Mass. Law Pretty Much Locks Brewers into Perpetual Contracts with Distributors, Says Local Brewery Owner

It's like pre-free agency baseball, critics say


but who sold it to you?
East Coast Wineries

The way the Republican of Springfield, Mass. explains it, the struggle of Antonio Rizos, owner of Opa Opa  Brewing in Western Massachusetts is akin to Curt Flood fighting for free agency in Major League Baseball. Via the Republican:

In Massachusetts, brewers need to contract with wholesalers for the distribution of their products to bars and package store. Rizos can sell as much beer as he wants at his own two restaurants, Opa Opa Brewery and Steakhouse in Southampton and the Brewmaster's Tavern in Williamsburg, but he needs a wholesaler if he wants to deliver a case to a package store down the street.

Rizos' issue with the law, Massachusetts General Laws Chapter 138, section 25E, is that once a brewer has a relationship with a wholesaler lasting six months or more, the wholesaler gains distribution rights indefinitely regardless of performance. And that, he said, is bad business.

Distributors, naturally, deny the characterization. If Rizos doesn't like the arrangement, after all, he can try to sever the relationship if he thinks he has "good cause." Then all he has to do is give 120 days-notice and wait for years of appeals to work through the state's alcohol commission. Then he can go find another distributor for his wares. A statement from Rizos' distributor claims that "Opa Opa chose to trade their proprietary rights to use other distributors in exchange for providing exclusivity to" the distributor. If you can parse that claim, let me know in the comments.

Rizos and the brewer's guild say in such situations brewers are forced by economic realities to stop producing the beer they don't think their distributor is distributing appropriately, costing jobs. The invocation of "jobs" has gotten the state involved. Is lawmakers' solution to permit producers to enter into any kind of contract with distributors and retailers that they can negotiate with them? The repeal of prohibition came with the proviso that states could control alcohol in their states any way they pleased, so perish the thought. The state, naturally, wishes to keep its controls on alcohol in place. A proposed bill to "fix" the problem of breweries being forced into indefinite contracts with distributors only provides an exemption for small breweries, like Rizos', from the state law. The brewers' guild supports that "small brewer relationship" exemption. The president of the guild explained to the Republican that when the original law, referred to as 25E, was passed, there were only about a dozen breweries in Massachusetts but 60 wholesalers. Those numbers have now pretty much been reversed.

Since the end of Prohibition, every state has had some form of a "three tier system," separating, regulating, and sometimes relegating to state ownership the production, distribution, and retail of alcoholic beverages. In 2011, Washington state became, via ballot initiative, the first state to fully privatize the alcohol industry. Since that law was implemented, DUI arrests have fallen, the opposite of what opponents of the initiative claimed before its passages. Privatization did not lower prices, something supporters actually steered clear of claiming. Higher prices can actually be partly attributed to the initiative, not because it privatized the industry, but because it added  new fees on retailers and distributors on top of some of the highest liquor taxes in the country.

Related: It gets better, slowly.

h/t John M.