Threat to Public Safety, Bad for Business
The long awaited release of the ORR Recommendations on Liquor Control debuted on June 29 to a resounding chorus of criticism. No wonder. The report was developed under a highly flawed process, resulting in recommendations that put Michigan jobs, businesses, and public health and safety at risk.
Many of the ORR recommendations are a direct attack on the fundamental pillars of Michigan’s time-tested, licensed three-tier system of alcohol regulations and safeguards, and NOT minor tweaks. They also run counter to public sentiment that overwhelmingly supports the responsible regulation of alcohol.
• Liquor Control Advisory Rules Committee (LCARC) appointments were skewed in favor of narrow business interests with little knowledge of alcohol regulations.
• Of 21 members on the LCARC, 17 represented alcohol industry interests.
• Law enforcement and public health representatives were an extreme minority.
• Well-qualified public health and law enforcement representatives were rejected for appointment.
• LCARC members pursued narrow special interests with little regard for public interest.
• The ORR even botched how it reported and recorded votes on important issues, raising serious doubts about the validity and reliability of the entire report itself.
The ORR report includes recommendations that threaten public health and safety, small businesses the ORR claims to protect and the future of family businesses:
• Replacing microbrewery and brewpub licenses with a single small brewers license available only to Michigan producers will undermine the entire foundation of Michigan’s system of responsible alcohol regulations and safeguards. If passed, the recommendation creates a one-tier system for the new licensees, removing essential checks and balances in the alcohol regulatory system and putting Michigan distributors and the 5,000 jobs they create at risk. The recommendation also ignores precedent set by the U.S. Supreme Court requiring equal treatment between in-state and out-of-state producers.
• Exempting from the franchise law contracts between distributors and certain small brewers and small wineries will eliminate a great equalizer between producer and distributor, thus destroying a level playing field. The franchise law helps maintain distributors’ independence, preventing large international suppliers from undue influence and allowing distributors to provide access to market for small craft brewers and wineries. Thus, the franchise law exemption would harm the small producers its supporters claim it will help. The current regulatory structure has resulted in one of the most vibrant craft brewer and small winery environments in the country so the question must be asked: What’s broken? This exemption also exposes the franchise law to total repeal by judicial fiat because it applies only to Michigan producers, violating the commerce clause.
• Recommendations to create so-called “parity” of privileges between the different small producer licenses – microbrewery, Michigan winery and craft distiller – would result in a host of problems, most notably significant exposure to commerce clause challenges as all these recommendations are designed to assist only Michigan producers. The result, again, could be the dismantling of our successful system of regulation. Additionally, beer, wine and liquor are different products, with different levels of alcohol content. There have traditionally and rightfully been differences in the manner in which they are regulated.
• Increasing the amount of spirits an on-premise licensee may purchase from a specially designated distributor will create a fourth tier that threatens retailer competition. It will also diminish accountability and product tracking, hurt state revenue collections, increase smuggling and burden small bars and restaurants.
• Other recommendations by the ORR would open the door for sanctioned bribery -- giving things of value to retailers – and large suppliers and retailers would use their deep pockets to control the market and severely threaten the small craft brewers, wineries and independent retailers.
The U.S. Supreme Court precedent in Granholm v. Heald requiring out-of-state producers to be treated the same as in-state producers is the fatal flaw in many of the ORR recommendations. Proposals purporting to benefit small brewers and wineries will have the opposite effect. If adopted, they will doom Michigan’s proven safeguards on alcohol and endanger businesses across the state. The Granholm decision and subsequent court cases across the country make it clear: states may not treat in-state producers differently than out-of-state producers.