Iowa: Guest view: Consumers lose if Iowa alcohol laws are gutted

Source: Quad City Times

Nathan Cooper

Mar 28, 2017

Next time you’re at the grocery store, take a minute to study the options. How many brands of soup? Of cereal? Of soda pop?

Then, walk down the alcohol aisles. Beer, wine and spirits of national, regional and local origin abound. Alcohol selections enjoyed by your grandfather, your mother and your friends are easy to find. In fact, Iowa consumers have access to thousands of different labels.

This selection is brought to you by Iowa’s brand of alcohol market regulation, primarily known as the three-tier distribution system and its cornerstone anti-corruption and anti-monopoly component, tied house protection.

A key contributor to the buy-local movement, Iowa’s alcohol policy encourages locally-owned alcohol operations. It’s no accident there are nearly 800 eastern Iowans employed in beer distribution alone.

The law provides protections for each tier – retailers, distributors and manufacturers – from undue influence by any other tier. Distributors buy only what can be reasonably sold and have market-based incentives to merchandise what’s popular. Bars and restaurants that sell only one manufacturer’s soft drinks can offer hundreds of beers, wines and spirits without fear of targeted price hikes or lackluster service.

Tied-house protections also contain exceptions for manufacturers to establish brands with taprooms or cocktail rooms at the manufacturing site to promote their products and provide a consumer experience. The net result is that Iowans are hard-pressed to find a deficiency in choice and availability.

During Iowa’s recent alcohol policy review, we heard from nearly every segment of the industry that Iowa’s laws are generally good for commerce. A chain retailer operating in several states said Iowa’s laws are “retailer-friendly.” Some of Iowa’s biggest liquor suppliers submitted that Iowa is a forward-thinking place to do business while some brewers said aspects of Iowa law are too liberal.

Iowa’s chief alcohol regulator paid lip service supporting the three-tier system but recently advocated publicly to weaken tied-house protections. Logically, a robust three-tier system and a weak tied-house law are mutually exclusive. It’s impossible to have both.

With more consumer choice than ever, more retail space dedicated to alcohol than ever and more Iowa manufacturers than ever, who are the victims of Iowa’s tied-house protections? Specifics are light.

Rather than advocating seismic shifts in an orderly marketplace that is clearly working for Iowa industry, consumers and the public interest, alcohol regulators should focus on enforcing laws that ensure a level playing field and industry-wide compliance with regard to excise taxes, fair trade practices and safe, responsible and legal sales.

So what if Iowa abandoned tied-house protections?

Consumers would be the first losers. Favorite beers, wines and spirits – big and small – could be excluded from aisles, tap lines, refrigerated spaces or entire stores altogether.

Increasingly, money would undermine merit-based shelf and tap access. Exclusive agreements and inducements would give retailers incentives to hit volume targets, nudging up consumption. Absentee-manufacturers calling shots at the retail level become more likely to disregard contemporary community standards and norms. Precisely the practice tied-house protections are designed to prevent.

Wide market access and consumer choice in this industry is because of Iowa’s three-tier system and its tied-house protections, not despite them. Let’s maintain Iowa’s free houses and keep the tied house a pre-Prohibition relic.