Update on the CARE Act

By Cary M. Greene

The effort to defeat the newly numbered H.R. 1161, known to many of you as the CARE Act or H.R. 5034 (the bill number given to it last Congressional session) continues as though it never stopped.  Last Congress, the wholesaler effort to pass the harmful H.R. 5034 culminated in a hearing before the House Judiciary Committee.  As we commented at the time, wholesaler trade group witnesses not only failed to justify the necessity of the bill, they “repeatedly and readily acknowledged that courts would be re-litigating and rehearing long settled principles of alcohol law for years to come if H.R. 5034 becomes law.”  WineAmerica, From the Chiefs Desk (October 2010 Newsletter) available at http://wineamerica.org/newsroom/newsletters/October_2010_Newsletter.pdf (containing our complete analysis of the hearing).

In other words, wholesaler witnesses—at a hearing they had sought, relating to a bill they had demanded—admitted that the CARE Act would open up a veritable can of jurisprudential worms.  But despite the failure to offer any good reasons for Congress to spend its time considering H.R. 5034 last session, wholesaler trade groups have seen fit this session to seek the reintroduction of the nearly identical and equally bad H.R. 1161.

As we did last session, WineAmerica continues working together with our coalition colleagues at the Wine Institute, Brewers Association, Beer Institute, Distilled Spirits Council (“DISCUS”), and the National Association of Beverage Importers to defeat this harmful bill.  So far, this producer coalition has sent a number of joint letters to the Hill and visited individually and in coalition with a wide range of Congressional offices.

Throughout this effort, WineAmerica’s message has been simple: the CARE Act is bad for American wineries.

The passage of H.R. 1161 would signal to states that they should be afraid.  It would tell state legislators and regulators that despite the promise of technology to improve and modernize their regulatory structure, and despite the effectiveness of free flowing interstate commerce in building and growing markets for local products, states should make their laws regulating alcohol tighter.  Even though data and evidence show that there are ways to safely regulate wine apart from the existing system, see http://wineamerica.blogspot.com/2011/02/wineamerica-joins-industry-partners-to.html, H.R. 1161 would tell states to ignore these possibilities because they are just too dangerous.

The spillover effect of the CARE Act for American wineries would be a more restrictive wine regulatory system with less accountability to consumers and less adaptation to market needs.

For more than a year now, wholesaler groups have argued that the CARE Act is necessary because they believe courts are undermining the Twenty-first Amendment and forcing the “deregulation” of alcohol beverages.  They want to provide the states virtually unlimited power when it comes to regulating alcohol.  To paraphrase one NBWA supporter’s arguments, at the time it was ratified “everyone knew” the Twenty-first Amendment “trumped” the Commerce Clause (the section of the Constitution that gives Congress the power to ensure the free flow of interstate commerce) and other federal laws.

Unfortunately, this revisionism ignores the forty years of history, case law and federal statute that preceded the Twenty-first Amendment.  As Supreme Court cases from the 1880s and 1890s confirm, states were never permitted to pass protectionist laws that favored local alcohol beverages or alcohol beverage dealers.  During this period, Congress also indicated that states may only regulate out-of-state alcohol “to the same extent and in the same manner as though such [alcohol beverages] had been produced in such State or Territory.”  In other words, court efforts to curb state protectionist tendencies have a long and telling pedigree and—reasonably enough—continue to shape court interpretation of the Twenty-first Amendment.

States wield a variety of judicially supported powers that are not in jeopardy, including: (1) establishing “control” jurisdictions; (2) licensing and investigating license applicants; (3) imposing and monitoring pricing controls; (4) conducting random compliance inspections; (5) establishing restrictions on hours of operation and outlet density; (6) establishing restrictions on exchange and use of marketing and advertising materials; (7) prohibiting consumption by various classes of consumers including those who are underage; (8) mandating ID checks; and (9) imposing excise and other taxes.

As with our other producer trade group colleagues, WineAmerica supports state rights to regulate alcohol, and has no interest in seeing alcohol abused.  At the same time, states should not be encouraged by Congress, as H.R. 1161 proposes to do, to abuse their regulatory power by passing laws that undermine the interstate commercial character of our national markets.  Federal courts have wisely used their powers of judicial review to strike down state alcohol laws that are anti-competitive, protectionist or a violation of vital Constitutional interests.  At the same time, courts have repeatedly affirmed laws that actually enforce “core” Twenty-first Amendment concerns, such as temperance.

WineAmerica will continue to advocate on behalf of American wineries to defeat the CARE Act. We hope our members continue to support our efforts whether through paying dues, or actively becoming involved in contacting your legislators.  Let us know how we can help you.