The three-tiered system of beer distribution that many states adopted to curb breweries’ influence on consumers is an unfortunate hangover from the end of Prohibition. In states like Pennsylvania, for example, most breweries must sell their beer to a wholesaler, which then sells the beer to a retailer where then it can finally be sold to the consumer. Not only does this scheme add artificial costs to retail beer, the legal mandate doesn’t apply to in-state breweries and so this expensive law is also a classic case of crony capitalism.
The Supreme Court struck down this sort of in-state favoritism in the 2005 case of Granholm v. Heald, in which nearly identical laws were used to protect wine distributors in New York and Michigan. Does Pennsylvania and other states with similar laws think that Granholm doesn’t apply because commerce in beer is constitutionally different from commerce in wine?
Last week, the Competitive Enterprise Institute released a paper, authored by former Cato legal associate David Scott, calling for the Keystone State to abide by the Supreme Court’s ruling and end its protectionist three-tiered beer distribution system.