Craft Brewers Score Legislative Victory

Proponents of a much-publicized measure are jubilant at the final passage Wednesday of the embattled Beer Bill, which is now on its way to the governor’s desk for his signature.

Current state law separates production, distribution, and retailing functions in the alcohol industry. But a loophole allows companies that make beer outside of Kentucky to open their own distribution centers in the state and cut out the middleman.

House Speaker Greg Stumbo’s House Bill 168 forces beer makers to abide by the same laws that govern wine and distilled spirits in the state. Once the bill becomes law, beer makers will no longer be allowed to own Kentucky distributorships.

Representatives of St. Louis-based Anheuser-Busch contend HB 168 would force them to sell their two existing distribution operations in the commonwealth, and result in 200 lost jobs. Stumbo and local craft brewers argued the legislation will align the rules for beer with wine and distilled spirits so that everyone is on the same playing field.

Sen. John Schickel (R-Union) carried Stumbo’s bill on the Senate floor. He said 37 states use the three-tier system of separate producers, distributors, and retailers that prevents monopolies in the liquor business.

“No state has adopted or approved Anheuser-Busch’s effort to deregulate, vertically integrate, or breech the three-tier system,” Schickel said. “Anheuser-Busch wants a monopoly, not a free market. Anheuser-Busch wants only to distribute their products, resulting in a reduction of consumer choice.”

Concerns About Private Property Rights

Shickel’s remarks sparked a fiery, 40-minute debate in the Senate chamber yesterday. Freshman Sen. Julie Raque Adams (R-Louisville) characterized the bill as an insult to a good corporate citizen and “the ultimate assault on private property rights.” She called HB 168 a punitive measure designed to punish Anheuser-Busch.

“If the true intention of House Bill 168 is to fix the three-tier system, then this bill would have been drafted as law going forward. But this bill does just the opposite,” Adams argued. “It retroactively takes from Anheuser-Busch what they have lawfully obtained.”

Adams filed a floor amendment that would have allowed companies like Anheuser-Busch to have up to two distribution licenses, but the amendment was not called up for action.

Sen. Joe Bowen (R-Owensboro) echoed Adams in arguing the fairness of the bill. One of Anheuser-Busch’s two Kentucky distribution operations is in Bowen’s district. He said it wasn’t right for lawmakers to suddenly change the rules under which businesses that have invested so heavily in Kentucky can operate.

In his floor remarks yesterday, Bowen also argued that it’s inappropriate for lawmakers to tinker with the free-market economy, such as they would do in HB 168.

“I think the business community is best suited to sort this out,” Bowen said. “I think the laws of a free market are the judge and jury on what’s acceptable and what isn’t, and I think we have little capacity to wade in on those very laws that make it possible for businesses to thrive and grow and succeed and excel.”

Fears About Monopolistic Bullies

Sen. Dan Seum (R-Fairdale) drew on his experience as a small businessman in Jefferson County, where he’s owned several restaurants and rental properties. In expressing his support for the legislation, he recalled an incident when a soft drink company tried to force him to sell only their brands, but Seum resisted.

“So I understand a bully when I see one. And I understand what it is if you’re a small businessman out there trying to make it,” Seum said.

Sen. Paul Hornback (R-Shelbyville) repudiated HB 168 as undue regulation. He noted the Louisville distribution operation that Anheuser-Busch has owned for nearly four decades, and said that, as a farmer, he understands the weight of what he deems over-regulation.

“It’s hard for me to imagine that we’re sitting here today thinking about taking away part of a business from a company that’s been in business for 37 years and hasn’t done anything wrong,” Hornback said.

Hornback added that Frankfort can’t fix every problem by issuing a new regulation or statute.

Protecting Local Entrepreneurs

Senate Majority Floor Leader Damon Thayer (R-Georgetown) defended the freedom of craft brewers like the owners of Country Boy Brewing in Lexington to do what they love, unencumbered by the legal loopholes HB 168 means to close. He said craft beer makers shouldn’t be forced to distribute their product.

“They don’t want to be in the beer distribution business… They’re thinking about creating a product and a brand that can succeed on a national basis,” Thayer said. “I urge the members to vote in favor of this bill to protect the entrepreneurs, the small businessmen and women like my constituents from Country Boy Brewery who are living the American dream.”

After a spirited debate, the Senate passed HB 168 on a 23 – 13 vote.

In a statement from Anheuser-Busch, a spokesman said, “This legislation violates our rights under the U.S. and Kentucky constitutions, discriminates against our company by providing economic protections for in-state special interests, and represents nothing short of a taking of our property.”

Gov. Steve Beshear said in a statement that he will be pleased to sign the measure, which he says promotes the integrity of the three-tiered system for alcohol sales in Kentucky that was designed to protect consumers and small producers.

Follow @ReneeKET on Twitter for updates throughout the day. You can also follow the Kentucky General Assembly on KET’s Legislative Coverage app for your smartphone or tablet.