ABL Insider - Winter 2018-19 by ABLUSA

THE V OICE OF AMERICAâ&#x20AC;&#x2122;S BEER, WINE & SPIRITS RETAILERS

ABL INSIDER VOL. 12, NO. 4 | WINTER 2018-19

A PUBLICATION OF AMERICAN BEVERAGE LICENSEES

With a Wave of Legal Challenges to the 21st Amendment Threatening to Upend 85 Years of the Three-Tier System, ABL Engages in the Debate

2019 Annual Meeting Preview P. 6-7

Supreme Court & Legal Updates P. 10-11

2018 Mid-Term Election Recap P. 14-15

VOL. 12, NO. 4 | WINTER 2018-19

contents 3 editor’s desk

10 legal update

4 leading

11 legal update

ABL Insider Moving to Digital-Only Format

ABL Is Fighting for Your (Legal) Rights

TWSRA v. Blair: What You Should Know

Overview of Additional Cases Impacting Beverage Retailers

12-13 state & local

5 where we stand

Fairytales & Facts – Navigating State Legislative Season

6-7 convene

Public Vaping Ban, Treating Cannabis Like Alcohol, Illegal Use of Liquor Licenses & Place of Last Drink

14-15 d.c. updates

2019 ABL Annual Meeting Preview

2018 Mid-Term Elections Recap & Updates from Capitol Hill

8 industry voices

Craig Purser, President & CEO, NBWA

9 industry voices

Michelle Korsmo, President & CEO, WSWA

industry calendar

16 where we stand (cont.)

Fairytales & Facts – Navigating State Legislative Season

17 associate & affiliate members

FEBRUARY 2019

MAY 2019

Maryland Alcohol Lobby Day

MBDAPA 83rd Annual Convention & Tradeshow

February 21 | Annapolis, MD

May 5 | Pocono Manor, PA

February 24-26 | Philadelphia, PA RHI Sociable City Summit

JUNE 2019

MARCH 2019

June 3 | Springfield, IL ILBA Annual Golf Outing

Wine & Spirits Guild of America Spring Meeting

Beverage Alcohol Retailers Conference

March 15-18 | Destin, FL March 19 | Madison, WI

June 10-12 | Louisville, KY

SEPTEMBER 2019

TLW Annual Legislative Day

September 9-11 | Sidney, MT

March 20 | Springfield, IL

MTA Annual Convention & Trade Show

ILBA Lobby Day & Legislative Reception

September 12 | Indianapolis, IN

March 24-26 | Las Vegas, NV

IABR Fall Golf Outing

2019 ABL Annual Meeting

September 15-17 | LeSalle, IL

March 31-April 3 | Orlando, FL

ILBA Annual Convention & Trade Show

WSWA 76th Annual Convention & Exposition

OCTOBER 2019

APRIL 2019

April 1-4 | Appleton, WI

Tavern League of Wisconsin Spring Conference & Trade Show

April 7-10 | Washington, DC

October 10 | Indianapolis, IN

IABR Annual Meeting & Board of Directors Meeting

NBWA Legislative Conference

Published by: American Beverage Licensees 5101 River Rd, Suite 108 Bethesda, MD 20816 (301) 656-1494 www.ablusa.org editor MATTHEW EVANS

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ISSN# 2331-6594 (c) 2019 American Beverage Licensees. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher.

AMERICAN BEVERAGE LICENSEES

executive director JOHN BODNOVICH director, trade relations & operations SUSAN DUFFY communications manager MATTHEW EVANS

editor’s desk A Letter from the Editor: ABL Insider Moving to DigitalOnly Format

fter more than 10 years in print format, the ABL Insider is moving to a digital-only format. The last print issue of the ABL Insider will be mailed in March 2019. Though the end of the print edition of the ABL Insider marks a change (especially for its Editor), it will not be the end of the ABL Insider as an entity – far from it! The focus on a digital format brings ABL in line with other association industry groups and recognizes that increasingly members are getting their news and publications in an electronic format. This change also affords ABL flexibility to better meet our members needs timely coverage of important industry topics and trends, as well as information about industry events and news. In some respects, the decision to move to a digital-only format will allow ABL to provide you – America’s beer, wine and spirits retailers – with even more information and additional updates on the state of the licensed beverage industry, as we

will no longer be constrained by page limits or print deadlines. It is also worth noting that this is not an entirely new frontier for ABL publications. To the contrary, every issue of the ABL Insider since 2016 has also been made available to ABL members digitally through the publishing platform Issuu. com. As such, we expect a relatively seamless transition from a publishing perspective. ABL has made great strides in the past two years in updating its database systems and contact information, but we are always striving to be better in this aspect of our communications. By reaching out to us to add or confirm your email address will ensure you are added to the ABL Insider distribution list and will help ABL deliver the news that matters most to our members. Please send an email to info@ablusa.org with the subject line “ABL Insider” and include your name and email address – we’ll take care of the rest! |

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leading ABL Is Fighting for Your (Legal) Rights

M STEVE MORRIS President American Beverage Licensees

ost of us who belong to state beverage associations understand the important role these organization play when it comes to alcohol policy debates in state capitols. We hire lobbyists to represent our members and their interest as small beverage business owners.

Cases before U.S. District Courts, U.S. Courts of Appeal and the Supreme Court of the United States that could set precedents that affect beverage laws and beverage retailers in multiple states;

This representation is critical for those of us in Montana – as an investment in a liquor licenses can cost more than $500,000. I know there are beverage licensees in other states who have paid similar amounts for their licenses and are equally committed to defending the value of those licenses and their businesses.

Supporting the legal work of other industry groups whose positions align with ABL.

And with your membership in ABL, you know that you also have a voice at the federal level in Washington, DC, standing up for America’s independent beer, wine and spirits retailers before Congress and federal officials. But over recent years, debates and decisions over alcohol policy and regulation have been increasingly migrating from state legislatures to state and federal courtrooms. This has posed a new challenge for independent beverage retailers who are well-versed in grassroots advocacy, but less so in legal jujitsu over alcohol laws. Legal disputes over alcohol laws include challenges to long-standing state alcohol laws and their Constitutional underpinnings. Despite decades of effectiveness and legitimacy, there are mounting challenges to these laws, often with little regard for: the 21st Amendment; an orderly beverage alcohol marketplace; public safety; and the reliance interests of hundreds of thousands of licensed beverage businesses and the millions of jobs they create. ABL is committed to stepping-up to address this challenge. The ABL Board of Directors, many of whom have experience in alcohol legal fights in their respective states, believes that legal advocacy on behalf of ABL members and the hospitality industry as a whole is fundamental to the association’s mission to “initiate, promote, and support laws, regulations and rules that preserve and protect the right of responsible on and off premise retailers of beverage alcohol to operate legitimate and lawful businesses without burdensome intrusion.” ABL can provide a national retail beverage alcohol perspective in court cases by focusing on:

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Defending the 21st Amendment and the Three-Tier System; and

By participating in alcohol law challenges and case, ABL provides independent beverage alcohol retailers with a voice in the legal process including: Standing up for the rights of states to determine how best to regulate the sale and distribution of alcohol within their borders – a right they are afforded by the 21st Amendment; Petitioning federal courts from the perspective of tensof-thousands of independent beverage licensees; Defending the Three-Tier System and the valuable role it plays in regulating beverage alcohol; and Fighting changes to state alcohol policy that could negatively affect independent beverage licensees, consumers and the public throughout the country.

While the up-tick in legal activity surrounding alcohol laws may seem to be a new phenomenon, the fact is ABL has been an active party in several legal proceedings directly impacting beverage licensees, having weighed-in on court cases in jurisdictions covering nearly the entire United States for more than 15 years. This includes filing briefs in cases in the 2nd, 4th, 5th, 6th, 7th, 8th, 9th and 10th federal circuit courts of appeal, and in 2018, weighing-in with Supreme Court in Tennessee Wine & Spirits Retailers Association v. Blair. ABL’s past legal advocacy has had a profound effect on how alcohol is sold and regulated in the United States and, thanks to the support of ABL members, we can continue to have a similar impact in the future. If you are interested in lending your support to ABL’s legal efforts, I encourage you to contact the ABL office (301-656-1494) and ask about contributing to the effort. Every dollar ABL spends on legal matters is a dollar going to protect and defend state-based alcohol regulation, an orderly and competitive alcohol marketplace, and a strong Three-Tier System. Help us by joining the fight today! |

where we stand Fairytales & Facts – Navigating State Legislative Season

JOHN BODNOVICH Executive Director American Beverage Licensees

round this time every year, the majority of state legislatures across the country return to work. Legislators dust off their legislatin’ boots and head to their State Capitols for what may be an intense 90 to 180 days. What awaits these public servants are a slew of issues, some with which they might be naturally familiar, and others that may be completely new to them. They are also often presented with a flurry of legislation related to state alcohol laws. While some of this legislation is welcome, and some of it is unwelcome, all of it must be addressed. Perhaps what’s most important to keep in mind when looking at these bills, and in our unending race to “modernize” and “innovate,” is to not hastily pass laws that have unintended consequences for beverage licensees. Let’s look at a few places where much-heralded (by some) changes to alcohol laws have had less-than-stellar outcomes for beverage retailers. More Days, No Additional Revenue In Minnesota, after years of fierce fighting between pro- and anti-Sunday liquor sales advocates, the state legislature passed a bill allowing Sunday Sales of liquor starting in 2017. Those that favored Sunday Sales took a victory lap and claimed that business and tax revenue would boom ($10.8-$15.1 million in new tax revenues for the State, they said!) because “Sunday is the busiest shopping day of the week.” Clearly the good people of Minnesota, unfairly suppressed for decades, were waiting for this law to change so they could unleash their innate desire for Sunday-Liquor-Consumerism. Back in the real world, it turns out that the local folks who own liquors stores, and know their customers, were right. They had argued for years that this change would simply spread six days of sales over seven, and there would be no great alcohol tax revenue boon. The Minnesota Department of Revenue reported just $7.2 million in tax revenue – for those keeping score at home that’s about half what some Sunday Sales proponents had predicted – was realized in that first year of Sunday Sales. This represents an overall increase in alcohol taxes in 2018 of 4 percent, which is, wait for it………………right in line with previous years, and not as high as some others. A quick note about ABL and Sunday Sales… ABL has members who operate successfully in states that have Sunday Sales, and others who operate successfully in states that don’t have

Sunday Sales. The point here is about the merits of the argument. The overriding fact is the vast majority of consumers have no problem accessing beer, wine and spirits, and to suggest otherwise is disingenuous. Another fact is that Americans are drinking about the same or even a little less (by volume) than they were the past few years. Public policy prescriptions are not going to get them to purchase (or drink) more, and thereby increase state tax revenues. If people want to have a debate on Sunday Sales, go for it, but do it based on facts and precedent, not by peddling a sales and tax revenue fairytale. More Wine Outlets, No Additional Revenue In Tennessee, after years of fierce fighting (is anyone sensing a theme here?), the state legislature passed a law allowing wine sales in grocery stores starting in 2016. Now, shoppers would have the chance to purchase one of the limited number of wine SKUs from one of the even more limited number of wine companies when they hit the grocery super-store for eggs and fabric softener. (In 2019, for good measure, the state legislature passed an additional law allowing wine to be sold in grocery stores on Sundays.) Somewhat remarkably, the Tennessee Department of Revenue does not break down by category the tax revenue from wine vs. other alcohol beverages, making it nearly impossible to determine if the wine-in-grocery change in 2016 resulted in a boost to state tax revenue. Perhaps the Department of Revenue could run the numbers to at least see if “Red, White and Food,” the campaign for wine-in-grocery stores, was correct when they claimed that “the change in legislation would generate revenue for the state upwards of $19 million to $32 million in tax revenue and 3,500 jobs.” Color me skeptical. What we do know when it comes to facts and figures is the massive negative impact the change has had on local liquor stores, many of which specialize in selling wine. Bard Quillman, owner of Red Dog Wine and Spirits in Franklin, said he has “lost 50 percent of my wine sells on Day One and that’s not been replaced.” This amounts to a loss of 30 percent of his overall business. Others Tennessee retailers have also reported roughly a 25-30 percent drop in their wine business over the last two years. continued on pg. 16

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convene The Challenge of Change: 2019 ABL Annual Meeting Preview

onstellation Brands Chief Global Sales Officer to Deliver Keynote Address at ABL Annual Meeting ABL is pleased to announce that Kevin Cooke, Chief Global Sales Officer – Wine & Spirits Division at Constellation Brands, will deliver the keynote address at the upcoming ABL Annual Meeting in Las Vegas, Nevada on March 24-26, 2019. During his keynote address, Cooke will discuss Constellation’s continued growth and the company’s strategic vision for its expansive portfolio in the context of an evolving consumer environment. Constellation Brands, a top-performing Fortune 500® and leading Total Beverage Alcohol company, produces beer, wine and spirits found in nearly every bar, restaurant, tavern and package store across the country. In addition to wine and spirits, Constellation Brands is the largest beer importer in the U.S. by sales and has expanded its portfolio earlier this year with its $4 billion investment in Canopy Growth, an Ontario, Canadabased cannabis company. “With a diverse portfolio that includes brands such as Corona, Modelo, Kim Crawford, The Prisoner Wine Company, Meiomi, Ruffino, SVEDKA and High West Distillery, nearly every ABL member has an existing business relationship with Constellation Brands,” said ABL Executive Director John Bodnovich. “We look forward to welcoming Kevin as a keynote speaker and hearing his perspective on the direction of the industry and Constellation’s plans to drive growth in a radically shifting marketplace.” In his role as Chief Global Sales Officer – Wine & Spirits Division, Cooke is responsible for leading Constellation’s Wine and Spirits sales goals. He manages a high performing group of leaders in Spirits, Fine Wine, Core Wine, Strategic Accounts, Sales Enablement and Sales Strategy. In his role, he leads a talented team of Constellation sales professionals across multiple channels. Cooke joined Constellation in May 2016 as Senior Vice President - Sales

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Strategy & Transformation, with a focus on integrating world class account management planning and enhancing Constellation’s Route to Market. He has over thirty years of experience in all sectors of the total alcohol beverage industry.

eading Industry Brands and Emerging Platforms Supporting 2019 ABL Annual Meeting ABL is pleased to announce the first slate of event and hospitality sponsors for the 2019 ABL Annual Meeting. In addition to a robust educational program, the annual meeting will feature hospitality events sponsored by leading beverage products and industry organizations, giving attendees opportunities to learn more about existing and emerging brands. ABL thanks the following companies and organizations for their sponsorship of events taking place during the 2019 ABL Annual Meeting: 3x3 Insights, LLC: A joint venture between several multi-generational alcohol industry veterans and Loeb Enterprises. Through its proprietary technology and a network of data partners, 3x3 Insights combines pointof-sale information with market data to produce groundbreaking trends and insights that enables suppliers and retailers to launch new brands, compete effectively and drive customer loyalty. 3x3 Insights will serve as the official sponsor of the ABL Annual Meeting Attendee Breakfast on Monday, March 25th. Brown-Forman: One of the largest American-owned spirits and wine companies and among the top 10 largest global spirits companies. With more than 25 brands in its portfolio, including such recognizable labels as Jack Daniels, Woodford Reserve, Herradura, Finlandia, Korbel and Sonoma-Cutrer, Brown-Forman employs more than 4,600 people worldwide with 1,300 located at its headquarters in Louisville, Kentucky. Brown-Forman will serve as the official sponsor of the ABL Retailer of the Year Reception on Monday, March 25th.

MillerCoors: The second-largest beer company in the U.S., MillerCoors is responsible for nearly 30% of beer sales in the country annually. A wholly owned subsidiary of Molson Coors, MillerCoors produces Miller Lite, Miller High Life, Miller Genuine Draft, Coors, Coors Light, Molson Canadian, Leinenkugel’s, Crispin Hard Cider Company, Saint Archer Brewing Company, Hop Valley Brewing Company, Hamms and Blue Moon. MillerCoors will serve as the official sponsor of the ABL Annual Meeting Luncheon on Monday, March 25th.

nnual Meeting Speakers to Provide Attendees with Insights into Key Issues for Beverage Retailers ABL is pleased to announce the initial slate of speakers for the 2019 ABL Annual Meeting. Additional announcements are expected in the coming weeks that will build on a program already rich with unique perspectives on a range of issues directly affecting independent beverage licensees. “The ABL Annual Meeting is the marquee event for independent beverage retailers, providing attendees from across the country with a forum to share, network and learn about important regulatory and legislative developments, emerging industry trends, the evolving legal landscape, and more, said ABL Executive Director John Bodnovich. “The annual meeting is an exceptional opportunity to celebrate our industry, build lasting connections, and impart valuable information and key takeaways that members can apply directly to their businesses.” Speakers for the 2019 ABL Annual Meeting currently include: Scott Keller | Partner | Baker Botts LLP | Legal Update for Retailers Scott Keller is chair of the firm’s Supreme Court and Constitutional Law Practice, and he has briefed and argued numerous appeals nationwide. Scott has argued 11 cases in the U.S. Supreme Court and has been counsel of record on over 80 U.S. Supreme Court briefs, including regulatory, free speech, immigration, election, criminal,

convene environmental, antitrust, intellectual property, and interstate water disputes. Keller regularly speaks and writes on appellate advocacy, and he has made several media appearances. Keller is also a member of the Federal Judicial Evaluation Committee, appointed by U.S. Senators John Cornyn and Ted Cruz to recommend nominees for federal judicial and U.S. Attorney positions in Texas.

Mike Provance delivers strategic growth and operational excellence to progressive, technology-centric companies. As CEO of 3x3 Insights, Provance leads a team of industry and technology experts who are applying analytics to disrupt the business of beverage alcohol consumption. This role follows 25-year career building groundbreaking digital businesses in industries spanning financial services, information services, and healthcare.

Ann Kitch | Transportation Research Analyst | National Conference of State Legislatures | Impaired Driving Policy Trends: Ann Kitch is currently a Transportation Research Analyst at the National Conference of State Legislatures, responsible identifying and monitoring state legislation on a variety of traffic safety issues. Her traffic safety expertise includes topics such as distracted and impaired driving as well as recent legislation pertaining to unmanned aircraft systems.

Heather Stone | Legal Counsel | Dinsmore & Shohl LLP | Addressing and Preventing Sexual Harassment in the Hospitality Workplace Heather Stone provides employers with advice, counseling and training to help them lower the frequency and severity of employment practice claims. With her guidance, employers develop and implement human resources best practices, educate supervisors and employees, and evaluate all aspects of their employment life cycle.

Kitch actively supports state legislatures and other organizations with their traffic safety efforts. Prior to joining NCSL, Kitch worked for the State of Colorado where she helped state agencies such as the Colorado Department of Transportation track their policy initiatives and improve their regulatory processes. Mike Provance | CEO | 3x3 Insights, LLC | Technology Platforms for Beverage Retailers An expert in scaling high-potential ventures and digital business strategy,

Stone’s experience includes conducting comprehensive audits of existing human resources practices, workplace investigations, analyzing corporate policies, and developing and presenting employment seminars. She also defends employers/individuals accused of wrongdoing in the workplace, including defense of claims of discrimination, retaliation, harassment, wrongful termination and wage/hour disputes. 2019 ABL Top Shelf Award - ABL will also honor Craig Purser, President & CEO of the National Beer Wholesalers Association, as the recipient of the 2019

ABL Top Shelf Award. The ABL Top Shelf Award, the highest honor presented by America’s beer, wine and spirits retailers, recognizes those who have demonstrated professional excellence in the beverage alcohol industry and have had a positive influence in their community. The award will be presented at the ABL Honors Gala on March 25, 2019.

EGISTER NOW! Registration is available online for $299, which includes access to all general sessions and ABL hospitality events + a COMPLIMENTARY 2-day pass to the Nightclub & Bar Show 2019 (Valued at $499). For more information on ABL or the annual meeting or to register, please visit www.ablusa.org.

OOK TODAY: ABL has secured room block for the 2019 ABL Annual Meeting at Bally’s Las Vegas Hotel & Casino. Please note that room availability at the reduced ABL costs (Saturday, March 23: $120.00 + $35.00 daily resort fee + applicable taxes/fees | Sunday, March 24 - Tuesday, March 26: $85.00 + $35.00 daily resort fee + applicable taxes/fees) is on a first-come, first-served basis. Once the room block is filled, ABL is unable to guarantee rates and availability. As such, we encourage attendees you to reach out to your members and remind them to book now! NOTE: Room block closes on February 20, 2019.|

Annual Meeting Schedule Overview*

SUNDAY, MARCH 24th

MONDAY, MARCH 25th

MONDAY, MARCH 25th (Cont.)

8:00 - 9:00 a.m. ABL Board of Directors Breakfast (Sponsor: American Distilled Spirits Association)

8:00 - 9:00 a.m. Attendee Breakfast

(Sponsor: 3x3 Insights, LLC)

6:00 - 7:00 p.m. Retailer of the Year Reception

9:15 a.m. - 5:00 p.m. ABL Board of Directors Meeting

9:15 a.m. - 12:00 p.m. General Session (I)

7:00 - 9:30 p.m. ABL Honors Gala

6:00 - 8:00 p.m. Opening Night Welcome Reception

12:00 - 1:15 p.m. Annual Meeting Luncheon

TUESDAY, MARCH 26th

4:30 - 6:00 p.m. Registration Desk Open

8:00 a.m. - 2:00 p.m. Registration Desk Open

1:15 - 4:15 p.m. General Session (II) (Sponsor: Brown-Forman)

9:00 - 11:15 a.m. General Session (III)

(Sponsor: MillerCoors)

*Please Note: Schedule Is Tentative & Subject To Change*

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industry voices Reflecting on America’s Alcohol System 100 Years After the Implementation of Prohibition

his year marks 100 years since the passage of Prohibition. The 18th Amendment to the Constitution was ratified on January 16, 1919, and led to a ban on alcohol in the United States for 13 long, dry years. CRAIG PURSER President & CEO National Beer Wholesalers Association

It also gave rise to one of our country’s most successful policies – state regulation of alcohol and the birth of the three-tier system of alcohol distribution. President Franklin D. Roosevelt reportedly celebrated the end of Prohibition with a famous toast, “What America needs now is a drink.” However, he also acknowledged that policies were needed to protect the country from the Wild West of the unregulated alcohol market which existed before and during Prohibition and fueled crime, corruption, and widespread alcoholism.

“Placing ‘Checks and Balances’ on the Distribution and Sale of Alcohol Was Intended to Safeguard the Public and Prevent the Chaos and Hardship That Was the Catalyst for Prohibition.”

In his official proclamation ending Prohibition, Roosevelt wrote, “The policy of the Government will be to see to it that the social and political evils that have existed in the pre-prohibition era shall not be revived nor permitted again to exist.” Lawmakers’ memories were similarly fresh with the abuses that led to Prohibition when it was finally repealed in 1933. Abuses like manufacturer-owned retail monopolies, or tied-houses, which limited choice and sold high volumes of low-cost alcohol in order to maximize profits.

Lawmakers understood that alcohol is different from toothpaste or potato chips, and they had the foresight to separate the production, distribution, and sale of alcohol – creating the effective three-tier system. They also recognized that our country is diverse and therefore, governments closer to the people – the states – are best equipped to regulate a socially sensitive, age-restricted product like alcohol. Placing “checks and balances” on the distribution and sale of alcohol was intended to safeguard the public and prevent the chaos and hardship that was the catalyst for Prohibition. And while the system that state legislators put in

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place has evolved, it has achieved exactly what it was established to do – promote vigorous competition, entrepreneurship, and consumer choice and protection. One hundred years ago, the passage of Prohibition created a horrible black market that unleashed crime, tainted alcohol, tax evasion, and a general disregard for the law. Our country recognized these errors and passed the 21st Amendment which has created a state-based alcohol regulatory system that has corrected the errors of 100 years ago. The three-tier system ensures the diverse selection of beer that consumers have come to expect gets from the brewer to the marketplace safely and efficiently. Because regulation ensures quality control, Americans do not have to worry about purchasing tainted alcohol, which remains a serious concern in other countries that do not enjoy an effective alcohol delivery system. You need to look no further than the vast selection in the beer aisle or at the variety of taps at your local tavern to see there is more beer choice today than ever before. This is a strong testament to the explosive opportunity fostered through the competitive independent beer distribution system. America’s independent beer distributors are proud to work with suppliers and retailers to bring the country it’s favorite brews. From coast to coast, more than 3,000 local, family-owned, independent beer distributors make stops in every neighborhood in our country so that taps keep flowing and the bar stays stocked. Like the Constitution itself, America’s beer industry has only gotten better with age, thanks in large part to our time-tested independent beer distribution network. There has never been a better time to drink beer in America. And to that we say cheers! | A version of this column originally appeared in Morning Consult.

industry voices Looking Forward: What 2019 Holds

MICHELLE KORSMO President & CEO Wine & Spirits Wholesalers of America

he last hundred-day stretch as the new President and CEO of WSWA has been a wonderful time of getting to know the people and companies that are a part of the threetier beverage alcohol industry. A highlight for me was speaking with the American Beverage Licensees Board of Directors at your October meeting. ABL members, like WSWA members, share a commitment to the communities where they live and work. I grew up on a farm in North Dakota where I learned the value family-owned business bring to the communities they serve. It is a privilege to advocate for the families and businesses who are the members of WSWA. Like all industries, there is tremendous change in the beverage alcohol business and we need to talk about the changes we see so everyone can make informed business decisions. There are several issues I see that we must address. The trend will only continue for consumers wanting to shop online and have their wine and spirits delivered. There will be more pressure through legal challenges on state laws that are viewed as protectionist, which will also be reflected in more lawsuits. There is a global trend for consolidation and smaller companies will seek to differentiate themselves to stay competitive. Consolidation shifts demand on the regulatory structure to become more consistent across jurisdictions. More data and analysis will be used as a competitive business advantage. Technology will continue to improve in each part of the business operation. Health and safety questions on beverage-alcohol will be raised based on government and public interest research reporting in the U.S. and abroad. At WSWA, we are closely watching the Supreme Court case on the authority of a state to set residency law for retailers and wholesalers. ABL has been a tremendous partner in the coalition to advocate for the 21st Amendment. To help bring more information and data to the industry, WSWA is compiling depletion data in a new tool called SipSource. This project will provide valuable information on product trends.

online platform that allows consumers to have beverage alcohol delivered to them from local retail locations. We’ve found the platform a positive solution to consumer demand to order online in a three-tier compliant fashion. At the federal level, we have a new congressional leadership team and a host of new elected officials. Educating them and working with them through the Congressional Hospitality Caucus (of which ABL is a co-founder) will be top priorities. The same is true in many state capitals. At both the federal and state levels, we benefit from our strong partnership with John Bodnovich and ABL members to find ways to work together. Our industry has a positive story to tell, and sharing it as a united front is persuasive and effective. And of course, we will continue to focus on making the WSWA Annual Convention & Exposition a can’t-miss event. This year that includes new components to attract retailers and consumers– please check out wswaconvention. org to learn more, and stay tuned for additional details on this exciting development. Like ABL, WSWA members are family-owned companies and that means involvement with your association is part of building a strong beverage alcohol community. I’m excited about the future of WSWA and I’m especially excited about the opportunity to outline common ground with our retailer partners. I look forward to working with you in the days ahead. |

“Like All Industries, There Is Tremendous Change in the Beverage Alcohol Business and We Need to Talk About the Changes We See So Everyone Can Make Informed Business Decisions.”

WSWA’s longstanding alliance with Drizly is another tool that will help us keep abreast of changes and evolution in the marketplace while being wholly three-tier compliant. Drizly is an

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legal updates TWSRA v. Blair: What You Should Know | Overview of Additional Cases Impacting Beverage Retailers

t’s not every day that the Supreme Court of the United States takes up a case concerning alcohol law. In fact, the Court grants writ of certiorari or, in other words, agrees to review, just five percent of the cases for which is receives appeals. But that was what happened in September 2018 in Tennessee Wine & Spirits Retailers Association v. Blair. The specific question of the case – whether the 21st Amendment empowers states, consistent with the dormant commerce clause, to regulate liquor sales by granting retail or wholesale licenses only to individuals or entities that have resided in-state for a specified time – is important, but the ramifications of the Supreme Court’s decision may have an impact on all of those in the beverage alcohol industry. The “dormant” Commerce Clause is a legal doctrine inferred by courts from the Commerce Clause in Article I of the U.S. Constitution. It prohibits state legislation that discriminates against interstate or international commerce. The 21st Amendment 1) repealed Prohibition and 2) prohibits “the transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof.” To a certain degree, this puts the “dormant” Commerce Clause in conflict with the 21st Amendment, as the 21st Amendment limits the power of the “dormant” Commerce Clause on a State’s regulatory power over the delivery and use of beverage alcohol within its borders. This natural tension has been the cause of a handful of legal cases wherein courts have attempted to make sense of the competing interests of the laws. In general, the “dormant” Commerce Clause applies differently in the context of state alcohol regulations. Tennessee law requires an applicant for a retail license to have been a resident of Tennessee for at least the twoyear period immediately preceding the submission of the license application. For corporate license applicants, the two-year requirement applies to any officer, director or stockholder of the corporation. To renew such a license the law requires Tennessee residency for at least ten consecutive years. Two prospective retail applicants who

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did not meet the two-year residency requirement sought licenses, whereupon the Tennessee ABC and Tennessee Attorney General asked courts to decide whether the residency requirement is constitutional. A district court in Tennessee ruled that the durational residency requirements violate the dormant Commerce Clause. This decision was appealed to the U.S. Court of Appeals for the 6th Circuit by the Tennessee Wine & Spirits Retailers Association (TWSRA), and on February 21, 2018, in a split 2-1 decision, the 6th Circuit affirmed the lower court decision. Dissenting in the case was Judge Jeffrey Sutton, a well-respected judge who pointed out that the core powers of the 21st Amendment retain their validity. Following petitioning by the TWSRA, on September 27, the Supreme Court granted review of Tennessee Wine & Spirits Retailers Association v. Blair. This triggered a broad discussion within the alcohol industry as to issues the case presents to those whose businesses operate in the state-based alcohol regulatory structure created by the 21st Amendment, and who are invested in the beverage alcohol marketplace that has been created because of it. This includes on- and offpremise beverage retailers. Should the Supreme Court uphold the 6th Circuit decision, its ruling could be narrow, sweeping or somewhere in between as it relates to the interplay of the “dormant” Commerce Clause and the 21st Amendment. A broad ruling against 21st Amendment authority could potentially make vulnerable and/ or invite legitimate challenges to any state alcohol laws that are perceived to discriminate against the economic interest of out-of-state parties (e.g. retail direct-to-consumer shipping; license limitations; franchise laws and other laws that require physical presence.) After being briefed on the case, the ABL Board voted unanimously to file an amicus curiae brief with the Supreme Court, which it did on November 20. ABL’s brief asked the Court to hold that Tennessee’s durational-residency requirement for granting retail and wholesale alcohol licenses is protected

under the 21st Amendment, and to reverse the 6th Circuit’s contrary ruling. ABL’s brief explained that the state’s residency requirements are lawful under the 21st Amendment and further the State’s legitimate interests as part of its multi-step and comprehensive ThreeTier regulatory system. The ABL brief states, “By requiring distribution to occur through entities with sufficient connections to a State, that State can best enforce its own alcohol regulations.” The brief further notes that the physical presence of in-state wholesalers and retailers allows for states to more easily inspect those entities and facilitates enforcement of “laws designed for orderly market conditions and public safety.” ABL’s brief also points out that the Court has long recognized that the dormant Commerce Clause applies differently in the unique context of state alcohol regulation under the 21st Amendment, and is not intended to eviscerate the core Section 2 power of the 21st Amendment, which explicitly gives a state the right to “regulate the sale or use of liquor within its borders.” On January 16, 2019, the Supreme Court heard oral arguments in the case. Attorneys on behalf of TWSRA and a group of 35 state attorneys general defended the Constitutional right of states to set alcohol policy, and the unique nature of alcohol as it relates to the Dormant Commerce Clause and 21st Amendment. In questions throughout the arguments, Justices’ asked informed questions that demonstrated their understanding of the history of alcohol commerce, practical alcohol regulatory policy and other issues addressed in more than a dozen amicus briefs filed on behalf of TWSRA, including ABL’s. The Court also recognized and cited the “unquestionably legitimate” ThreeTier System, and discussed potentially troublesome implications of adopting remedies suggested by the respondents, including a wave of litigation over state alcohol policy that could undermine the entire alcohol regulatory system.

legal updates A decision is expected by the end of the Court’s term in June 2019. In addition to the TWSRA v. Blair case, here is a look at a few of the other cases making their way through federal courts that could have meaningful impacts on the beverage industry and for beverage retailers: Missouri Broadcasters Association vs. Dorothy Taylor (8th Circuit): The Missouri’s Broadcasters Association has launched a constitutional challenge to the Missouri alcohol code’s “tied-house” law, which prevents alcohol manufacturers and distributors from providing advertising support to retailers. The Broadcasters argue that sections of the law violate their First Amendment rights to speech by restricting the funding of speech. The Missouri Division of Alcohol and Tobacco Control contends that it is within its right to regulate alcohol industry actors’ conduct under the tied-house law, and that this is not a First Amendment issue. The case bounced back and forth between the district court and the 8th Circuit Court of Appeals before the district court, in July 2018, struck down enforcement of the advertising laws related to sales below cost and disclosure of the number of retailers. Of note is that the opinion further struck down enforcement of Missouri’s tied-house law. The State has since appealed the ruling to the 8th Circuit. The case bears some resemblance to the RDN case in 2016 where a similar California advertising restriction was successfully upheld by the 9th Circuit. Practical Impact: The Missouri federal district court opinion is notable and concerning as it not only enjoined enforcement of the of the state’s restrictions on the provision of supplier and wholesaler funds to retailers (i.e. state tiedhouse law), but it also placed the Missouri law at odds with FAA Act tied-house restrictions. It has also generated questions about the impact such payments could have on the marketplace – specifically that they could weaken the independence of the tiers and disproportionately benefit larger, national retail chains. ABL joined the National Beer Wholesalers Association, Wine & Spirits Wholesalers of America, Missouri Beer Wholesalers Association and Missouri Craft Brewers Guild in filing an amicus curiae brief in the 8th Circuit on behalf of the state in late 2018.

Wal-Mart Stores v. Texas ABC (5th Circuit): Wal-Mart is challenging state laws restricting publicly-owned companies from holding retail liquor licenses Texas, arguing that these laws violate the Equal Protection, Commerce Clause, and Privileges and Immunity Clause of the U.S. Constitution. The Texas ABC and the Texas Package Store Association defended the state’s laws in district court, but in March 2018, a district court judge ruled for Wal-Mart on its challenge to the public corporation ban and on its challenge to a “consanguinity” exception to the five-store limit per person/entity. This decision has been appealed to the 5th Circuit court of Appeals in New Orleans where a decision is pending. Practical Impact: If the Texas law is overturned, it would be a serious blow to the delicate balance of the 21st Amendment and the dormant commerce clause. It would open the door for challenges to other state laws that rely on the strong authority of the 21st Amendment to implement laws that preserve a competitive alcohol marketplace and recognize the need for public safety when it comes to selling agerestricted products. ABL filed an amicus curiae brief in support of the Texas ABC and TPSA in district court and was joined by the American Distilled Spirits Association in filing an amicus curiae brief with the 5th Circuit Court in support of the Texas ABC and TPSA. Lebamoff v. Rauner: In 2016, an Indiana wine and spirits retailer challenged Illinois’ law prohibiting outof-state retailers from shipping directly to Illinois consumers in district court. The plaintiffs argue that the Granholm Supreme Court decision applies to retailers, not just wineries, and are attempting to use the Commerce Clause and Privileges and Immunities Clause to make their case. This case hews closely to Arnold’s Wines, Inc. v. Boyle (2nd Cir. 2009). After the case was initially dismissed by the district court, it was appealed to the 7th Circuit Court, where in November 2018, the 7th Circuit concluded “that it was too quick to (dismiss the case)” and sent it back to the district court for further review and fact-finding. In its opinion, the 7th Circuit seemingly buysin to the concept that internet sales are a new market and thus minimizes the scope of the 21st Amendment. Notably, the timing of the opinion’s release, during briefing in the TWSRA v. Blair Supreme Court case, could be read as an attempt to influence the Justices’ thinking.

Practical Impact: It is clearly the plaintiffs’ intent to dismantle the Arnold’s decision, putting the existing precedent concerning outof-state-retailer shipping at risk by creating a circuit split, and enticing the Supreme Court to take up the case. The outcome of the case will likely be tied to the decision in the TWSRA v. Blair case, and could have broad implications as it relates to states that require physical presence, and the future of alcohol e-commerce. The opinion also could have influence on states that allow in-state retailers to “deliver” but do not allow “shipping.” ABL and the Illinois Licensed Beverage Association filed an amicus brief on behalf of the state of Illinois. Connecticut Fine Wine & Spirits d/b/a/ Total Wine & More v. Harris: Connecticut Fine Wine & Spirits, also known as Total Wine & More, filed a complaint in August 2016 alleging that certain alcohol laws in Connecticut are in violation of the Sherman Act. The lawsuit challenged the state’s laws on price post, price hold, quantity discounts, and selling below costs. In June 2017, the United States District Court for the District of Connecticut granted the motions to dismiss the case after the state successfully argued that the challenged laws have previously been challenged and upheld at the district court and 2nd Circuit levels. Nonetheless, Total Wine & More subsequently appealed to the 2nd Circuit. At oral arguments before the 2nd Circuit, Connecticut Fine Wine & Spirits once again argued that the laws on price posting, price hold, price discrimination, and minimum retail pricing laws violate the Sherman Act. The state pointed out that its regulatory system serves many important policy objectives and these types of laws have already been found by the Second Circuit not to violate the Sherman Antitrust Act. Practical Impact: Should the appellants prevail, the currently level playing field for alcohol retailers of all sizes would be titled to toward the largest licensees, ultimately limiting consumer choice and fair competition. The state legislature has wrestled with changing the law and refused to do so at least four times in recent years, noting that doing so could mean thousands of lost stores and jobs. The Wine & Spirits Wholesalers of Connecticut, Connecticut Restaurant Association, Connecticut Beer Wholesalers Association, and Connecticut Package Stores Association submitted a brief in the case. Nearly one year after the 2nd Circuit held oral arguments on February 1, 2018, there has been no decision announced on this case. |

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state & local Public Vaping Ban, Treating Cannabis Like Alcohol, Illegal Use of Liquor Licenses & Place of Last Drink Florida: Voters Ban Vaping in Public: Floridians gave public vaping two thumbs down when the state’s unusual Amendment 9 passed with no trouble. More than 60% of Florida’s voters approved the single amendment that made up a double ban on most public vaping and on offshore drilling, two proposals that were bundled together on the state ballot, according to the Palm Beach Post. The two-part amendment was the result of Florida’s Constitutional Revision Commission (CRC), which meets every 20 years to streamline state laws. That effort resulted in bundling two loosely related issues connected to health and the environment. Massachusetts: Panel Suggests Drivers Be Penalized for Cannabis Like Alcohol: A commission convened to review and provide recommendations for updates to the state’s impaired driving statutes has recommended that drivers who are suspected of being under the influence of cannabis and who refuse law enforcement demands to take a drug test should lose their license for a period of six months. This period is on par with the penalty for suspected drunk drivers who decline a breathalyzer. The commission has recommended that drivers who show signs of drug impairment should face an automatic license suspension if they refuse a blood test, a saliva test, or a 12-step evaluation that includes a urine test, the commission decided. “I don’t think it’s unreasonable to say to [an allegedly impaired] driver, ‘If you want the privilege of driving in Massachusetts, you have to participate in a noninvasive test,’” said John Scheft, an attorney appointed by Attorney General

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Maura Healey. Maryland: Majority of Voters Favor Legalizing Sports Betting: While Maryland voters likely will have to wait at least two years to decide whether to legalize sports gambling, a narrow majority of the state’s voters approve of adding lawful sports betting today, according to a Washington PostUniversity of Maryland poll. The poll found 53 percent of registered voters are in favor of legal professional sports gambling, with 37 percent opposed, and 10 percent of voters having no opinion. Those with strong opinions on the issue were about evenly divided, with 26 percent strongly disapproving of legal sports betting, and 24 percent strongly approving. Since a Supreme Court ruling in May struck down a federal law barring sports gambling from all but a handful of states, Pennsylvania, New Jersey, Delaware, Mississippi and West Virginia have legalized sports betting, and lawmakers in the District and Virginia have expressed interest in considering the issue in 2019. Nevada: State to Require DUI Offenders to Install AlcoholSensing Ignition Locks: A new Nevada law that aims to expand the use of alcohol-detecting ignition devices among those arrested for drinking and driving could cut roadway deaths by one-third, according to the measure’s supporters. Senate Bill 259, which was signed into law last year, requires that those arrested for driving under the influence install the breath-analyzing devices in their cars in order to regain their driving privileges. The technology prevents drivers from starting their cars if they have even a small concentration of alcohol in their blood.

Officials stress that those who get the devices installed are not admitting guilt, and they can continue to defend themselves in court. New Jersey: 20,000 DWI Cases Could Be Tossed After State Supreme Court Ruling: More than 20,000 people accused of drunken driving in New Jersey could have their cases tossed based on a recent ruling of the state’s Supreme Court. In a unanimous decision, the high court found criminal charges against a State Police sergeant who oversaw calibrating breath-testing devices made the test results from five counties inadmissible as evidence. The court vacated the conviction of a woman who pleaded guilty to drunken driving based on a result from one of those machines - and then died while waiting for the legal fight to finish. New York: State Liquor Authority Fines Wegmans $1.1 Million for Illegally Running Liquor Stores: In late November, the New York State Liquor Authority announced that Wegmans Food Markets and five of their affiliated liquor stores have been fined for availing their liquor license. The liquor authority says that the only store in the Western New York region that was fined was the location on Amherst Street in Buffalo; all other locations were in Rochester, Johnson City and Fayetteville, New York. Wegmans was fined $750,000 to settle eight charges, including six violations for availing their license to five affiliated liquor stores, one charge for availing the license of a wholesaler, one charge for aiding and abetting illegal gifts and services, and one charge for illegally trafficking in wine.

state & local North Dakota: ‘Place of Last Drink’ Proposal Looks to Decrease Drunk Drivers: The North Dakota Liquor Control Board is scheduled to hear a proposal on new effort keep on-premise retailers from over-serving customers: Place of Last Drink (POLD). Under POLD, law enforcement works to track the of locations where people last consumed alcohol when they are involved in incidents like DUI’s and assaults. In utilizing this data, officers can find patterns and zero in on specific places that need to be talked to. Most bartenders don’t typically know if a patron has been kicked-out of another local establishment or what happens to that customer when they leave their establishment. Officials add that utilizing POLD tracks those patterns and aims to stop over-serving – which in turn, should decrease the number of impaired drivers on the road. Oregon: Report Recommends Standalone Agency to Regulate Marijuana: Oregon needs an independent state agency to regulate marijuana rather than relying on three disparate agencies, according to draft recommendations prepared by the Oregon Cannabis Commission. The state needs to “provide a unified and consistent vision on cannabis regulation,” the report states. The cannabis commission is part of the Oregon Health Authority. As it stands, marijuana is regulated by three agencies — the OHA, Oregon Liquor Control Commission and Oregon Department of Agriculture — whose powers and responsibilities extend far beyond pot into public health, alcohol and crop services. Pennsylvania: Tougher Penalties for Repeat DUI Offenders: Under legislation signed by Governor

Wolf in October and took effect January 1, the legal consequences for repeatedly driving under the influence have become increasingly severe by establishing the state’s first felony charge for a DUI. The new law applies when an individual has been charged with a third offense in a 10-year period with at least twice the legal limit for alcohol OR for any fourth-time offender. Prior to the new law taking effect, all DUI offenses in the state had been treated as misdemeanors, which carry lighter penalties and fewer other consequences. “What we think will happen is that people are going to have another reason not to drive impaired against after the first time,” said Chris Demko of Pennsylvania Parents Against Impaired Driving. Vermont: Employers Seek to Relax DrugTesting Following Cannabis Legalization: Having legalized the possession and use of marijuana, some Vermont employers are looking for the state to ease its restrictions on how far businesses can go to determine if workers are using drugs. More than 30 years after passing a law limiting workplace drug testing, state lawmakers are expected to debate whether to create a taxed and regulated marijuana market. A 1987 Vermont law prohibits employers from randomly testing their workers. Employers can drug-test applicants after a conditional employment offer has been made. They can also test if there is probable cause of drug use. Deborah Wright, the owner of Green Mountain Traffic Control in Bellows Falls, said without testing, she sometimes learns of drug use on the work site days or even weeks later from other employees.

recent legal analysis — angering freemarket conservatives who say Schimel’s opinion “threatens” the growing industry. In a legal analysis provided to Rep. Rob Swearingen, R-Rhinelander, earlier this month, the outgoing attorney general weighed in on a long-standing debate over whether barn owners who rent the spaces for private events should be subject to state rules applying to businesses that serve liquor. Schimel said private places that may be rented out for a limited private event are still considered public and thus subject to state laws governing public places that serve alcohol. Wyoming: University Proposes Tougher Hits for Selling Alcohol to Minors: Officials from the University of Wyoming have argued that the city of Laramie, home to the state’s flagship university, should increase penalties levied on area businesses found to have sold alcohol to minors. Under the current point-based system, the city levies sanctions to businesses that are caught violating alcohol-related ordinances or state statutes – with the current penalty for selling to a minor resulting in 25 points and a $250 fine. Businesses who accrue 75 points in a 12-month period face a temporary suspension of its liquor license. With compliance checks conducts twice annually, it is extremely difficult for a business to face a suspension for repeated violations. Under a proposal from university officials, however, the penalty would increase to 50 points and a $500 fine for each violation. |

Wisconsin: State AG Says Wedding Barns Are Subject to State Liquor Laws: Barns rented for events such as weddings are subject to the state’s liquor laws, Attorney Brad Schimel suggested in a

WINTER 2018-19 ABL INSIDER INSIDER SPRING 2016 || ABL

d.c. updates 2018 Mid-Term Elections Recap & Latest Updates from Capitol Hill

UTLOOK Beer, wine and spirits know no political affiliation and it is with that in mind that beverage retailers will get to work with the newly elected 116th Congress, governors and state legislators in 2019. In Washington, the Democratic party has won control of the House of Representatives for the first time in eight years, while Republicans took advantage of a favorable election map to expand their majority in the Senate. With divided government returning to Washington, the outlook for the new Congress is muddled. House Democrats have expressed their interest in working on a bipartisan infrastructure bill, lowering prescription drug prices, strengthening data security and privacy, and working together on less partisan issues. However, House Democrats will also be driven by a sense of professional oversight duty and the politics that comes with it. The test of Speaker of the House Nancy Pelosi (D-CA) will be to balance the impulse to resist the Administration at all turns while demonstrating an ability to govern and get results. The Senate, meanwhile, is likely to further embark on remolding the federal judiciary by approving federal judicial appointments while operating at its traditionally slower pace than the House. So-called “must-pass” legislation will likely provide the few opportunities for major legislative action with the lens of the 2020 Presidential Election already coloring the debate. Nonetheless, there will be plenty to work on for beverage licensees and their industry counterparts in the 116th Congress. U.S. HOUSE OF REPRESENTATIVES At the time of this writing, Democrats hold a 235 to 199 majority in the House of Representatives with one (1) race still not called. What is currently a 36-seat net gain is comparable to Democrats’ 2006 “blue wave” election in the House,

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when they picked up a net of 32 seats. Democratic candidates were broadly successful in suburban districts, and districts that went for Hillary Clinton in 2016 in otherwise red states. U.S. SENATE Following the mid-term elections, Republicans have added to their majority in the Senate and now control the chamber by a six-seat margin, with a 5347 majority. GOP candidates unseated Democratic incumbents in Indiana, Missouri and North Dakota, and held off challenges in Tennessee and Texas. Democrats picked up a Republican seat in Nevada, and successfully defended seats in Michigan, Minnesota, Montana, New Jersey, West Virginia and Wisconsin. LEGAL On November 20, ABL submitted an amicus brief with the U.S. Supreme Court in the case of Tennessee Wine & Spirits Retailers Association v. Blair. As the petitioner in the case, the Tennessee Wine & Spirits Retailers Association is asking the Court to hold that Tennessee’s durational-residency requirement for granting retail and wholesale alcohol licenses is protected under the Twentyfirst Amendment, and to reverse the Sixth Circuit Court of Appeals’ contrary ruling. As ABL’s brief explains, the state’s residency requirements are lawful under the Twenty-first Amendment and further the State’s legitimate interests as part of its multi-step and comprehensive threetier regulatory system. The ABL brief states, “By requiring distribution to occur through entities with sufficient connections to a State, that State can best enforce its own alcohol regulations.” The brief further notes that the physical presence of instate wholesalers and retailers allows for states to more easily inspect those entities and facilitates enforcement of “laws designed for orderly market conditions and public safety.” ABL’s brief also points out that the

Court has long recognized that the dormant Commerce Clause applies differently in the unique context of state alcohol regulation under the Twentyfirst Amendment, and is not intended to eviscerate the core Section 2 power of the Twenty-first Amendment, which explicitly gives a state the right to “regulate the sale or use of liquor within its borders.” The ruling of the Sixth Circuit, if left to stand, could wrongly expand the express holding in Granholm v. Heald (2005), where the U.S. Supreme Court ruled on when state alcohol laws can treat instate and out-of-state entities differently. Granholm reaffirmed that the three-tier system is “unquestionably legitimate” and recognized that case dealt with just the first tier of alcohol production – not wholesale or retail tiers. “Independent beverage retailers support the strong authority of the Twentyfirst Amendment, which has been recognized by courts and Congress for decades,” said ABL Executive Director John Bodnovich. “The Twenty-first Amendment and the three-tier system it has fostered have given rise to individual state retail alcohol markets that provide unprecedented choice and value to meet customer needs, while also accounting for those same consumers’ demands for public safety, product safety and accountability by those who produce, distribute and sell beverage alcohol products.” Oral arguments were held on January 16, with an opinion from the Court expected sometime in June 2019. ALCOHOL AND TOBACCO TAX AND TRADE BUREAU (TTB): On November 26, the TTB announced the publication of a rulemaking document (Notice No. 176) in the Federal Register, in which it proposes to update, simplify, and clarify the labeling and advertising regulations for wine, distilled spirits, and malt beverages. The updated labeling and advertising regulations are intended to facilitate industry compliance by simplifying and clarifying regulatory standards, incorporating guidance

d.c. updates documents and other current policies into the regulations, and reducing regulatory burden on industry members where possible. TTB encourages public comments on the regulatory amendments proposed in the rulemaking document, particularly from affected industry members. TTB also welcomes suggestions for other changes to these regulations not specifically proposed in the rulemaking. Comments will be accepted through March 26, 2019. Please see the notice for instructions on how to submit a comment. CANNABIS On December 17, Sen. Cory Gardner (R-CO) introduced the “Strengthening the Tenth Amendment Through Entrusting States Act” (STATES Act) (S. 3032) as an amendment to a criminal justice reform bill in the Senate. The Senate rejected the amendment as it was not granted unanimous consent for a vote to add the amendment to the larger bill. Nonetheless, Sen. Gardner’s action demonstrates that there is a growing bipartisan appetite in Congress to address cannabis laws as more states move to legalize recreational cannabis. The amendment would have amended the federal Controlled Substances Act to ensure U.S. states would be protected from federal law enforcement if their marijuana rules and enforcement are in line with respective state laws. It would have also allowed legal-marijuana-related financial transactions. The Senate did, however, vote to legalize hemp in December as part of a broader agriculture bill. A pet project of Senate Majority Leader Mitch McConnell (RKY), the Agriculture Improvement Act of 2018 (H.R. 2) allows for the legalization of cultivation, processing and sale of industrial hemp, and makes hemp plants eligible for crop insurance ESTATE TAX With 2020 Presidential politics set to pick up in 2019, advocacy groups will be readying talking points to continue an ongoing debate over the estate tax (a.k.a. death tax). The issue generally moves more prominently into Presidential campaign politics and was recently part of the 2017 tax reform debate. In 2018, an individual could pass up to $11.18 million without paying estate tax at death,

and a married couple can pass $22.36 million because of changes in the 2017 law. That’s twice as much as they would have been able to transfer previously, but this higher exemption level expires after 2025. IMPAIRED DRIVING On October 26, Rep. Kathleen Rice (DNY) introduced the Prevent Impaired Driving Child Endangerment Act (H.R. 7099). The bill directs the Department of Transportation to withhold from states allocations of transportation funding unless such states enact and enforce certain laws with respect to an individual who is charged with driving a motor vehicle, with a child passenger, while intoxicated or impaired by alcohol, drugs, or a combination of substances. The bill has no cosponsors, and its introduction so late in the Congressional session signifies that it is primarily a messaging effort on an issue that has long been important to Rep. Rice. MUSIC LICENSING On December 12, the House Judiciary subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing at which Makan Delrahim, Assistant Attorney General and head of Department of Justice’s antitrust division, testified alongside Joe Simons, Chairman of the FTC. A large part of the hearing focused on the DOJ’s intent to undo the consent decrees that govern music licensing fees for ASCAP and BMI, with legislators expressing concern that the doing so could increase fees public venues pay to play songs and otherwise create chaos for music users. Delrahim announced in April the DOJ’s intent to undo the decrees as part of a wider initiative to review 1,300 antitrust consent decrees that may be outdated. The DOJ’s settlements with ASCAP and BMI, originally created in 1941, require the organizations to offer licenses to broadcast services, concert halls and other public venues on equal terms, set by a federal court, to promote competition in the music market. Prior to the hearing, the MIC Coalition lobbied each member of the subcommittee, and the payoff was significant. In his opening statement subcommittee Chairman Tom Marino (R-PA) included concerns about the Department’s review of the ASCAP &

BMI consent decrees and the market disruption that could be caused if they were to be eliminated without a legislative replacement in place. He also pressed AAG Delrahim for answers on where he is in the review process during Q&A. Committee Ranking Member (and now Chairman) Jerry Nadler (DNY) expressed similar concerns in his opening statement. AAG Delrahim stated that the antitrust division has been “meeting with every interested party from wine shops and restaurant owners to hotel owners to broadcasters and musicians and songwriters.” He said that the Department will make a public announcement for greater public comment before they decide on the fate of the decrees. He told the Committee that “we have not made any conclusions of what the outcome of that review shall be, but we will be carefully looking at that and consulting with you, consistent with the Music Modernization Act, as well as just your oversight role in how we proceed with that.” ONLINE SALES TAX The Supreme Court’s ruling in Wayfair earlier this year has triggered a handful of developments on the online sales tax front. For its part, South Dakota, the state that filed the case that led to the Supreme Court’s decision, has resolved all remaining issues with the businesses involved in the lawsuit and began collecting state sales tax on January 1, 2019. Many states have passed or are working on legislation like South Dakota’s law enforcing current laws to collect online sales taxes. A trade group representing catalog mailers pushed for Congress to legislate “a realistic and orderly phase-in date” for the Supreme Court’s decision, as well as provision that would prevent states from collecting taxes on sales made prior to the establishment of new state sales tax collection standards. To that end, Congressman Jim Sensenbrenner (R-WI) has introduced the Online Sales Simplicity and Small Business Relief Act of 2018 (H.R. 6824), but with the end of the 115th Congress, that legislation died at the end of the Congressional session.|

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leading (cont.) continued from pg. 5 Perhaps more ominous – especially and ironically for some of the winein-grocery proponents – is that these independent retailers have had to cut the number of wine products they sell. This means less retail shelf space and opportunity for small producers, imports, and new, untested brands. Spirits sales have helped independent retailers stay in business, but it remains to be seen how much time will pass before a Floridaesque “Whiskey & Wheaties” bill finds its way to Nashville. More Beer Outlets, No Additional Revenue In Oklahoma, an increase in beer licenses has failed to bring a windfall in sales tax revenues, which have remained relatively flat one quarter after significant changes to Oklahoma’s alcohol laws were implemented. Those recent changes include: allowing strong beer to be sold at breweries; allowing wine and all beer to be sold at grocery and convenience stores; and enabling liquor stores to sell cold beer - all of which went in to effect on October 1, 2018. The $600,000 drop – from $10.3 million in alcohol taxes in September to $9.7 million in October – shows that the change simply shifted the

market as opposed to adding to it.

going to schools and roads?

Another figure also declined. According to the Oklahoma Alcoholic Beverage Laws Enforcement Commission, the total number of active retail liquor store licenses dropped from 645 at the beginning of October to 627 at the end of the month. This is down from 684 in October 2017 and represents a 54 store (8 percent) year-to-date decline.

Pushing Back and Fighting for Consumer Choice In Minnesota, a new public education campaign for Minnesotans who love craft beer, wine, and spirits, launched recently with a website (www. minnesotans4choices.com). Billed as “a group of Minnesotans from throughout the state who love their craft beer, wine diversity, and spirit assortment”, Minnesotans4Choices aims to “preserve Minnesota’s heritage of easy accessibility and unsurpassed beer, wine, and spirit selection.”

Liquor store owners raised their concerns in the many months leading up to the alcohol law changes, noting that they are not opposed to competition, but are against unfair competition. That’s a tough argument to make, however, when the world’s largest out-of-state retailer contributes more than $1.6 million to the campaign to change the laws. Increasingly, bait-and-switch arguments (“More alcohol outlets = more tax revenue!”) are being recognized for what they are: attempts by large out-of-state corporations to cannibalize markets that already sufficiently serve customers and communities. The real question is: Are citizens better served by laws that destroy small businesses in their communities and eventually diminish product choice and selection with no additional revenue

Campaigns such as this, that raise awareness of the unintended consequences of sweeping alcohol legal and regulatory changes, which are proposed at this time every year, resonate with consumers and are a natural reaction to the speed with which alcohol laws are being challenged and changed. I predict we will see more, not fewer, efforts like this as beverage businesses with ties to their local communities take a stand to defend their role in the greatest age of beer, wine and spirits the world has ever experienced. |

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WISCONSIN Tavern League of Wisconsin

WINE & SPIRITS GUILD OF AMERICA

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SPRING 2016 | ABL INSIDER