During its first meetings, the Interim Study Committee on Alcoholic Beverage worked through the most of the topics in its legislative charge.  In its final meeting before the beginning of the 2009 session of the Indiana General Assembly, the Committee heard testimony on the historic origins of the Indiana alcoholic beverage laws.  Developments since the Committee’s last meeting indicate there won’t be much to watch regarding alcoholic beverage regulation during the 2009 session.

Historic Origins of Indiana’s Alcoholic Beverage Regulation

The Committee heard testimony from Marc Carmichael of the Indiana Beverage Alliance, Jim Purucker of the Wine and Spirit Wholesalers of Indiana, Fred Biesecker of Ice Miller, Phil Terry of Monarch Beverage Company, John Livengood of the Indiana Association of Beverage Retailers and the Indiana Restaurant Association, David Heath, Chairman of the Alcohol and Tobacco Commission, Lisa Hays Murray of Hays, Murray, Castor, LLC, Larry Sateck of Satek Winery, Mark Easley of Easley Winery, John Keeler of Baker and Daniels, and Allen Dale Olson, Richard P. Hofstetter, and Kenneth Harker, Jr., of Vinsense.

According to Carmichael, the Twenty-First Amendment repealed Prohibition and allowed each state to adopt its own regulatory scheme.  He pointed out that one problem prior to Prohibition was that many suppliers coerced retailers into selling certain products, and other suppliers simply acted as their own retailers.  The post-Prohibition three-tier alcoholic beverage regulatory scheme adopted by Indiana and many other states separates producers, wholesalers, and retailers.

Purucker testified that thirty-two states issue wholesale licenses, while other states themselves act as the wholesaler.  Terry, Livengood, and Chairman Heath each testified in strong support of Indiana’s three-tier system.  Chairman Heath stated that the system creates economic separation among the tiers, ensures an orderly market, aids in the collection of excise taxes, and promotes moderate and legal alcohol consumption.  He expressed his view that wholesalers are a necessary mechanism and the lowest cost means of regulation.  Terry stated that the wholesaler tier strikes an appropriate balance of availability by restricting access to minors without penalizing responsible adults.

Biesecker summarized the key holdings of the Granholm case, which involved Michigan and New York statutes that favored in-state wineries.  Under Granholm, a state may apply a three-tier regulatory system, but may not grant preferences to local wineries.  After the case, Indiana made changes to its local winery laws: it removed provisions similar to those struck down under Granholm, it prohibited a direct wine seller permitee from holding a wholesaler permit, and it required a face-to-face transaction before a direct-shipping transaction.  A federal court permitted the requirement of a face-to-face transaction, but struck the prohibition on holding direct wine seller and wholesaler permits at the same time.  The case has been appealed to the United States Supreme Court. 

The remaining witnesses testified on the burdens placed on Indiana wineries by the three-tier system.  Murray stated that Indiana wineries have seen a dramatic drop in business since Indiana adopted a face-to-face transaction requirement.  She claimed there were no “access to minors” violations from Indiana wineries in the previous five years.  Keeler testified that the three-tier system does not fit the variety of wines available for purchase – he said there are simply too many different wines for the system to handle well.

Comments from Committee Members

Before adjourning, the Committee Chair, Senator Alting, sought comments.  He stated that, because developers are willing to pay market price for restaurant permits, he thinks the minimum bid for a new permit in an economic development area should be the market price, and that the Committee should determine how to establish the market price.  Alting also stated that allowing Sunday sales for carryout by Indiana microbreweries would be consistent with Indiana wineries’ ability to do so.  Representative Bell commented in favor of creating a fund for Indiana microbreweries similar to the Indiana wine grape development fund available for Indiana wineries.

What’s Next?

The Committee issued a “Final Report” after its last meeting even though it was authorized for a two year study period.  The Final Report summarized the testimony it received, but did not include findings and recommendations.  In early January, a group formed to push for reform of Indiana’s alcoholic beverages laws, Hoosiers for Beverage Choices, announced that it would not push for any changes during the 2009 Session.  Not long thereafter, Senate President Pro Tempore David Long announced that alcohol issues are "off the table" for this session.  If the Committee meets again before the start of the 2010 Session, Taft will be there, so stay tuned for the next Taft Dispatch from the Indiana Statehouse!