For more information on policy suggestions for making Michigan’s alcohol distribution system less expensive and more consumer-oriented, please see www.mackinac.org/1933
(Editor’s note: A longer version of this story appeared in
Michigan Capitol Confidential on Sept. 29, 2011.)
Ken Burns’ latest documentary, “Prohibition,”
notes that the era “made a mockery of the justice system, caused illicit
drinking to seem glamorous and fun, encouraged neighborhood gangs to become
national crime syndicates, permitted government officials to bend and sometimes
even break the law…” Unfortunately, that is still the case today. The
regulatory scheme enacted to “safely reintroduce” alcohol into society
following Prohibition’s repeal has grown into a labyrinth of state-based rules,
resulting in a number of negative consequences — many similar to those of
In Michigan, distributors have made campaign contributions of millions of dollars to maintain their monopoly.
Many readers may balk at that, and ask, “Sure,
we’ve got some blue laws here and there, but how bad could it be?” Examining
the regulations on the sale of just one type of alcoholic beverage, beer, makes
it clear that significant remnants of Prohibition are still with us today —
strangling small businesses and protecting cartels.
Perhaps the worst effect of Prohibition was the
crime and corruption resulting from mob warfare in the underground market.
Because demand was not squelched with the ban on alcohol, criminals were able
to amass great wealth by successfully shipping and selling alcohol at high
prices to the drinking masses. Successful bootleggers were those who could
bribe or blackmail police and politicians into looking the other way. While the
days of the beer baron may be over, there are still plenty of deals being made
behind the scenes. The difference is that the buying and selling of political
favors is now legal.
The “three-tier system” legally separates brewers
from distributors and retailers. That means that a brewer is required to sell
his or her product to a distributor or wholesaler who may then sell to bars,
restaurants and stores. This was meant as a way to get the mob, which had
controlled beer distribution during Prohibition, out of the industry.
The ban on alcohol manufacturers selling their
product directly to consumers or retailers makes producers fully reliant on
wholesalers to get their product on the market — giving those wholesalers
massive amounts of power over the industry. If a wholesaler chooses not to
distribute a brewer’s products or does a bad job of it, the brewer could be put
out of business. This mandate has transformed the distributors into one of the
nation’s most powerful and wealthiest lobbying groups. In the 80 years since
the end of Prohibition, the makeup of the American brewing industry has changed
dramatically, from a handful of large breweries during the 1940s to thousands
of small brewers across the nation today. Yet the power held by the
distributors’ lobby has allowed them to maintain the requirement that brewers
only sell to distributors, hamstringing brewers’ ability to expand their market
despite their willingness to grow and an increase in consumer demand.
In Michigan, distributors have made campaign
contributions of millions of dollars to maintain their monopoly, blocking
brewers’ ability to sell directly to consumers. Unfortunately, their efforts
have been successful. Michigan, like some other states, maintains “franchise
laws” that virtually lock a brewer into a contract with a distributor, regardless
of whether that distributor does a good job of selling the producer’s beer or
not. Sometimes brewers can be locked into contracts for years or decades
without any way out.
As a result of current mandated distribution laws,
most small brewers are forced to limit the sales of their beer to one or two
states. Furthermore, consumers have fewer choices at higher prices, and those
who want to purchase a beer that isn’t distributed in their state have to break
the law by either crossing into another state and transporting it home, or by
having the beer shipped to them.
Unless we reject the antiquated idea that alcohol
is a “different kind of product,” or an evil from which we need the government
to protect us, we will never truly put Prohibition behind us. It is time to end
the mandatory three-tier system to allow producers to have control over the
distribution of their products and to give consumers the freedom to make their
own decisions about where, when and for how much they purchase their alcoholic beverages.
It is time to truly bring Prohibition to an end.
Michelle Minton is
director of insurance studies at the Competitive Enterprise Institute. The
Mackinac Center for Public Policy is a research and educational institute
headquartered in Midland, Mich. Permission
to reprint in whole or in part is hereby granted, provided that the author and
the Center are properly cited.