Federalism’s Tension with the National Love of Craft Beer

Federalism allows the individual states to function as “laboratories of democracy.” Innovations in the law of one state can spill over into others; in some cases creating a national consensus. Since alcohol regulation was largely left to the states after Prohibition, each became such a “laboratory” with respect to alcohol laws.

While the general three-tier system has been in place throughout the country, each state has put its own stamp on it. And some of the laboratories have performed more experiments than others, whose lab equipment still bears the dust that settled shortly after the passage of the 21st Amendment . Some of those experiments have benefitted small brewers because the three-tier system generally “protects” distributors and retailers from big bad manufacturers.

In particular, a strict three-tier system prohibits brewers from selling (or in some cases, even offering samples of) beer from the brewing premises directly to the public. Brewers in those states must employ a distributor to get their beer to retailers if they hope to make any money. Many states, such as California, allow breweries (small and large) to self-distribute and to offer tasting (for profit) at the brewery. And lo, the world has not ended. But it has provided start-ups with an instant revenue stream from the ability to sell beer on-site before they’ve even managed to find local accounts or considered a strategy for expansion/distribution.

It has also provided the public with an excellent way to appreciate their local beer: they can look at the brewing equipment and chat with the brewers and proprietors as they enjoy the beer made on site. Then, they can take growlers of it home. Of course, not everyone gets to enjoy local beer this way. Consequently, not everyone gets to enjoy a great variety of local beer: restrictive beer laws mean fewer would-be entrepreneurs will think it is worthwhile to start up.

In tension with these variations across the states is the national culture of beer appreciation growing rapidly in the United States. Drinkers just joining the ranks are well aware of the best beers across the nation, thanks to rating sites, social media, and the general modern ease of knowing about things beyond one’s own state’s borders.

When such a person reads something like this: “If their strategic plan was based on them opening up a microbrewery then changing state law, then that was a poor strategic plan,” he or she may be confused, even angry. He or she may know about the lines to fill growlers at Hill Farmstead or the Alchemist’s Heady Topper kerfluffle. He or she may have seen the picture of the lady with a 2-month-old baby waiting all night for a shot at some Pliny the Younger. Such a person may want a phenomenon of that nature to occur in his or her back yard.

Georgia’s Senator Jack Murphy added, “The three-tier system has been in place for, what, 80 years now? And what it was designed to do and is designed to do is regulate an industry that needs regulating,” Murphy said. Such a person, upon hearing this, is apt to think, “Federalism Sucks!” (Perhaps not in those terms). An opportunity for civic engagement, I suppose. It does seem that more and more politicians recognize the opening of small breweries as an opportunity to tout job creation, particularly in [rural] places that have not seen a lot that. Consequently, a challenger to an old “three-tier” guy may have a lot of success talking about small business growth, new jobs, and the good small brewing businesses have done for local communities.

While it is good that states can establish their own policies, the online and inherently borderless nature of like-minded communities, such as craft beer nuts, puts federalism in tension with the national mood. One national mood of craft beer is: locally made, locally consumed, [very] locally enjoyed. Small breweries (where they can) have teamed with the food truck phenomenon to turn their industrial-zone warehouse sites into cool, brewpub-esque hangouts. And it is a shame that residents of some states can only be spectators [and tourists] to this aspect of beer appreciation.

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Sanctum Brewing Some More Life Into The Heart of Pomona

I had a chance to pop in to visit the best thing to happen to Pomona, craft-beer-wise, since the Rookery opened downtown in the old Joey’s BBQ spot. Sanctum Brewing opened its doors a couple weeks ago, initially only Fridays and Saturdays. Now, Thursdays too. Eventually, they are likely to add Wednesdays (since they can).

The space is just east of Towne avenue, at Palm and Commercial just north of the train tracks. Located in the newly renovated Pomona Packing Plant, the history of the buildings includes housing stone fruit and citrus packing operations going back nearly 100 years.

Sanctum’s Jason Stevens and Scott Lucas acquired a pile of old pallets, and put many hours (days, actually) into reconditioning them as decor for their walls and bar. It looks great. As for the beer, the initial test batches include a mild, two blondes (one with apple), a dubbel, a chocolate stout, and an IPA. I would say very successful for test batches–clean flavors, nothing off (that I could detect). I did not get much apple from the blonde, but the plain one was fine and probably better off without it. With a tasting flight, I did not get to appreciate any one of the beers fully, so I’ll leave my comments on them at that.

From a Law.of.Beer perspective, I had enough curiosity to scan Pomona’s council records regarding the opening of Sanctum. The only thing that stands out from a legal perspective is that a zoning amendment was required before the brewery could operate in its location. The particular industrial zone  did not allow for a brewery that served beer on the premises. After a non-contentious amendment, the city approved Sanctum’s CUP and here they are–a great addition to the city. Welcome, Sanctum!

It Ain’t Me, Babe: Bob Dylan, Italian American Cars, and Big Misunderstandings

Still being new to the Twitter-verse, it was interesting to watch the comments of the 650-ish people I follow develop in real time during the Super Bowl. My follow-portfolio is undiversified: mostly beer-related folks, next most are sports types (the Danettes and Rich Eisen, e.g.). When the Chrysler Ad aired, the immediate fallout took me by surprise, and the continued “outrage” has continued to take me by surprise, culminating (in part) in this post from New Holland Brewing Co’s Fred Bueltmann’s rebuke of Chrysler.

Where I’m confused about the uproar is highlighted by Bueltmann’s characterization of this thought process: “At first, I thought it was a simple snub.” Then he realized he thought not only was it a snub, but it was much worse than that. I take issue, though, with the thought that this was a “snub.” Calling it a snub entails there having been some kind of contest, which could have legitimately been won by any number of entrants. Of course, among those of us who know what excellent beer is being made here in America, many would vote USA to the top of the list. But there was no list, no competition.

It was purposeful that a different country appear as a figurehead for each product in the commercial which was about making cars in the USA. Never mind, for the purpose of the story being told, that an Italian company now owns Chrysler. The point is, the commercial was a little story about how the USA made cars. Since America made cars, you should buy the cars they now make.

The USA, however you want to slice it, did not make watches, despite the fact there are fine watchmakers here. And we did not make beer, despite the fact that, indisputably, excellent beer is being made here. Superb, delicious beer. But Germany made beer–a long time ago. That one can reasonably disagree with an argument they continue to make the best beer is beyond the little story being told in the commercial.

For that reason, I don’t think the commercial should be viewed as offensive to American beer. It was just intended to give rhetorical effect to the statement, we’ll make your car. And it had better rhetorical effect, from a writing standpoint, than saying: let the USA make your beer; let the USA make your watches; let the USA make your electronic doodads; We’ll make your car. That would have no rhetorical effect, which is not what they were going for.

Maine’s Prohibition on Posting Alcohol Content: Unconstitutional Restriction on Commercial Speech

 Maine’s Liquor Licensing and Compliance agency reportedly ordered a brewer to take down information regarding the alcohol content of beers on offer. The problem with the law is that it is restriction on commercial speech that is neither false nor misleading. Manufacturers should be encouraged to share as much truthful information as possible about their products so that consumers can make rational, informed decisions about what they buy. The Constitutional doctrine developed under Central Hudson says that while commercial speech may deserve somewhat less protection than political speech, for example, restrictions on speech containing information about a lawful product that is neither false nor misleading must serve a “substantial interest” of the state, with the regulation directly furthering that interest, restraining the speech only to the extent necessary to further the interest (tailoring).

According to the article, the law has been on the book since 1937, and has probably never been challenged under the doctrine espoused by Central Hudson. In 44 Liquormart v. Rhode Island, the Supreme Court struck down the state’s ban on advertisement of liquor prices because it unconstitutionally abridged commercial speech. In his (non-majority) opinion, Stevens stated, “The First Amendment directs us to be especially skeptical of regulations that seek to keep people in the dark for what the government perceives to be their own good.” This statement seems to address precisely what is happening in Maine’s prohibition on alcohol content posting. If Maine’s regulation were construed to be a “flat ban” on posting/advertising alcohol content, it would not likely survive First Amendment scrutiny.

Jester King Craft Brewery, Inc. was a plaintiff in a Texas suit against the TABC (835 F. Supp. 2d 227). There, the District Court recognized the First Amendment protection in the context of Texas alcohol content labeling/advertising laws that plaintiffs claimed were “inconsistent, nonsensical, and [not justified by] any substantial government interest.” The court also held that forcing plaintiffs to call ale “beer” if its alcohol content was below a certain level violated the First Amendment because the state failed to show the regulation advanced a substantial state interest.

In Rubin v. Coors Brewing Co, the Supreme Court struck down a regulation on displaying  alcohol content in certain contexts, finding the regulation not “sufficiently tailored to its goal.” Notably, the court acknowledged that there may be a substantial interest in suppressing “strength wars” (the government’s justification for prohibiting information about alcohol content). However, the regulation at issue was too internally inconsistent to achieve that goal, so it failed the First Amendment test. Concurring, Stevens called the regulation an attempt “blindfold the public,” and argued that truthful information about alcohol content deserves full First Amendment protection.

Thus, it would seem the door is not entirely closed on Maine attempting to justify its regulation on posting alcohol content, but the state would face an uphill, and likely losing battle–probably not one it has an interest in fighting. Jonathan Adler of the Volokh Conspiracy posted an article on February 7, 2014 contending that Maine’s law, under Rubin, violates the First Amendment. Good enough for me to remove the question mark from the title of this post and state it affirmatively (even though the Rubin did not foreclose the “strength wars” argument).

Interestingly, there has been a fair amount of chatter amongst the beer-drinking public about “strength wars” amongst craft brewers. Double-triple-imperial beers are ubiquitous. Many, of course, enjoy a high-alcohol beer for the depth and complexity of flavors it can offer. A high-alcohol beer’s “efficiency” often plays a role in popularity as well. Extreme examples of high-alcohol beer recently made by BrewDog and others bring to mind the arms race played out by Tom and Jerry, with each one topping the other’s newest arsenal acquisition with ever-larger cannons and incendiary devices.

Consumers themselves have reacted to this increase by expressing desire for more “sessionable” beers, the popularity of which continue to rise. Most brewers, along with various imperials and doubles, now seem to have some form of lighter “day” IPA, XPA, or hoppy lager. Stone Brewing Co. announced its “Go To” Session IPA on 2/3/14. Brewers self-regulate the serving of stronger beers as well. As beers approach 7-8% and up, they are far more likely to be served in reduced portions–often 6–8 ounces for the strongest beers.

If the market responds in this way to “strength wars,” there is little reason to believe the government should intervene by “blindfolding” the public in hopes doing so will quell a strength war. The whole thing is silly, anyhow, given that someone interested primarily in strength can just go out and buy the cheapest “handle” of vodka, gin, whiskey, rum, brandy, tequila . . . or order the same at a bar.

Ironic, too, the early fear of strength wars in beer. Some 80 years later, the drafters of legislation such as Maine’s might be surprised to know that for the mass market in beer, consumers themselves have kept the alcohol level nice and low, as it turns out that “cold tasting” beer is necessarily low in alcohol.