"Beer bill" set to become law, subject of possible court battle after Senate vote

03/04/2015 08:53 PM

FRANKFORT — A bill separating brewers, distributors and retailers in the so-called three-tiered model already in place for wineries and distilleries appears primed for a legal challenge after the state Senate approved the measure on a 23-13 vote Wednesday.

Republicans and Democrats occupied both sides of the debate on House Bill 168, sponsored by House Speaker Greg Stumbo, and Gov. Steve Beshear said in a statement that he “will be pleased to sign House Bill 168” since it restores the three-tiered approach to alcohol production and sales.

“This system was designed to protect consumers as well as small producers like new breweries,” the Democratic governor said in a statement. “This aligns the rules for beer with rules for other alcoholic beverages, so everyone is on a level playing field.”

Some senators cried foul because the legislation would strip Anheuser-Busch of two distributorships in Louisville and Owensboro while others said the measure would put brewers on an equal playing field in Kentucky with a three-layered model that dates back to the end of Prohibition.

“I feel like I’m living in some sort of strange, parallel universe today when I look around the room at who agrees with me on this issue, who disagrees with me on this issue,” said Senate Majority Floor Leader Damon Thayer, a Georgetown Republican who voted for HB 168.

“… It’s not a no-brainer. It’s a 51-49 issue that has burnt a lot of brain cells.”

The measure, which passed the House 67-31 last week, drew fierce opposition from the world’s largest beer maker.

Anheuser-Busch released a minute-long television ad on Monday reiterating the company’s position that HB 168 would cost the state nearly 200 jobs, and after duking it out in the court of public opinion, the company appears ready to take this session’s “beer battle” to the courtroom.

Damon Williams, director of sales and marketing for Anheuser-Busch of Louisville, called the legislation that will soon become law “an appalling exercise and nothing short of a full-scale attack on a good corporate citizen.”

“This legislation violates our rights under the U.S. and Kentucky constitutions, discriminates against our company by providing economic protections for in-state special interests, and represents nothing short of a taking of our property,” Williams said in a statement. “We have been doing everything possible to protect our employees and our Kentucky business. This was always an unnecessary solution in search of a problem that didn’t exist, and we will continue to fight for the business we’ve successfully built with our employees over the last 40 years.”

Senate President Robert Stivers said regardless of HB 168’s success, he expected the matter to wind up in court.

He was unsure whether the bill could withstand a legal challenge given the constitutional questions surrounding a state’s ability to regulate alcohol under the 21st Amendment versus equal protections offered in the 14th Amendment.

“This is such a complex issue, and we’ve had attorneys on both sides and we’ve had our own attorneys, we’ve gone to outside counsel,” Stivers, R-Manchester, told reporters. “… It’s an interesting questions and a very good topic for quite a collegial discussion in the court system, and I don’t know, they may blow up the whole three-tier system.”

Those constitutional concerns surfaced among HB 168’s supporters and detractors within the Senate, with many who voted against the bill railing against forcing Anheuser-Busch to divest from its distributorships.

Sen. Julie Raque Adams, R-Louisville, withdrew a floor amendment that would have allowed breweries to hold no more than two distribution licenses and decried HB 168 as “the ultimate assault on private property rights.”

“House Bill 168 seeks to rectify, clarify and codify flaws in this so-called three-tier system we currently operate under, but make no mistake: House Bill 168 is a punitive bill that seeks to punish Anheuser-Busch,” she said. “… It retroactively takes from Anheuser-Busch what they have lawfully obtained.”

Adams withdrew the amendment for a lack of votes, Stivers told reporters after the Senate adjourned.

Others, however, noted that the alcohol industry is one of the most heavily regulated and said the bill would put breweries of all sizes on equal footing.

Senate Majority Caucus Chairman Dan Seum reminisced about having tap after tap in his bar stocked with bygone Kentucky beers. The jobs at those breweries went to St. Louis, Milwaukee and elsewhere as larger beer makers bought up their smaller competitors, he said.

“All those companies went out of business,” said Seum, R-Fairdale. “And of course that’s what happens when you have one goliath that just says, ‘I just want to sell my product and nobody else gets to be part of my distributor chain.’”

A number of groups, such as Kentuckians for Entrepreneurs and Growth and MillerCoors, backed the legislation.

Daniel Harrison, co-founder of Lexington-based Country Boy Brewing, said he was excited about what HB 168 will mean for his and other craft breweries around the state.

When asked about the prospects of enduring a lengthy legal battle after lobbying lawmakers for months, Harrison said he’d cross that bridge when appropriate.

“At this point we’re just really, really happy and thankful to leadership, both in the House and the Senate, and to all the members who voted to pass (HB) 168 through,” he said. “But like I said, we’ll get to go back to making beer right now and we’ll cross whatever bridges come when we get there.”


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