Big Alcohol’s Attempt to Dismantle Regulation State by State A Marin Institute Report Control State Politics September 2010

U.S. Alcohol Control System  Two models try to protect public health and maintain a three-tier system 1 - Control Model state has direct role in alcohol sales 2 - License Model state agency licenses private businesses to sell alcohol  Privatization eliminates government control in favor of license model Producer (Distilleries, Breweries, Wineries) Distributor/Wholesaler Retailer (Bars/Restaurants, Liquor Stores, Grocery Stores) Drinker

What’s Going On Now?  State control is important to public health  Control provides states with a significant and stable source of income  Big Alcohol and big box retailers are using their power to eliminate state control of alcohol

Many Benefits of State Control  Consumption lower rates of drinking and binge drinking  Availability fewer stores with fewer hours of operation  Accessibility state employees better trained and motivated to keep alcohol out of the hands of underage drinkers  Harm reduced violence, suicide, homicide, assaults  Money control generates hundreds of millions in revenue to states; lowers the costs due to alcohol-related harm

Where Control Eroded = More Harm  Privatization increases outlet density, which is associated with increased consumption and alcohol-related harm  Studies from Iowa, West Virginia, British Columbia and Alberta Canada, United Kingdom, and most recently from Sweden all support need for control.

Erosion of Three-Tier System  Concentration of power vertical integration  Industry influence on lawmakers, lobbying, contributions  Spirits v. Beer & Wine spirits manufacturers want to normalize their product  Big Guys v. Little Guys Big Alcohol wants a level playing field, small breweries, wineries, and distilleries don’t want to get edged out

Erosion Through Court Challenges  Granholm v. Heald: narrow ruling on constitutionality of direct shipping laws  Litigation has expanded Granholm to further deregulate alcohol  House Resolution 5034 would protect the state’s authority to regulate alcoholic beverages

Battleground: Washington State  Currently State Liquor Control Board controls the distribution and retail of spirits  Initiative 1100 the “Costco Initiative” would dismantle three-tier system  Initiative 1105 a distributor-backed initiative to privatize the sale of spirits

Washington: Privatization Pushers  Costco based in Issaquah, WA. Wants to buy spirits direct from supplier (volume discounts) as other products ($70 billion in annual sales)

Washington: Initiative 1100  Privatizes the sale of distilled spirits  Deregulates the sale of beer and wine  Demolishes 3-tier system  Costco has opposed state control in courts, legislature  Costco has contributed more than $1 million in cash and in-kind to I-1100

Washington: Initiative 1105  Privatizes distilled spirits sales; allows volume discounts  Maintains three tier system, most other controls  Privatizes spirits sales, results: increased availability, higher outlet density  Young’s and Odom-Southern contributions = $2,244,000

Washington State: Control Allies  Protect Our Communities Coalition health care, firefighters, police, parents, teachers, churches, wholesalers, social services  “Small Alcohol” small wineries, breweries, distillers that don’t want to be shut out of the market  Governor Christine Gregoire protectourcommunities.com Also making major donations to the “No” campaign: Beer Institute, National Beer Wholesalers of America ($2 million each) and the Washington Beer and Wine Wholesalers ($975,000)

Battleground: Virginia  Governor Bob McDonnell used privatization as a campaign platform  Promises (without basis) a huge cash windfall to fund the transportation  Claims that selling alcohol is not government’s job

Virginia: Privatization Supporters  ABC Privatization Coalition Costco, WalMart, Kroger, Safeway, Food Lion, restaurants  Big Alcohol

Virginia: Control Allies McDonnell’s faces opposition from skeptical legislators  Local Virginia governments concerned about impact  Law enforcement officials  Small breweries, wineries, distilleries  Faith coalition, including Virginia Interfaith Center for Public Policy and Baptist General Association of VA (yourvaluesyourvoice.com)

Recommendations  Politicians Stop using alcohol regulation as a bully pulpit to call for smaller government. Alcohol is regulated because it is potentially harmful to residents of (and voters in) your states.  Governors, legislators, and staff Get a history lesson in the horrible conditions that led to Prohibition, and why 18 states chose to control alcohol sales to protect health and safety.  State regulatory agencies Understand why your jobs are so important and play a more vocal role in defending state alcohol control and protecting the public.  Voters In Washington State, vote “No” on both initiatives there. In Virginia and in every control state, tell your political leaders to protect the public interest over corporate profits.

Recommendations  National trade orgs for state alcohol regulators Distance yourselves from industry influence and do more to stop state alcohol control erosion efforts.  Federal government Help strengthen state role in alcohol regulation; stop undermining state authority.  Public health groups A single-issue focus (e.g. drunk driving, underage drinking) is not sufficient. Support state control and regulation of alcohol sales.  Alcohol control allies Alert state residents to the harm and cost privatization will bring to their states. Urge them to vote down any privatization initiatives, and tell lawmakers to do the same.

For more information You can download the full text of the report, Control State Politics: Big Alcohol’s Attempt to Dismantle Regulation State by State along with fact sheets and other resources: MarinInstitute.org Report Authors Sarah Mart & Michele Simon Contact (415)