This is one quarrel that won't likely be settled over a cold one.
Trade associations and lobbyists for alcohol manufacturers such as MillerCoors, Anheuser-Busch, Heineken and Diageo are brawling with their wholesale distributors over a bill that would strengthen states' ability to regulate alcohol and make it harder to challenge state alcohol laws in court. The National Beer Wholesalers Association and the Wine & Spirits Wholesalers of America are pushing hard for the legislation, which would solidify their role as industry middlemen and effectively keep regulatory fights at the state level, where they have more influence. But drink manufacturers are scrambling to squelch it, arguing that the bill would create a patchwork of state regulations while potentially allowing states to override federal labeling and food safety laws, among other things.
The rift is playing out before the House Judiciary Committee, not the typical arena for alcohol issues. The fight is going on even as the beer manufacturers' trade group, the Beer Institute, copes with a leadership void: Its longtime head died earlier this year, and his replacement doesn't begin until August. The trade association recently brought in outside lobbyists for the first time in a decade, hiring Patton Boggs partner Jonathan Yarowsky, a former general counsel to the House Judiciary Committee. And some of the Beer Institute's biggest members, including MillerCoors, are taking leading roles in the lobbying fight.
The result is an unusual coalition of beer, wine and hard alcohol manufacturers working together against their business partners, the wholesalers. It's a potent conflict among industry trade associations that, combined, spent roughly $7 million lobbying the federal government last year. "Right now we're all consumed by this," said Mark Gorman, senior vice president for government relations for the Distilled Spirits Council of the United States. "It's sort of the first time in the 10 years I've been here that we have a very strong beer, wine and spirits supplier coalition working hand-in-hand, consulting with each other every day."
The Comprehensive Alcohol Regulatory Effectiveness Act of 2010 would declare it congressional policy that states have primary authority to regulate alcohol. The legislation, filed in April, has 125 co-sponsors in the House, though no companion bill has been filed in the Senate.
The wholesalers' groups and drink manufacturers disagree on its potential impact, including whether it would effectively overturn a 2005 U.S. Supreme Court decision -- Granholm v. Heald -- that said states cannot discriminate against out-of-state producers in favor of in-state producers.
Manufacturers say that, if the bill passes, states could more easily create regulations that make their business more expensive and create other problems. For instance, Kentucky bourbon producers have said they are concerned about whether states could pass laws creating individual standards for bourbon. The bill also eliminates a provision requiring states to regulate out-of-state alcoholic beverages the same way as in-state, something manufacturers say could lead to protectionist and anti-competitive measures. They also say the bill threatens direct shipping to consumers, protecting distributors. Wholesalers say the bill just reinforces the rights of states to make such decisions locally.
The bill also places a higher burden on plaintiffs who sue to overturn state regulations. Plaintiffs would have to prove that the regulation doesn't promote drinking in moderation or restrict underage access to alcohol, among other things.
Mike Johnson, executive vice president and chief advocacy officer with the National Beer Wholesalers Association, said the Supreme Court decision prompted 26 lawsuits "challenging other parts of the states' regulatory authority."
Johnson said the timing was tied to the beer wholesalers' annual legislative conference. More than 800 distributors from across the country met with more than 400 members of Congress, urging them to co-sponsor the new bill.
The beer wholesalers and brewers met for months to arrive at a legislative compromise but didn't reach consensus. Still, the wholesalers' push took some off-guard. "We weren't aware of the bill until the bill was filed," said Wendell Lee, general counsel of the Wine Institute, which represents California wineries.
Firms lobbying on and monitoring the legislation for manufacturers include McDermott Will & Emery and Washington lobbyists Fierce, Isakowitz & Blalock; Podesta Group; and Elmendorf Strategies. Yarowsky, speaking for the Beer Institute, said brewers believe that the bill "would lead to a protectionist and anti-competitive system that would hurt consumers."
The bill is still in committee. But the fallout from the dispute has affected the relationships among the industry associations. Gorman, of the distilled spirits association, said his group worked with wholesalers earlier this year on tax and food safety issues, but this has "kind of overtaken all of that at the moment."
