An antiquated rule dating to the end of Prohibition was meant to guard against monopolies, but in the modern era of the craft beer boom, it stifles competition.
Call it the law of unintended consequences.
A pair of Charlotte breweries and the advocacy group Craft Freedom sued the state this week, asking a Wake County Superior Court judge to block enforcement of North Carolina’s 25,000-barrel cap on self-distribution.
Brewers whose production exceeds the cap are required to sign contracts with wholesale distributors in order to get their ales, pilsners and porters on retail store shelves. Those who brew 24,999 barrels or fewer are free to deal directly with merchants.
State legislators passed on an opportunity to force a compromise between brewers and distributors last month. House Bill 500 includes various changes to alcoholic beverage control laws, but bowing to pressure from the deep-pocketed beer distributors’ lobby, they stripped out a provision to raise the self-distribution cap to 200,000 barrels.
The N.C. Beer & Wine Wholesalers Association poured $231,662 into state candidates’ campaign coffers in 2016, according to N.C. Free Enterprise Foundation figures. Not surprisingly, the industry has powerful allies in Raleigh.
A statement from the group published in Durham’s IndyWeek newspaper warns raising the cap “places North Carolina distribution jobs at financial risk.”
Sure, and if the federal tax code was streamlined and written in plain language so more folks felt confident filing their own returns, a lot of tax preparers would be out of work. But shielding middleman jobs created by bad legislation simply isn’t a valid reason to keep wrongheaded laws on the books.
Distributors fear raising the cap will cut into their action. A law designed to encourage competition by preventing a few large breweries from cornering the retail market now achieves the opposite result — protectionism.
For consumers, the choice is clear. Raising the cap on self-distribution — or better yet, dispensing with it entirely — would lead to more variety and lower prices.
“Without self-distribution, there is a tremendous disincentive for entrepreneurs to invest in a craft brewery, because the brewery’s access to market rests in the hands of other private companies that have no vested interest in the success of the brewery,” plaintiffs Craft Freedom LLC, The Old Mecklenburg Brewery and NoDa Brewing Co. argue in the lawsuit.
It’s only natural for distributors to fight a bill that could harm their business, but we wish they’d be more open to compromise. After all, it’s easier for national and regional retail chains to deal with a handful of wholesalers than hundreds of small breweries. Market conditions would likely support a hybrid model where brewers self-distribute on their home turf where demand for their product is highest and ink deals with distributors if and when they want to grow their footprint.
Breweries, however, should retain the option of going it alone. We oppose any law that requires companies to enter into private contracts against their will. Consumers should, too.