohol producers. The testimony given by Shurtleff at a House Judiciary Committee hearing in September was drafted by the National Beer Wholesalers Association with his input, he told the Salt Lake Tribune.

A statement released by the groups representing most of the beer, wine and spirits producers in the country said, "By its very nature, the primary function of this legislation is to affirmatively permit states to pass discriminatory laws. Simply put, H.R. 5034 is bad legislation, bad public policy and bad for free enterprise."

It appears to be a response to a 2005 decision by the U.S. Supreme Court that ruled Michigan and New York laws that allowed in-state wineries to ship to consumers without using a wholesaler but prohibited out-of-state wineries from doing the same were unconstitutional.

Shurtleff said more than 25 lawsuits have been filed regarding the decision.

One of those lawsuits was filed by Anheuser-Busch after the state of Illinois tried to block the company from purchasing 70 percent of a wholesaler, of which it already owned 30 percent.

A court ruled for Anheuser-Busch, which claimed it was discriminated against as an out-of-state brewer by not being allowed to sell directly to consumers. However, the ruling will not be enforced until March, giving state legislators a chance to rework the law, Crain's Chicago Business reported.

Shurtleff said Anheuser-Busch and small wineries can't be "similarly situated" because the company's products are "everywhere."

Paul Pisano, the general counsel for the National Beer Wholesalers Association, drafted the testimony, and the group arranged for Shurtleff's trip to testify.

"He gave me some information," Shurtleff told the Salt Lake Tribune. "I was communicating with him, and he drafted it for me because I was coming straight here (to Washington, D.C.)"

Some, like WineAmerica Chief Operating Officer Cary Greene, say the system currently in place is working just fine. Shurtleff's testimony even said "state-based alcohol regulation has been a stunning success."

Greene agrees, noting that underage alcohol abuse statistics are down. The legislation, he argues, would inevitably create higher barriers for wineries to get their products on the market.

"This will affect a lot of vineyards which are family-owned and provide a lot of jobs -- a lot of good-paying jobs," he said.

Tom Wark, executive director of the Specialty Wine Retailers Association, says the CARE Act also strips wine stores of their protections against state-based discrimination under the Commerce Clause.

"This is highly significant insofar as it would be only the second time in American history whereby Congress stripped an industry of its Commerce Clause protection, the first and only other time being (the insurance industry) with the McCarran-Ferguson Act of 1945," he said.

Regulations that differ from state to state would be a hurdle for wineries, Greene said. Shurtleff claims that the "people of Utah feel differently about alcohol than the people in Detroit" and that alcohol "causes harm to society."

Greene countered, "Several studies have proven the positive health effects of moderate alcohol consumption -- especially red wine."

Shurtleff's testimony also says states are wasting their resources on litigation and the CARE Act would restore "sanity to this area of the law."

Charlie Papzian, president of the Brewers Association, isn't buying it.

"H.R. 5034 still seeks to 'fix' a system that is not broken and has worked well for decades. Smaller craft brewers are the fastest growing segment of our industry and that growth would be jeopardized if states are allowed to enact discriminatory laws," Papazian said.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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