Keeping Spirits Competitive and Consumer Friendly

Understanding President Biden’s Executive Order and the Department of Treasury Report on Competition

Department of Treasury Report on Competition

On July 9, 2021, President Biden issued an Executive Order (EO) on Promoting Competition in the American Economy. The EO directed the Secretary of Treasury, in consultation with the Federal Trade Commission and Department of Justice, to produce a report related to competition in beer, wine, and spirits.  

The main emphasis of the executive order on competition was to examine consolidation in entirely unrelated industries like health care and technology. The alcoholic beverage industry was unnecessarily included in the wide-ranging 72-initiative executive order.   

As directed by the executive order, on February 9, the U.S. Department of the Treasury, in consultation with the U.S. Department of Justice and the Federal Trade Commission, released a report on competition in the beer, wine, and spirits markets. 

As it has been for nearly 100 years, the regulation of the alcoholic beverage market should be left to individual states. 

Nevertheless, efforts to change the current structure of the beverage alcohol industry would threaten the consumer-forward nature of the beverage alcohol industry, stifle consumer choice, and harm competitiveness. It is essential to preserve the Three-Tier System and prevent overreach into proven beverage alcohol industry practices. 

Preserve the Three-Tier System 

The booming beverage alcohol industry is a testament to the strength of the modern Three-Tier System. The system continues to see innovation and competition as new entrants join the marketplace and Americans agree that the current regulatory system is working. 

The number of craft breweries, distillers, and wineries has grown exponentially across the country over the past decade, giving consumers a greater number of choices than ever before in the beverage alcohol industry. 

The Three-Tier System prevents any one entity from dominating shelf space in stores, bars, and restaurants and provides small businesses the opportunity to grow their business in the production, distribution, and sale of beverage alcohol products. 

The Three-Tier System supports the safe standards that consumers want in the alcoholic beverage industry. The Three-Tier System creates a system of checks and balances as products moves through the supply chain, which ensures products remain safe from production to sale.  

Foreign countries have suffered without the three-tier system and the safeguards it provides. 

• In December 2021, 88 people in Turkey died of poisoning after consuming bootleg alcohol.
• A liquor store in the U.K. was stripped of its license after being caught selling vodka with alcohol content more than 150,000 times the legal limit.  
• In Mexico, more than 100 people died from tainted alcohol in a two week period, with methanol being the suspected culprit in the illegal alcohol that was seized. 
• 87% of Americans trust that their alcohol beverages are safe to consume. 

Prevent Overreach Into Proven Beverage Alcohol Industry Practices 

Category management benefits the entire alcoholic beverage ecosystem by streamlining information sharing between distributors and retailers, which helps retailers manage the diverse array of products they sell, helps consumers select products, and helps producers gain exposure to new audiences and markets. 

• Communication between wholesalers and retailers helps identify and increase visibility into trends and opportunities for retailers to better serve their customers. 

• Category management directly strengthens standard control, custom labeling, and inventory, all of which are crucial to the efficiency of retailer customer service. 

By building strong partnerships through exclusive contracts, suppliers are guaranteed promotion and brand-building assistance from distributors and retailers. 

• Small producers and businesses are supported by exclusive contracts that help build their brands and increase their reach.  
• Undermining exclusive contracts opens the door to uncontrolled commercial activity that threatens the integrity of beverage alcohol markets.

Standards of fill for alcoholic beverages should be maintained in their current form. 

• Standards of Fill provide clarity on the container sizes wine and spirits can be bottled in.
• Standardizing beverage packaging helps consumers better identify what types of products they are purchasing and establish clear, consistent expectations about the products they are purchasing.
• These standards streamline the inspection of alcoholic beverages for regulators and.
• Deregulating standards of fill would unnecessarily burden all levels of the three-tier system from suppliers to distributors to retailers as they adapt to new product sizes and invest resources toward updated inventory management, storage, shipping and handling.

Federal regulators should prioritize fair treatment of companies in the alcoholic beverage industry in enforcement actions. 

• The severity of the violation, not the size of the company, should be the basis for enforcement actions and fines.
• As the alcohol industry continues to expand, the same expectations for quality and safety should be set and enforced regardless of company size or age.