his own ends.34
It did not take long for the political process to begin. When Utah voted for the Twenty-First Amendment in December 1933, Congress was in recess, which meant the federal government had no statutory means by which to manage the instantly legal alcohol industry. As an interim measure, President Franklin D. Roosevelt, by executive order, established the Federal Alcohol Control Administration (FACA) to guide the transition from Prohibition to regulation.35 Roosevelt chose Joseph H. Choate Jr., an East Coast upper-class attorney, to head the FACA. Choate worked in the interest of repeal and assisted in the reestablishment and growth of the liquor industry. He helped the industry, especially the trade associations, to design the market structure most amenable to alcohol businesses and also to the collection of taxes.36 The latter was of particular concern for state and federal governments, the representatives of which met with leaders from the liquor industry to set standards and policies and to develop procedures for efficiently collecting taxes.37 And so it happened that in the months following the end of Prohibition, as states considered various options for liquor control, alcohol businesses came to play a central role in crafting policies.
MAINTAINING THE BOTTLENECK
In the years that followed, distributors (also known as wholesalers) used favorable state policies—specifically three-tier laws—to build a powerful position and protect their government-manufactured slice of the market.38 Whenever attempts to reform or alter the three-tier system have surfaced, distributors have lobbied aggressively to protect their privilege.39 But their activities are not purely reactive. According to David Rehr, the former president of the National Beer Wholesalers Association, today the association is one of the most influential lobbies in America, boasting operations in every state and congressional district.40 It has a presence in every community and state legislature, and distributors visit every member of Congress as part of the association’s annual meeting in Washington, DC, with the stated intent of “shoring up the three-tier system.”41 In its annual reports from 2013 to 2015, the NBWA boasted that its members conducted more than 450 meetings on Capitol Hill during its 2014 legislative conference42 and more than 400 meetings in 2015.43
Such influence earned the NBWA the title of “heavy hitter” from a campaign-finance watchdog organization.44 Additionally, through its political action committee, the NBWA has consistently been one of the largest contributors to state and federal political candidates. From 1990 to 2014, its PAC contributed more than $32 million to candidates and spent more than $11 million in lobbying, including expenses associated with more than twenty lobbyists just at the federal level.45 The primary focus of this lobbying has been to protect the distributors’ interests in the three-tier system. For example, as Anheuser-Busch InBev worked to finalize its acquisition of Grupo Modelo, the maker of Corona beer, and to clear a review by the US Department of Justice in 2013, the NBWA lobbied to ensure that the beer conglomerate would not encroach upon the distributors’ turf.46
The NBWA’s annual legislative conferences in Washington, DC, routinely include a who’s who of elected officials and members of the media. The 2014 conference, for example, featured addresses by former House speaker John Boehner and former House majority leader Steny Hoyer. The conference also included a lunch with former representatives Aaron Schock and Tulsi Gabbard. Journalists from Politico, the Washington Post, and ABC News were panelists. Legislative issues on the conference agenda included state-based alcohol regulation, and conferees attended sessions like the “Perfect Pitch: Selling the Value of Alcohol Laws.”47
The Wine and Spirits Wholesalers of America (WSWA) works alongside the NBWA, having contributed more than $11 million to candidates between 1990 and 2014, more than $18 million through lobbying activity, and more than thirty federal lobbyists.48 Although not as prolific as the NBWA, the WSWA has nevertheless “made a concerted effort to aggressively build [its] industry grass roots and develop a broad base of political engagement across the country,” as President and CEO Craig Wolf boasted in a 2012 press release.49 The WSWA’s government affairs are managed by a senior vice president, four vice presidents, and a coordinator, all of whom keep members apprised of state and federal issues, provide resources for members’ political activity,50 and coordinate efforts with thirty-two state affiliates.51 The WSWA’s Web site includes a feature that enables members to identify a specific congressional or state legislative district and then produce custom reports with industry information for use in lobbying.52 The site also offers information on such topics as the economic impact of distributors, jobs created, and taxes paid. The NBWA offers a similar feature on its Web site.53
At the state level, alcohol bottleneckers likewise protect their interests through lobbying and contributions. For example, from 2009 to 2012, legislators in Juanita Swedenburg’s home state of Virginia considered a series of bills—none of which saw any action beyond committee hearings—to privatize state-owned alcohol retail stores. While the bills were being considered, legislators sitting on the respective committees received a total of more than $200,000 in campaign contributions from the Virginia Wine Wholesalers Association and the Virginia Beer Wholesalers Association.54
For both organizations, prolific spending and lobbying is the cost of ensuring that the government allows them to maintain their grip on a significant industry. Today, an estimated 6,690 distributor facilities serve more than four thousand breweries nationwide, up from fewer than fifty breweries in the late 1970s and early 1980s.55 Similarly, wine wholesalers total 5,900 across the United States.56 Together, distributors report an annual revenue of $135 billion.57
BATTLING THE BOTTLENECKERS
Because of the influence bottleneckers have held on state and federal legislatures, Juanita and David had only one viable recourse if they wanted to serve out-of-state customers—the courts. On February 3, 2000, they sued in federal district court in New York—a state with one of the biggest wine markets in the country but one that prohibited those that didn’t operate within its bounds from shipping wine directly to consumers in the jurisdiction—thereby bypassing distributors.58 Although Juanita and David were challenging New York’s laws, it quickly became apparent that it wasn’t the state’s interests that were really at stake.
No sooner had they filed their lawsuit than the state’s four largest liquor distributors, whose combined revenues exceeded $1 billion annually, intervened to help defend the bottleneck,59 with additional help coming from the WSWA and the NBWA.60 In the first hearing, Juanita and David’s two attorneys from the Institute for Justice were taken on by eighteen attorneys mostly representing industry insiders.61 Throughout the trial, the state attorney said nothing while the liquor distributors’ lawyers litigated the case with a degree of bombast and hyperbole that demonstrated that the real purpose, and result, of the laws was to protect liquor distributors, not public health and safety, as the distributors’ attorneys claimed.62
The health and safety assertions were particularly important because courts are sympathetic to regulations that purport to protect public health and safety but are skeptical about laws designed to economically favor a special interest group—like those laws protecting the favored position of alcohol distributors. With such a concern in mind, the lawyers fighting for the distributors relied heavily on the underage access issue, asserting that the direct shipment of wine would facilitate increased alcohol consumption by minors.63
Attorneys for Juanita and David responded by presenting data showing how sixteen thousand minors had acquired alcohol through the three-tier system over a five-year period, whereas none had managed to obtain wine by means of direct shipment, such as would happen if they purchased it over the Internet.64 Moreover, they presented evidence from the Federal Trade Commission indicating that protecting against underage drinking could be facilitated through regulatory actions short of discriminatory prohibitions against direct shipping.65
