Craft Beer

New Jersey Regulators Crack Down on Craft Beer

New Jersey’s lousy craft beer rules are an affront to free speech and consumer choice

|

Last week, New Jersey regulators pumped the brakes on the state's craft beer industry. The state's Alcohol Beverage Control board (ABC) issued a special ruling that restricts breweries in the state in a number of ways—including who, what, when, and how they can serve.

The new rules replace others the ABC had planned to adopt last year. Facing pushback from brewers, the ABC decided to pull back and ponder the rules.

James Graziano, acting ABC director, said in a statement announcing the new rules that the ABC chose to work with "the very few, very vocal licensees who felt their views were not adequately represented." Yet after all that pondering and listening to breweries, the special ruling itself notes that it's "substantially similar" to the 2018 ruling.

Under the new rules, a brewery still may not sell food but may provide delivery menus to patrons. Yay. A brewery also may not allow a food truck to park on its premises but may allow food trucks or other food vendors to sell food to brewery customers off premises (duh) provided the brewery "does not coordinate with the food vendor or food trucks."

The special ruling is grounded in an effort—an impermissible one, I'd argue—to protect restaurants, bars, and liquor stores in the state from competition.

The state's powerful restaurant lobby, for example, opposes "any legislation that would relax the state's uniquely restrictive rules on [brewery] tasting rooms, such as allowing food service and eliminating a requirement that every patron must tour the facility each time s/he visits."

Star-Ledger columnist Paul Mulshine, in an excellent column lambasting the new ABC rules this week, notes that New Jersey courts have determined that "laws cannot be written or interpreted to protect liquor license holders from competition." Mulshine cites an earlier liquor case in the state that held "a desire to protect other businesses from economic competition is an impermissible consideration."

Historically, New Jersey hasn't been known as a beer state—craft or otherwise. According to the Brewers Association, which represents the interests of craft brewers around the country—and which I've written about many times, including here and here—New Jersey is ranked 45 out of 51 in U.S. breweries per capita. The state also ranks 47th in gallons of beer produced per capita. That puts the state just behind Kansas and just ahead of Arkansas, each of which is probably known more for its dry counties than its beers.

Despite these figures, New Jersey's craft beer scene has grown in bunches in recent years, thanks in large part to a 2012 law that helped bolster the state's craft beer scene. The special ruling, the ABC says, was intended to clarify that state law.

But clarity doesn't appear to be the agency's forte. When it comes to regulation and competition, New Jersey's ABC appears to misunderstand a lot, including the purpose of the breweries it regulates. For example, the special ruling states that the ABC's vision for regulating breweries in the state involves restricting what breweries may sell and to whom so "that consumers could become more interested in the craft beers and would want to buy them at" New Jersey liquor stores, restaurants, and bars. In the eyes of the ABC, in other words, breweries in the state exist largely for the purpose of promoting other businesses regulated by the ABC.

Rather strangely, the New Jersey Brewers Association, which represents many craft brewers in the state, released a statement last week applauding the new ABC rules. I reached out to Alexis Degan, executive director of the NJBA, who clarified the statement in a series of emails to me, explaining, basically, that the rules proposed last year were far worse, and that the NJBA hopes to work with lawmakers moving forward to improve the law.

"When it comes to the rules, we recognize that it is time to engage the Legislature in crafting a clearer statute to protect the rights of the breweries to advertise without limit the events which the ABC Director has now said we can host," Degan tells me.

Degan also accepted my characterization that the new rules are less awful than those proposed last year and less terrible than they might have been.

She's right. Among the improvements over the earlier proposed rules, Degan notes the new rules removed caps on the number of events a brewery can host. That's true. But the new rules also limit to 25 the number of events a brewery can market publicly. That's something Degan and the NJBA hope to change through the legislative process. But the marketing cap is also so arbitrary (among other problems) that it could be ripe for a brewery to challenge the limit on First Amendment grounds, whether or not the legislature moves to amend the law.

New Jersey's lousy craft beer rules should evolve. They, like the state ABC's understanding of craft beer, will evolve. And craft brewers and consumers in New Jersey will be better off for it.