Idaho Continues Efforts to Limit Anheuser-Busch

There's all kinds of good news in the world of craft beer. Today's Year in Beer report from the Brewers Association has all the details. The grey cloud hanging over the good news is Anheuser-Busch, which is buying up distributorships and mucking up the three-tier system wherever it can.

I've reported on the ongoing antics of AB in the past. Doing so has earned me a place on their list of undesirables. When the suits from AB and 10 Barrel were in town hoping to drum up some positive press for the acquisition, I failed to make the list of potential "friendlies."  Shucks, I suppose you can't blame them.

Forget the 10 Barrel deal for just a second. There are going to be more deals like it in coming months and years. If we truly are opening 1.5 new breweries a day in this country (that's a Brewers Association stat), there are going to be a lot of buyouts and consolidations coming down the pike. But never mind.

Last spring, I reported that Idaho was considering legislation that would block Anheuser-Busch's stated desire to acquire distributorships within the state. Such acquisitions are a clear violation of the three-tier laws that came into existence following Prohibition. Unfortunately, a lot of state laws have loopholes that have enabled AB to come in and buy distributors. Oregon, by the way, is one of those states. Idaho is one of a few states that decided to do something about it.

With the passage of House Bill 524 in late March, Idaho amended its laws to state that only brewers producing less than 30,000 barrels annually can hold a retail, wholesale (self-distribution) or brewpub license within the state. The intent of this amendment, which is slightly more detailed than this, is to prevent big beer from owning distributorships, retail outlets or pubs within the state. It effectively reinforces the three-tier system.

Now comes word that Idaho Beer and Wine Distributors are asking state courts to review the language of the law (Title 23) and verify that only brewers producing less than 30,000 barrels may enjoy the privileges as stated in the law. This comes on the heels of the 10 Barrel deal. If you aren't aware, 10 Barrel brews 40,000 barrels a year, owns a brewpub in Boise and is, of course, now fully owned by Anheuser-Busch (which produced 122 million barrels in 2013).

Some folks are wondering if the move by the Beer and Wine Distributors is directed specifically at Anheuser-Busch and 10 Barrel. Hmmm. That's a touchy question. But it's pretty obvious that the Distributors are testing the water to see if the barrel limit, signed into the state code well before the recent acquisition of 10 Barrel, will stick.

This ought to be interesting. For if the courts somehow rule that the 30,000 barrel limit is not a binding part of the law, it will mean passing laws designed to slow the encroachment of Anheuser-Busch and other big brands is an ineffective means of addressing this problem. Then what?

Surprise! An Area Where Oregon Should Follow Idaho's Lead

The state of Idaho and progressive policy aren't generally mentioned in the same breath. I mean, this is a state that typically ranks at or very near the bottom of the pack in spending on education and social spending generally. They've had a string of wacky Republican governors. The state is a company store.

So I was surprised to learn the Idaho House has passed a bill that will prevent breweries from owning any interest in beer wholesaling or retailing operations. House Bill 524 passed by a 63-6 vote and is moving to the Senate. No word on its prospects there.

If HB 524 is passed into law, it will effectively block the types of acquisitions we've seen in Oregon, where Anheuser-Busch has come in and bought several distributors. The most recent example is the buyout of Morgan Distributing, discussed here a short while back. 

The folks behind HB 524 are attempting to block similar acquisitions in Idaho. The idea is to protect the growing craft brewing industry there...and jobs. They want to make sure big beer can't come in, buy up the state's beer distributors and put craft brewers at a competitive disadvantage.

This seems like a no-brainer to me, but sensible rationale hasn't stopped some people from opposing it. One of the counter arguments is that, by protecting the three-tier system, legislators are interfering with "free market" principles. Seriously? 

Look, the reality is you cannot have any semblance of a free market if you let beer behemoths come in and buy up distributors. If you do that, you put small breweries at a disadvantage because access to retail outlets will go through big beer. Protecting free market principles means you must pass legislation that preserves the integrity of the three-tier system.

If you don't believe it, just wait and see what Morgan Distributing's (to be called Western Beverage, evidently) product list looks like. On the beer side, the list will be dominated by AB products. Craft beer doesn't fit with their objectives. They want to sell their crap. Period.

If Oregon had a clue, it would start working on something like what Idaho is trying to pass. Otherwise, we will soon face a situation in which Anheuser-Busch has more control of market access than it should. And if you believe self-distribution offers a way out of that mess, you may need to schedule some sessions with your shrink.