The U.S. needs direct shipping of alcohol because the FTC created a monster

Source: The Gray Report

W. Blake Gray

January 12, 2016

Nothing about the Prohibition of alcohol in the United States made sense or was well planned. We still suffer the consequences, not only from the dumb idea itself, but from the way its repeal was written.

The latest consequence is the creation of a national monopoly on wine, beer and spirits distribution.

The merger this week of Southern Wine & Spirits and Glazer has created a 41-state behemoth with exclusive rights to many essential brands and  the market power to muscle out smaller competitors. This is normally the type of company that the U.S. tries to break up to protect consumers, but alcohol is a special case, because of Prohibition.

By 1933, most Americans realized Prohibition did not work. It created organized crime, as gangsters developed networks to bring whiskey in from Canada. And it made liars and criminals of most of our community leaders. It’s interesting to watch films from the period: police chiefs had bottles of whiskey in their desks.

Congress wrote the 21st Amendment to the Constitution to repeal Prohibition. At the time, some communities — probably the many Muslim parts of America, because we all know Jesus drank wine — wanted to keep their states or counties dry. To appease them, Congress wrote in Section 2:

    “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

Politically this was expedient in 1933. It gave every state the opportunity to write its own liquor laws. Some took longer to give up Sharia law than others: Kansas stayed dry until 1948.

No problem, ladies

Some U.S. counties are still closer to Saudi Arabia’s law than America’s. Half of Arkansas is “dry,” and more than a quarter of the counties in Kentucky consider it a crime, if not a sin, to sell good Kentucky Bourbon or any other intoxicating beverage.

The persistence of a few pockets of people who don’t want alcohol sold legally in their community makes it unlikely that the 21st Amendment will be amended in our lifetimes. But the unintended consequence of this wording is the new Southern Glazer’s Wine & Spirits LLC company, which will determine which wines, beers and spirits most Americans have the opportunity to buy in their local stores.

I don’t understand why the Federal Trade Commission allowed this merger. Before the merger, both companies engaged in anti-competitive behavior as much as possible, such as threatening merchants to stop carrying or promoting competitors’ products, using the cudgel of withholding necessary big brands.

This merger is bad for liquor retailers, many (not all) of which are small businesses. It’s bad for restaurants, most of which are small businesses. And it’s bad for consumers, as it will reduce choices and allow the distributor to set artificial monopoly prices.

There is only one alternative to a local distribution monopoly: direct shipping of wine, beer and spirits from both producers AND out-of-state retailers.

Shipping costs on bottles of liquid are high, so if it’s cheaper in Tennessee to order whiskey from Texas than to buy it from the store down the street, that’s a clear example of local monopoly pricing.

For the many states and communities that don’t yet allow full direct shipping, you are allowing a monopoly distribution industry to take advantage of your citizens. Protect them. Allow free and unfettered direct shipping of alcohol.

That may not have been what Congress wanted in 1933. We’re not in 1933 anymore, thank God. Laws change, morals change, and this is not Saudi Arabia. Let people drink what they choose.