Following the end of Prohibition and the repeal of the 18th Amendment, Congress enacted the 21st Amendment, which gave states the power to regulate and control the alcohol industry. Each state then created its own method of regulating the "three-tier system" of alcohol distribution: production, distribution, and retail. In this system, producers of alcohol, such as brewers, distillers, and importers, may sell their products to distributors who in turn may sell their inventory to retailers. Only then may retailers sell alcohol to consumers.
Although these rules and regulations vary among the several states, they all completely or partially prohibit any one individual or entity from owning all three tiers. This general, multi-tier ownership limitation—a "tied-house restriction" in legal parlance—is not without its exceptions, however. For instance, some states allow certain businesses, like smaller breweries and wineries, to distribute or sell the alcohol they produce directly to consumers, thereby permitting them to operate as both a producer and retailer. Federal law also governs how the states’ respective three-tier systems function and interact with one another in interstate commerce, which presents a whole other layer of complexity to an already complicated industry. The point is that businesses with a product such as alcohol—be they a producer, distributor, retailer, or some permitted combination of the three—need competent, knowledgeable counsel to assist them in navigating the myriad regulations surrounding the industry.
The legal disputes that may arise in the context of the alcohol industry are diverse and quite numerous. These issues often derive from other areas of the law, including breaches of contract, intellectual property infringement, product liability matters, and real estate disputes. The regulation of alcohol also presents many challenges to a business operating at any one of the three tiers, such as trade practice matters, and permit or licensing issues before a state alcoholic control board or the United States Alcohol Tobacco Tax and Trade Bureau. Given the wide array of matters facing the alcohol industry, you need attorneys who are not only well versed in alcohol regulation, but the many other practices that affect alcohol distribution as well.
Barton Cerjak has a firm understanding of alcohol regulation and the myriad legal challenges facing the industry’s producers, distributors, and retailers. Call us today to find out how we can help you become a successful player in the world of alcohol distribution.