Illinois Liquor Control Commission Approves Anheuser-Busch InBev\u2019s 30%<\/em><\/p>\nSPRINGFIELD, IL \u2013 October 31, 2012\u00a0\u00a0 In a 4-2, decision, the Illinois Liquor Control Commission (Commission) ruled today that Anheuser-Busch Inbev (ABI) may continue to hold an interest in four Illinois distributorships.\u00a0\u00a0 Despite a law enacted in June 2011, which prohibits brewers from owning beer distributorships (brewery branches) in Illinois, the Commission ruled in favor of the large international conglomerate brewer.<\/p>\n
Today\u2019s decision by the Commission allows ABI to maintain an interest in City Beverage distributorships through an Anheuser-Busch Inbev affiliate, WEDCO.\u00a0 \u201cThe large brewer could play a substantial role in the day-to-day operations of the four beer distributorships,\u201d said Bill Olson, president of the Associated Beer Distributors of Illinois (ABDI).\u00a0 \u201cOnly independent distributors create competition, are easy to regulate, and are a vital part of the local communities they service,\u201d he continued.<\/p>\n
\u201cThis ruling impairs Illinois\u2019 authority to regulate alcohol beverages.\u00a0 Without independent distributors in the State\u2019s three-tier regulatory system, a brewer could influence every aspect of the sale of beer in the State,\u201d said Bill Olson.<\/p>\n
By issuing the order, the Commission has taken upon itself to create public policy despite the Legislature’s intent.\u00a0 Judge Dow stated in his decision in Anheuser-Busch v. Schnorf, \u201c\u2026 the regulation of the distribution of liquor is a matter of public policy and a quintessential legislative function.\u201d (Decision p. 35).\u00a0 This public policy was determined in the Legislature and was clarified in a statement of legislative intent (a statement read into the record during legislative debate) when the sponsor stated “\u2026all brewers, in-state and out-of-state\u2026may not self-distribute or own a distributorship in Illinois.”<\/p>\n
The Liquor Control Commission\u2019s ruling to allow Anheuser-Busch InBev (ABI) to have an ownership interest in a distributorship is an example of the regulatory process run amok.\u00a0 The Commission has demonstrated, through its actions, that it wanted to maintain control of this issue so it could create public policy.\u00a0 A regulatory action, which could have been addressed in a few months, has taken one year and five months since the Governor signed SB 754 into law.\u00a0 Because of the slow, drawn-out process, concerns are raised regarding the Commission’s ability to effectively regulate alcoholic beverages in a timely manner.<\/p>\n
\u201cNow that ABI is allowed to own distributorships, craft brewers, new imported brands, and new domestic brands will have reduced access to market.\u00a0 Independent distributors provide an avenue for those products to reach consumers that brewery-owned distributors won\u2019t provide,\u201d continued Bill Olson.<\/p>\n
In most other countries where ABI operates, it controls the distribution of its products.\u00a0 Passage of the 21st<\/sup> Amendment to the U.S. Constitution gave the right to regulate alcohol beverages to the states.\u00a0 Every state created a regulatory system which prohibits vertical integration.\u00a0 The U.S. Supreme Court has stated that the three-tier regulatory system is \u201cunquestionably legitimate.\u201d<\/p>\n\u201cToday\u2019s decision weakens Illinois\u2019 regulatory authority as granted by the 21st<\/sup> Amendment to the U.S. Constitution. Alcohol distribution outside the U.S. is handled differently.\u00a0\u00a0 When InBev bought Anheuser-Busch, they also bought into the system of alcohol regulation in the U.S.,\u201d said Olson.\u00a0 \u201cIf they were unaware of how beer distribution is regulated in the U.S., they didn\u2019t do their due diligence.\u00a0 It is not the Liquor Control Commission\u2019s purpose to accommodate ABI\u2019s global business plan and ignore the intent of SB 754 as passed by the Illinois General Assembly,\u201d continued Olson.<\/p>\nIn February 2010, ABI requested the Commission permit the transfer of the licenses of four City Beverage distributorship locations to ABI as part of its purchase of City Beverage \u2013 Illinois.\u00a0 ABI (through an affiliate) had a 30% interest in the four locations and wanted to own 100% interest in the licenses.<\/p>\n
On March 10, 2010, the Commission held that ABI did not qualify for a distributor license on the grounds that out-of-state manufacturers are prohibited from holding an Illinois distributor license.<\/p>\n
Following the ruling, ABI immediately filed a complaint (AB v. Schnorf) in the US District Court Northern District of Illinois stating that the Commission\u2019s ruling violates the Commerce Clause of the Constitution by permitting in-state brewers to obtain a distributor license while prohibiting out-of-state brewers to do the same.\u00a0 The complaint further stated that the Commission interfered with ABI\u2019s contract to purchase City Beverages, and it did not interpret Illinois\u2019 alcohol code correctly or fairly.<\/p>\n
On September 3, 2010, Judge Dow rendered his decision that there was discrimination between in-state and out-of-state brewers because two in-state brewers were granted a distributorship license and ABI, an out-of-state brewer (Non-Resident Dealer) was denied that ability, the discrimination constituted a Commerce Clause violation.<\/p>\n
Judge Dow denied ABI\u2019s \u201crequest to remedy the unconstitutionally of Illinois\u2019s system by extending the self-distribution privilege to out-of-state brewers.\u201d\u00a0 He continued, \u201cThat remedy would be more disruptive to the existing statutory and regulatory scheme than the alternative remedy of withdrawing the self-distribution privilege from in-state brewers.\u201d<\/p>\n
Judge Dow stayed his opinion until March 31, 2011, \u201c\u2026in recognition of the General Assembly\u2019s ultimate authority over Illinois public policy, including a remedy for the constitutional defect \u2026.\u201d<\/p>\n
SB 754, a bill authorizing only small craft brewers, ones that manufacture less than 15,000 barrels of beer annually, self-distribution rights, passed and became law (P.A. 97-0005) on June 1, 2011.\u00a0 The craft brewer category was created to allow the two in-state brewers in the original action to self-distribute.\u00a0\u00a0 In passing SB 754, the Illinois General Assembly clearly made it public policy in the state of Illinois that brewers cannot hold a distributor\u2019s license.<\/p>\n
The Liquor Control Commission held a public meeting on December 7, 2011, in response to complaints by multiple Illinois liquor license holders and organizations that represent license holders.\u00a0 The Commission heard testimony on the following questions:<\/p>\n
\n\u201cA. What effect does the enactment of P.A. 97-0005 have on the ability of a Brewer or Non-resident Dealer to hold an ownership interest in an Illinois distributor?<\/li>\n \u201cB. If the law prohibits a Brewer and\/or Non-resident Dealer from holding a distributor license, does Illinois administrative law permit the Illinois Liquor Control Commission to grant equitable relief to City Beverage, Illinois, LLC, owner of four distributorships, to allow for the continued 30% ownership interest by a brewer\/non-resident dealer affiliated entity (Wholesale Equity Development Corp \u2013 WEDCO)?\u201d<\/li>\n<\/ul>\nOn June 7, 2012, the Commission cited and notified the four City Beverage distributorships to appear before the Commission as to why each liquor license \u201cshould not be fined, suspended or revoked for a violation of the Illinois Liquor Control Act\u2026.\u201d\u00a0 The citation further indicated that the Legal Division of the Illinois Liquor Control Commission recommended \u201cthat the City Beverage \u2026 licenses be revoked and that the revocation be stayed pending the divestiture of ownership interests of Anheuser Busch, LLC and its affiliates from City Beverage\u2026.\u201d<\/p>\n
The Commission held a hearing on October 1, 2012, to determine whether ABI may directly or indirectly own a beer distributorship or distribute beer.\u00a0 ABI claimed it can be both a brewer and a distributor but Commission lawyers argued this dual ownership violates the three-tier regulatory system of Illinois law.<\/p>\n
Following the hearing, the Commission took the matter under advisement and indicated that the Commissioners would meet behind closed doors to discuss these issues and reach a decision before rendering a ruling.\u00a0 The Executive Session continued on October 2, and again in the morning session of today\u2019s meeting.<\/p>\n
The Associated Beer Distributors of Illinois, a not for profit business trade association, represents, maintains and improves the interests of its members who distribute beer of all brewers. ABDI advocates value in the state-based regulatory system by being the unified voice for beer distributors on legislation and regulation, by promoting responsible beer consumption, and by providing educational and other services to meet its members\u2019 needs.<\/p>\n
Distributors are licensed by the State of Illinois to import and distribute beer to licensed retailers.\u00a0 ABDI members directly employ more than 3,300 people across the state.\u00a0 They collect and pay $63 million each year in excise taxes to the state and pay more than $280 million in direct wages and health care benefits.<\/p>\n
For more information about ABDI, visit www.abdi.org<\/a>.<\/p>\n###<\/p>\n<\/blockquote>\n
WSDI Statement:<\/p>\n
Wine and Spirits Distributors of Illinois, an association of family-owned businesses, obviously is disappointed in the Illinois Liquor Control Commission\u2019s decision to allow Anheuser-Busch, which though controlled for years by international conglomerate InBev remains the largest brewer in the United States, to retain its 30% interest in and control over CITYBeverage, an Illinois licensed distributor.<\/p>\n
The three-tier system separates the liquor industry\u2019s three tiers (manufacturers, retailers and distributors) to prevent vertical integration and to help revenue collection, temperance, and consumer choice. The system also supports countless jobs in this State. WSDI, along with the Associated Beer Distributors of Illinois, support the state’s three tier system, and therefore urged the Commission to enforce the law passed in 2011 by the Illinois legislature that prohibits a brewer from owning a distributor and revoke CITYBeverage\u2019s licenses unless Anheuser Busch divested itself of its interest in CITYBeverage as the law required. Anheuser Busch and its attorneys Skaden Arps, aided by two of the Commission\u2019s own former general counsel, argued that \u201cfairness\u201d dictated that Anheuser Busch should be allowed to retain its 30% interest in CITY Beverage.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":2,"featured_media":8181,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[363,392,473,391,393],"yoast_head":"\n
ABDI Chides IL Liquor Control Commission Over City Beverage Decission<\/title>\n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n \n \n \n \n \n\t \n\t \n\t \n