By: Louis J. Terminello, Esq.
On July 6, 2021, President Biden issued the Executive Order Promoting Competition in the American Economy. The order is designed to increase competition in the U.S. marketplace by curbing monopolistic behavior across a swath of industries. The alcohol beverage industry was not immune from the reach of the Order.
Specifically, the Order tasked the Secretary of the Treasury through the Administrator of the Alcohol and Tobacco Tax and Trade Bureau (TTB) to submit a “report to the Chair of the White House Competition Council, assessing the current market structure and conditions of competition, including an assessment of any threats to competition and barriers to new entrants, including:”
- (i) any unlawful trade practices in the beer, wine, and spirits markets, such as certain exclusionary, discriminatory, or anticompetitive distribution practices, that hinder smaller and independent businesses or new entrants from distributing their products;
- (ii) patterns of consolidation in production, distribution, or retail beer, wine, and spirits markets; and
- (iii) any unnecessary trade practice regulations of matters such as bottle sizes, permitting, or labeling that may unnecessarily inhibit competition by increasing costs without serving any public health, informational, or tax purpose.
No doubt, current alcohol market conditions, particularly at the wholesale level, are consolidated in the hands of a few large distributors. Consolidation is occurring at the manufacturing level as well.
The current environment, arguably, makes the introduction of new products challenging for brand owners in securing channels of distribution. The general consensus among industry observers is that the Order may result in loosening the route to market restrictions for small suppliers of wine, beer and spirits. Additionally, the examination of “unnecessary trade practices” may result in an examination of certain restrictive Tied House regulations but this remains unclear at this juncture.
The path forward will be challenging and will likely not result in deep nor immediate change. Reports under the Order are not due for some time. Changes, if any, will likely not occur at least until 2023. At a minimum though, the Order puts something of a spotlight on competitiveness and restrictions in the alcohol beverage business which hopefully will lead to healthy debate.