ShareThisThe beer mugs were clinking on a mid-April afternoon at a hotel just off Capitol Hill.
They often do when members of the National Beer Wholesalers Association convene. The trade association’s annual legislative conference was stoked by two of the oldest ingredients in American politics -- alcohol and money.
As 750 attendees fanned out across the Hill to meet with lawmakers, they marched with a singular mission: win support for a two-page bill the distributors believe is vital to protecting their business.
In essence, the legislation would give new legal support to state alcohol regulators that choose to restrict sales of alcohol from out-of-state. This would also help protect the wholesalers’ entrenched position as alcohol middlemen in most states since the end of Prohibition.
It was a gambit that would set off a barroom brawl of harsh words and big spending within the normally solid alcohol alliance of Washington. It split interest groups within the $400 billion industry, pitting wholesalers against producers and retailers who want to sell directly to consumers.
The outcome could affect prices and availability for everyone who drinks, particularly those who shop online or buy alcoholic beverages imported across state lines.
Although the big-money battle seems to have been fought to a draw this fall, both sides expect to continue the fight with the new Congress next year.
But that April afternoon, beer distributors had reason to feel confident as they promoted the Comprehensive Alcohol Regulatory Effectiveness (CARE) Act, largely written by their lawyers and introduced just days earlier by four friendly members of Congress.
Representatives of the beer wholesalers and its ally, the Wine and Spirits Wholesalers of America, had been working on it for months with key members of the House Judiciary Committee. A subcommittee hearing in March -- called by Rep. Bill Delahunt, D-Mass., who sponsored the final bill -- mostly featured witnesses supporting the bill’s call to strengthen state authority against challenges in federal courts.
At the same time, the wholesalers’ political action committees were increasing their donations: more than $1 million to most of the bill’s 152 backers. They included 90 Democrats and 62 Republicans, more than a third of all House members. Many donations were made within a few weeks of each lawmaker signing onto the bill.
And while records show many of the co-sponsors received contributions from other alcohol interests during the 2010 campaign, nearly 80 percent (119 members) got more than half of their liquor-industry donations from wholesalers, and nearly a quarter got alcohol donations only from wholesaler PACs.
Only a few CARE Act backers had been among the top 120 beneficiaries of alcohol PAC money over the past four elections. But during the 2010 campaign, 44 CARE Act co-sponsors were among the top 120 recipients thanks largely to donations from the wholesalers.
During the conference, the beer wholesalers hosted a fundraiser for House Judiciary Committee Chairman John Conyers, D-Mich., and wholesalers responded by donating more than $47,000 to his campaign over the next several weeks. That helped make him the third-biggest recipient of alcohol industry donations in the House this election, according to the Center for Responsive Politics. Although Conyers did not co-sponsor the bill, he has been closely involved in shaping the measure and held a committee hearing on the bill in September.
Neither the members, nor the donors, see anything untoward about the flow of money, with lawmakers saying they’re simply being backed financially by groups that already agree with them on specific issues like alcohol regulation.
“We’re obviously going to support representatives who support socially responsible alcohol beverage delivery systems and we’re going to continue to do that because we think it’s in our long-term interest,’’ said Craig Wolf, president and CEO of the wine and spirits wholesalers.
“There has been a gradual loss of states’ rights to control alcohol distribution,’’ argued Paul Pisano, the NBWA’s general counsel and chief author of the legislative fix. “Our concern is unelected federal judges making alcohol policy instead of state legislatures.”
The NBWA backing for the bill at times has been revealed to be a little too material, however. Promoters were chagrined during the September Judiciary Committee hearing when copies of testimony presented by Utah Attorney General Mark Shurtleff support of the CARE Act revealed a stamp showing the text had come from Pisano’s computer.
Beer wholesalers are consistently among the top 10 donors to congressional campaigns. They gave more than $3 million in the last election cycle and more than $2.5 million during the 2010 campaign (and wine wholesalers another $677,000), according to reports filed with the Federal Election Commission as of August. The wholesalers often give even more to politicians at the state level.
The Center for Responsive Politics reports the NBWA’s members made $4.9 million in state campaign donations in 2007-08. And a 2008 report prepared for the Specialty Wine Retailers Association – a perennial foe --- noted that wine and spirit wholesalers collectively gave nearly $50 million to state legislative campaigns between 2000 and 2006.
While alcohol wholesalers don’t like a 2005 Supreme Court decision that opened the door for direct shipping of wine in most states, their greater concern is federal courts blocking their home-court advantage in statehouses and alcohol control boards. By giving state alcohol laws a special exception from the commerce clause of the Constitution, the CARE Act would make it harder to mount federal challenges to those state laws, which the wholesalers say protect the public.
Alcohol producers and retailers see things differently. “State regulation of alcohol is alive and well and has not been impaired since the Supreme Court’s decision,” insisted Rep. Mike Thompson, D-Calif., a co-founder of the Congressional Wine Caucus whose district includes much of Napa Valley and the most small breweries of any congressional district.
He’s also among the top recipients in Congress of alcohol PAC money -- more than $33,000 this campaign, including a $5,000 donation (before the battle over the new legislation) from beer wholesalers in 2009, according to the Center for Responsive Politics.
Thompson says the wholesalers have been a political force in virtually every congressional district for decades, while smaller wine and beer producers are mostly political novices outside California.
“We’re an industry with a great story, but we’re a much younger industry and don’t have the same clout or resources at the state level as the wholesalers,” said Cary Greene, chief operating officer for WineAmerica, which represents mostly vintners outside California.
While direct shipping of wine is vital for many vineyards, the sales account for only 1 percent of all national wine shipments, industry officials say. But the sales, often made over the Web, are part of new approaches to selling alcohol.
“We’re still trying to fit laws that were created at the end of Prohibition into an electronic-age framework, and we have to make sure that the rules that we have in place are best for the market and the consumer,” said Ann Heidig, sitting on a terrace at the Lake Anna Winery near Fredericksburg, Va. She and her husband, Bill, founded the winery in 1983. She’s also president of the Virginia Wineries Association.
The 27-acre winery is built around a 70-year-old barn, but the operation, now run by two sons, relies on both a local distributor and the Internet to sell 7,000 cases a year.
“We ship to the states that let us ship and we have to be aware of and follow all the rules,’’ Heidig said. “But I don’t understand how making it impossible to challenge laws that discriminate helps the system. Nothing that’s protectionist is good for the consumer.”
But Wolf, of the wine and spirits wholesalers, counters that they do “a great job of bringing products from all over the world to consumers. The selection is beyond their imagination.” Consumers “like the system and the controls and accountability we have now.”
Small wineries and breweries are lined up with the Distilled Spirits Council, the Beer Institute and industry giants like Anheuser Busch, SABMiller and Diageo PLC, who have somewhat different issues but are also concerned that the changes to federal law will hurt their ability to take on state liquor regulations they consider discriminatory.
While their campaign donations are relatively modest, the organizations are among the top spenders on Washington lobbying -- more than $5.5 million so far this year, according to congressional reports, compared with $920,000 by the wholesalers.
“We didn’t expect the level of opposition to this we’re seeing when we started, but I can tell you, they’re absolutely dwarfing us in terms of the total money they’re pouring into this battle,” Wolf said.
The battle over the legislation has drawn quirky alliances beyond the alcohol interests. Opposing the bill may be one of the few issues House Speaker (and vineyard owner) Nancy Pelosi has in common with Wayne Brough, top economist for Tea Party affiliate Freedomworks. Supporters range from civil rights activists concerned about cheap liquor in poor neighborhoods to the Christian Action League.
For all the effort, and even with a pending lame-duck session of Congress, it’s likely the Sept. 29 hearing before the Judiciary Committee will be the final action on the bill this year. It hasn’t been reported from the committee nor is there any matching proposal in the Senate.
But everyone also agrees that the issue will be back in some form next year. “Congress is going to change, but change of Congress is not the worst thing in the world,’’ Wolf said. “It gives us a chance to educate new members about the importance of a strong alcohol system.”
Conyers noted at the hearing that he knows “the stakes are high and the dollar amounts involved are immense. But that should not prevent us from working across the aisle to make sure the 21st Amendment remains relevant in the 21st Century.”
