Private clubs, middle ground?

The Prohibition is known as the noble experiment ... that failed! The lesson learned from the experiment that legislating morality and person conduct is difficult. Not only is it difficult, it has proved to be counterproductive, since drinking increased during the 1920s, with an estimately 100,000 speakeasies in New York alone. While the Prohibition was repealed, states are empowered to make their own legislature when it comes to how it regulates alcohol. The focus of this blog is on how Arkansas has exercised this right.

Arkansas operates on a “local option” system, under which each county or city may determine whether alcoholic beverages may be sold in that area.  The 1969 law allows a private club to exist in a dry county as a nonprofit corporation with certain purposes “other than the consumption of alcoholic beverages.” Then in 2003, the law was amended to add three more purposes for private clubs — community hospitality, professional association and entertainment. The map below represents the unofficial "wet-dry" status of the counties in Arkansas.

"In a wet county, the retail sale and manufacture of alcoholic beverages in legal. In dry counties, only a private club permit may be issued." It is interesting to note that "most of the wet counties have dry areas within their borders such as townships or cities." Every year these areas can put local option on the elections through petition during November General Elections

The issue gets complicated due to the private club permit provision within the regulation. For example, Cleburne County is “dry;” that is, alcoholic beverages may not be sold to the general public. Even so, alcoholic beverages may be legally dispensed through non-profit private clubs, provided certain criteria are met by those establishments.  This bothers people and organizations, such as The Dry Counties Coalition, who believe if the county has voted to be “dry,” it should actually be dry. In order to accomplish this, Arkansas General Assembly would need to actually change the law.  

The bizarre practice of "voting dry, but drinking wet" is a consistent theme with American's relationship with liquor. On the one hand, our nation sees it as a sin, an immorality that is not good for individuals and society. However, people want to drink and so they do. Further, because of this desire, alcohol regulations can have economic effects on an entire town. In fact, Arkansas Legislature highlighted this conflict in their alcoholic beverage control law which states that "such activities will be strictly regulated, but then acknowledges the importance of tourism and conventions to the state; the competition among states for them; and proclaims that visitors to the state must be provided “accommodations, services and facilities” to allow Arkansas to be competitive with other states."

An example of the detrimental economic effects of being dry is the history of Monmouth, Oregon, which was the last dry town on the West Coast. OBP's historical piece is an insightful reflection on the turmoil regarding this issue. Ultimately, the economic impact on the town was just something that cannot be ignored. In fact, it even lost its supermarket due to population loss. It seems holding onto the dream of a dry county makes no sense if you don't have any people left.

Wine-O Canada

While the United States deals with its own challenges regarding shipping of wine across state lines, our neighbors to the north face a similar problem. Though the laws of some of our own states may seem archaic and overly stringent, they pale in comparison to at least one Prohibition-era law still on the books in Canada. Under the 1928 Importation of Intoxicating Liquors Act, provinces are able to prohibit individuals from carrying wine and alcoholic beverages across provincial lines, let alone receive direct shipments from out of province wineries. Presently, some in Canada are trying to remove this vestige of the Prohibition-era, but are facing significant pushback from the provincial liquor boards.

History of Prohibition in Canada

The temperance movement was not unique to the United States, and our country was neither the first nor last to prohibit alcoholic beverages. Russia, Iceland, Norway, Finland, and Canada each had their own prohibition eras. Just as in the U.S., however, each faced the same fate as a result of opportunistic bootleggers and organized crime.

Much like the United States, religious and women’s groups were the lead proponents of prohibition early on, hoping to cure the social ills they believed to be caused by intemperance. Canada’s first prohibition on the sale of intoxicating liquors occurred during the War of 1812, when an Act was passed as a temporary war measure to prohibit the exportation of grain restrict the distillation of spirituous liquors from grain.

In 1878, the Canada Temperance Act was passed as a local-option measure, prohibiting the sale of intoxicating liquors in those localities that decided to adopt it. In 1898, an official, though non-binding, federal referendum on prohibition was held, receiving just over half the votes for prohibition. Despite its popularity, however, the government chose not to introduce a federal bill on prohibition. Therefore, Canadian prohibition was enacted through laws passed by the individual provinces. By 1921 every province except Quebec and British Columbia had declared for prohibition. However, the provinces repealed their prohibition laws, mostly during the 1920s.

Advocates of the temperance movement realized that they would not be able to keep the population from drinking entirely, but were able to pressure all of the provincial and territorial governments to curtail the sale of liquor through the tight control of the liquor control boards.

In 1928, the federal government passed the Importation of Intoxicating Liquors Act. This Act gives provincial liquor control boards monopolistic power and control over the importation, inter-provincial shipment, distribution, and retailing of wine and other alcoholic beverages in Canada. Taking liquor across provincial borders is a federal offense. Though it appears that no one has ever been prosecuted under this law, in the current era of internet ordering and transcontinental shipping of wine, it may prohibit individuals from easily accessing and enjoying wines from other regions, and prove to be a detriment to Canadian wineries.

The Legal Argument

Under existing law, Canadian wineries can ship to liquor stores, but not directly to customers. Alcoholic beverages cannot be sent or taken across provincial boundaries unless prior arrangements have been made to consign he shipment through the liquor control board of the destination province. Customers are not allowed to directly import wine from another province, but rather must either only purchase that which his local liquor control authority makes available, or use the special order system of the liquor control board in his home province, a process involving extensive paperwork, waiting for shipments, and paying provincial markups.

Canadian legal scholars make the argument that just as the U.S. Supreme Court found state laws prohibiting direct shipment to be unconstitutional in Granholm v. Heald, so too are Canada’s restrictions unconstitutional under its constitution. One scholar reasons that prohibitions on the inter-provincial shipment of wine are contrary to § 121 of the Constitution Act of 1867, which requires that products made in one province must be “admitted free” into other provinces.

Current Action

Presently, a Member of Parliament is attempting to pass a bill that would change the existing law and allow for direct shipping of wine and other alcoholic beverages. Bill C-311, an act to amend the Importation of Intoxicating Liquors Act, was introduced in the House of Commons last fall by British Columbia Conservative MP Dan Albas. The bill has passed committee and will return to the House of Commons for further debate.

While trade between provinces in Canada is a federal responsibility, liquor sales themselves are regulated by the provinces. Therefore, even if the bill passes, the provinces can control how much people bring in. Presently some jurisdictions place volume limits on the amount of wine begin shipped or require it to be on one’s person.

Groups such as the Alliance of Canadian Wine Consumers argue that current laws encourage Canadians to buy foreign wine, thereby hurting domestic wineries. Some argue that privatization of the distribution and sale of premium wines will expand opportunities for the domestic wine industry and provide Canadian consumers with a greater level of convenience and a wider selection.

However, not everyone agrees with the proponents of the bill. Canada’s provincial liquor boards say that the amendment is unnecessary because they can order wine from outside of their borders for their customers. The executive director of the Canadian Association of Liquor Jurisdictions told MPs last week that he and the Association have concerns with direct sales into other provinces since this would be a new and distinct retail channel. Such a change allowing direct sales would have a potentially substantial impact on the jurisdictions’ business and the provincial revenues.

It is clear that while winemakers and consumers stand to benefit from a change in the law, the provincial liquor control boards are fearful that they will be squeezed out of the distribution chain, and thereby lose profits. Canadian constitutional scholars have a strong argument for allowing direct shipments and transportation to take place, and it is the hope of many that current legislation will eradicate this remnant of the Prohibition-era.  

Wine Not Help Small Business?

When it rains it pours. It seems that legislatures like to get on a bandwagon and roll with it. OpenMarket.org, a blog of the Competitive Enterprise Institute, featured a lengthy list of proposed alcohol laws in their Alcohol Regulation Roundup.  Many of them focus on beer and breweries, but quite a few affect the wine industry. For example, the recently filed Arizona referendum hoping to raise taxes on all alcoholic beverages. Part of the referendum calls for an increase in wine taxes by 20 cents per bottle (making wine taxed at $1.04 a gallow!).  However, the money is said to support alcoholism-related social programs. In New York, lawmakers are pushing to legalize wine in grocery stores. The economy stimulating goal is clearly repented in the title of the legislature, the "Wine Industry and Liquor Store Revitalization Act."

One might think wine and immediately think deep pockets and rich snooty people make and drinking the delicious elixir. But notions like these make it easy to forget that there are many small wine makers, who are more economically vulnerable and were hit heaviest by the Great Recession. Enter Alabama House bill sponsored by Representative Becky Nordgren, R-Gadsden.  The Alabama House’s Economic Development and Tourism committee bill hopes to even the playing field to allow small farm wineries to be competitive. 

The bill has stalled since its first reading early last month, but Nordgren stresses the powerful effect this bill could have. Currently in Alabama, wine manufactures can only sell on their premises, and this bill would allow farm wineries to sell to wholesalers or distributors.  America's alcohol operates under a  three-tier distribution system. The distribution system emerged after the prohibition, with the historic rationale to assure that alcohol taxes are duly paid and collected by the government. Further, it is believed by some that the system "serves the interests of everyone in the value chain: consumers, states and their revenue collectors, local communities, brewers, wholesalers and retailers. Consumer choice would suffer if retailers were owned or controlled by a supplier or distributor, as they would feature only the brands offered by these suppliers and exclude others."

However, Nordgren says the current structure systematically disadvantages small business. While small farm wineries can currently sell bottles of wine on their premises, they struggle distributing their product because they don't produce large enough quantities to entice distributors. She thinks that if you allow farm wineries to self-distribute, you will give them the leg up needed to grow to a size that would distributors would be willing to work with.

But are Alabama small wineries really in an economic position that ensure this legislation will serve its purpose? While I am doubtful, Nordgren and supporters are not. A similar experiment in North Carolina was met with great success. The state had 19 wineries before the bill, and in the five year period after the bill was passed the number reached a whopping 99. These wineries equated to jobs and taxes for the state, and a 2011 study by Frank, Rimmerman & Co. of St. Helena, California estimated

 "the total economic impact of the wine industry was $1.28 billion. During the five-year period, the number of jobs in the North Carolina wine industry increased from 5,727 to 7,575 and wages paid increased from $158 million to $237 million. Production increased from 470,000 cases to 529,000 cases, and the number of wineries grew from 55 to 89. Wine-related tourism produced $122 million in 2005 and increased to $156 million in 2009. In the final year of the survey, the North Carolina wine industry paid $65 million in federal taxes and $51 million in state taxes.

John Copety, Wills Creek Vineyard owner, believes that the Alabama would have the same effect on its' state wine industry as its equivalent did in North Carolina. He confidently proclaimed that not only are "people ... going to buy wine,” and “[he'd] prefer them to buy wine from Alabama and not California.” As a Californian, I may not want this for selfish reasons, but I can't argue with a state trying to revitalize their economy.

Women's suffrage and Prohibition

I learned in Wine Law class that the first women’s movement for social reform in the United States was not Women’s Suffrage. Instead, women came together out of a growing aspiration among wives, mothers, sisters, and daughters to achieve purity and sobriety. Led by the Woman’s Christian Temperance Union, women banned together in great numbers for the first time in history to push for Prohibition. The impetus for these noble Prohibition pioneers was not grounded solely in dutiful piety. It was also understandably motivated by the sin-filled saloons of the time, where imbibers, mostly men, could kick back after work with a pint, or two…or five. Toasty in spirit and mind, men could then cavort with prostitutes, returning home empty handed save for shame and, sometimes, an STD. These women were not exaggerating a benign problem. Americans were drinking a lot and suffering the health and social consequences. Prohibition may have been a failure, as evidenced by the quick passage of the 21st Amendment only year later. But there was a reason why so many Americans wholeheartedly endorsed the 18th Amendment. Interestingly, the distaste for saloons was so potent that it lasted even after the 21st Amendment was passed, repealing Prohibition. The word “saloon” remained taboo post-Prohibition.

That women were able to play such a central role in passing a Constitutional Amendment was proof to everyone involved that women, when properly motivated, could affect big change. It was a moment of empowerment. This is not to say that successfully banning alcohol led to women’s suffrage or vice versa. Rather, it is more accurate to see the two movements are two woven threads through the times and politics of the United States, involving the same key players and decision makers. Those who opposed Prohibition, namely the brewers and drinkers, opposed women’s suffrage, because they believed a female constituency would lead inevitably to their demise. Women who were pro-Prohibition, were often leaders in the suffrage movement. Indeed, the timing of the two Constitutional Amendments illustrates their connectivity—the 18th Amendment was passed in 1919, and the 29th Amendment, granting women the right to vote, was passed in 1920, just one year later.