Wisconsin Tavern League, beer distributors draft plan to narrow distribution laws

The Wisconsin Tavern League, along with two other lobby groups want to narrow how the state regulates companies that manufacture, distribute and sell alcoholic beverages and create a new government office with broad discretion to regulate the industry.

The Wisconsin Tavern League, Wisconsin Beer Distributors Association and the Wisconsin Wine and Spirits Institute want to create an Office of Alcohol Beverages Enforcement to crack down on violations, according to a draft of the plan obtained by the Cap Times Thursday.

The proposal would narrow the state’s three-tiered system – a series of laws that regulates how alcoholic beverages are manufactured, distributed and sold in the state – and create a fee structure for businesses that violate the system. Under the proposed structure, businesses could be fined up to $10,000 for some violations, including failing to buy beer from a wholesaler. The Office of Alcohol Beverage Enforcement could also issue civil penalties for those who do not comply with the law.

Craft beverage companies, including New Glarus Brewing Company which makes Spotted Cow beer, have come out against the plan.

“This is something we’ve seen floated around for a few years by liquor wholesalers,” said Deb Carey, founder and president of New Glarus. “I do support the three-tiered system, however over the last 10 or 15 years it has become increasingly flawed and doesn’t really protect the manufacturers, whether they’re wineries or breweries and that’s disheartening.”

The plan is “just bad business” and there is no need for it as the Department of Revenue already has a staff member regulating licenses, Carey said.

“I just don’t understand the necessity for this,” Carey said. “Here we’re suddenly going to pile on a bunch of rules. You’d be hard pressed to find a Republican that says ‘yes, let’s expand government regulation of businesses.'”

The proposal would allow the governor to appoint, and the Senate to confirm, a director of an Office of Alcohol Beverage Enforcement for a six year term. The director would be a full-time salaried state employee who would appoint 15 additional employees to permit, audit and enforce liquor licenses statewide. The office would be affiliated with the state Department of Revenue, which currently regulates the alcohol beverage industry, though it would have independent authority to issue and revoke permits and levy fines.

The office would not be subject to supervision or regulation from the Revenue secretary, according to the plan. It would cost $2 million to create, funded in part by fees collected by DOR. Ongoing costs of maintaining the office and paying staff was not included in the proposal.

A draft of the plan was given to the Cap Times by a representative of Americans for Prosperity Wisconsin, who says it was obtained from legislative staff.

Eric Bott, state director of Americans for Prosperity Wisconsin, blasted the plan, calling it a “vicious sneak attack on hundreds of Wisconsin small businesses.”

Bott said he had heard for months that lobbyists for the Tavern League and Beer Distributors Association were crafting a plan. The craft beverage industry, including the Wisconsin Brewers Guild, Wisconsin Winery Association and Wisconsin Distillers Guild said they were not consulted on the proposal. The groups are working together to creating a craft beverage association to lobby for their industries and combat the Tavern League’s plan.

“We need a seat at the table when these discussion happen,” said Brian Sammons, president of the Wisconsin Distillers Guild and the owner of a Twisted Path Distillery in Milwaukee. “You’ve got the distribution tier and the retail tier trying to rewrite law. No one is talking to the manufacturing tier and that doesn’t seem to make sense.”

Pete Madland, executive director of the Wisconsin Tavern League, and lobbyists for the Beer Distributors Association and the Wisconsin Wine and Spirits Institute did not immediately respond to an email requesting comment on the proposal and the groups’ plan for it.

The law would create statutory barriers between each segment of the alcohol beverage industry, barring business owners from doing any kind of business with another segment of the industry.

It would create a new section of law, prohibiting those who hold permits or licenses from one group of the system from holding an interest or ownership in another part of the system, including all manufacturers, wholesalers and retailers of alcoholic beverages “regardless of the subchapter and type of alcohol beverage product sold.”

For example, under the proposal a beer distributor could not also have a stake in a winery.

Wineries are regulated in state statutes under Chapter 125, which houses all laws relating to the state’s alcohol industry. The package of laws generally dates back to 1934.

Wisconsin, along with several other states, adopted a three-tiered system mandating that alcohol in the state must be made, distributed and sold by different companies. For example, a business that makes alcohol cannot also distribute it. In addition, within the system, businesses that make the alcohol – brewers, wineries and distilleries – each have distinct rules they must follow.

The system is a regulatory structure to prevent monopolies, but small craft brewers and wineries, which often operate their own tasting rooms or brewpubs, said it now does the opposite.

“At a time when we should be looking to modernize the system and have some flexibility to reflect what consumers want and instead the distributors want to go in the opposite direction and really tighten things up,” Bott said.

Ryan Prellwitz, vice president of the Wisconsin Winery Association and owner of Vines & Thrushes Winery in Ripon, said the Tavern League’s proposal could shut down winery tasting rooms, because it could ban wine manufacturers from also selling their wine on site.

Wineries in the state often distribute their wine through a co-op, which could also be dismantled under the proposal because the manufacturers have a stake in the co-op, Prellwitz said.

“They’re trying to separate the tiers of the three-tiered system as much as possible, and (wineries) are a manufacturer and we’re a retailer,” Prellwitz said. “They’re also setting things up for a beverage commission that could define rules that could eliminate that capability (to have tasting rooms).”

The Wisconsin Winery Association has lobbied the Legislature to change the law to extend winery opening hours. A bill is currently being circulated to extend opening hours from 9 p.m. to midnight.

In a letter sent to Gov. Scott Walker Thursday, the Wisconsin Brewers Guild called the proposal a “solution in search of a problem” and said it’s an example of “wasteful government spending.” The plan would hurt the already lagging state craft brewing industry, the group said.

“As Wisconsin’s independent craft brewers, we are not three-tier abolitionists; rather we are simply looking for an equitable relationship and an even playing field within our industry,” wrote William Glass, president of the Wisconsin Brewers Guild. “Not a day passes where there isn’t a new example of one of our small businesses trying to grow, or even get off the ground, being stifled by prohibition era laws.”

The plan comes in the waning weeks of the state budget process and could be introduced in the budget committee as a last minute motion, Bott said. Lawmakers are set to hammer out the final, most contentious parts of the budget in the coming weeks.

“This is the type of thing that historically would show up in the 999 motion, the wrap-up motion,” Bott said. The 999 motion has traditionally been used to advance special interest legislation and sometimes controversial changes that did not get votes earlier in the year. 999 measures are not attributed to specific lawmakers and so far, none have publicly sponsored this proposal.

The budget committee co-chairs have said they want to avoid using the motion as a last minute policy vehicle this year.

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