Massachusetts: A kegful of self-serving arguments

Mark Willingham Uncategorized

Massachusetts: A kegful of self-serving arguments

 

Source: Boston Globe

By Dante Ramos

July 14, 2016

 

The usual recipe for booze regulation is: one part public interest, nine parts rent-seeking.

 

As the Globe’s Dan Adams recently reported, local craft beer brewers have been trying for years to win the right to switch distributors, and they made a hail-Mary effort this week to change state law accordingly. Once a brewer signs on with a distributor, the existing beer franchise statute makes it difficult for them to escape – even if the distributor is lackadaisical, or worse, at promoting the brewer’s product. State Senator Barbara L’Italien filed a measure Wednesday to weaken that statute.

 

Its prospects look dim. Time in this legislative session is running short – and the wholesalers that distribute beer, wine, and liquor have too much muscle on Beacon Hill.

 

To economists, “rent-seeking” is when some group uses its power to extract benefits that aren’t otherwise justified. Think of the troll that hides behind a bridge he doesn’t own and then jumps out to demand money from travelers who cross it. The public policy equivalent is when some entrenched interest uses its political muscle to protect its own money or turf at the expense of somebody else’s. The beer franchise law is a classic example.

 

Ever since Prohibition, state governments in Massachusetts and elsewhere have heavily regulated the supply chain for alcohol. This micromanagement was supposed to promote moderate consumption and, perhaps, to keep would-be Al Capones from dominating the newly legalized industry. Yet the setup also carved out a legally protected role for distributors. Over the years, distributors have given generously to lawmakers and lobbied them intensely. In the 1970s, when they feared abandonment by the likes of Miller and Anheuser-Busch, the Legislature essentially forbade the big beer companies from divorcing them.

 

The beer market has changed since the 1970s, and large distributors have tremendous power over today’s small brewers. But amid rising concerns about inequality, the distributors are portraying any change in the existing law as a threat to Mom and Pop. From Adams’ story:

 

“This is a last-minute, back-door attempt to force a more extreme version of a long-rejected bill into law,” Bill Kelley, president of the Beer Distributors of Massachusetts, said in statement [about L’Italien’s legislation]. “This amendment hurts locally-owned family businesses, hurts working families, and uses an approach completely lacking in transparency, openness, and public deliberation.” Distributors argue the current system works just fine, pointing to the greater-than-ever selection of craft beer.

 

Please. Small brewers employ people, too. And brewers surely understand their own interests far better than the distributors who are trying to keep them locked down.

 

In today’s market, brewers and distributors should be capable of collaborating or parting ways without any supervision from the government, just as producers and wholesalers of zillions of other products do. And despite House Speaker Robert DeLeo’s exhortation that both sides of the beer dispute should “get serious about coming to the table,” distributors have no incentive to concede anything at all.

 

If nothing else, they know how the game is played. Effective rent-seeking requires a veneer of altruism – a pretense that a policy like the franchise law somehow serves the public good, no matter how much of a special-interest ploy it is.