April 11, 2012

Beer Wars

The future of the state’s beer market potentially is about to change, and not for the better. That is, if some legislators in Jefferson City get their way. The Missouri Senate is considering Senate Bill 876, in which the main provision states that no brewer, brewer employee, nor brewer affiliates “may have any financial interest in a beer wholesaler, or serve as a director, manager, employee, or agent of a beer wholesaler.”

There is an exception for small breweries (those that produce less than 10,000 barrels a year) owning wholesalers that sell only those breweries’ beers. My question is, why is the state interfering in beer distribution in the first place? Is there a great harm that the state needs to address? Is there anti-competitive behavior occurring? I have not seen an argument being made for this bill on its merits. However, I can see a potential negative. Middlemen, such as beer distributors, succeed when they add value to the process. Such middlemen can be important components of economic organization, but that is only if they add value to the process; state officials should not mandate them into existence.

While there are some legitimate roles for the government in regulating alcohol sales (i.e., age restrictions), the provision that would be created in this proposal is not one of them. If brewery officials do not think it is to their benefit to own or have a financial interest in wholesalers, they will make that decision. However, I do not see why the state should involve itself even more in the market with a mandate for the distribution system of a certain product. SB 876 is another example of the state meddling in areas that are best left to the market.

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