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58–477 PDF 2010

COMPREHENSIVE ALCOHOL REGULATORY 

EFFECTIVENESS (CARE) ACT OF 2010 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

ON

H.R. 5034 

SEPTEMBER 29, 2010 

Serial No. 111–152 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

C O N T E N T S 

SEPTEMBER 29, 2010 

Page 

THE BILL 

H.R. 5034, the Comprehensive Alcohol Regulatory Effectiveness (CARE) Act 

of 2010 ................................................................................................................... 2 

OPENING STATEMENT 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Chairman, Committee on the Judiciary ..................... 1 

The the Honorable William D. Delahunt, a Representative in Congress from 

the State of Masachusetts, and Member, Committee on the Judiciary ........... 58 

WITNESSES 

The Honorable Mike Thompson, a Representative in Congress from the State 

of California 

Oral Testimony ..................................................................................................... 6 

Prepared Statement ............................................................................................. 8 

The Honorable Peter DeFazio, a Representative in Congress from the State 

of Oregon 

Oral Testimony ..................................................................................................... 9 

Prepared Statement ............................................................................................. 11 

The Honorable Bruce Braley, a Representative in Congress from the State 

of Iowa 

Oral Testimony ..................................................................................................... 13 

The Honorable Edolphus Towns, a Representative in Congress from the State 

of New York 

Oral Testimony ..................................................................................................... 14 

Prepared Statement ............................................................................................. 16 

The Honorable George Radanovich, a Representative in Congress from the 

State of California 

Oral Testimony ..................................................................................................... 17 

Prepared Statement ............................................................................................. 19 

The Honorable Gary G. Miller, a Representative in Congress from the State 

of California 

Oral Testimony ..................................................................................................... 33 

Prepared Statement ............................................................................................. 35 

The Honorable Mark L. Shurtleff, Attorney General for the State of Utah 

Oral Testimony ..................................................................................................... 62 

Prepared Statement ............................................................................................. 65 

Ms. Nida Samona, Chairperson, Michigan Liquor Control Commission 

Oral Testimony ..................................................................................................... 69 

Prepared Statement ............................................................................................. 71 

Mr. Richard A. Doyle, Chairman and CEO, Harpoon Brewery 

Oral Testimony ..................................................................................................... 76 

Prepared Statement ............................................................................................. 78 

Mr. Stephen M. Diamond, Professor of Law, University of Miami 

Oral Testimony ..................................................................................................... 82 

Prepared Statement ............................................................................................. 84 

Page

IV 

Mr. Einer Elhauge, Petrie Professor of Law, Harvard Law School 

Oral Testimony ..................................................................................................... 102 

Prepared Statement ............................................................................................. 104 

Ms. Tracy K. Genesen, Partner, Kirkland & Ellis, LLP 

Oral Testimony ..................................................................................................... 133 

Prepared Statement ............................................................................................. 136 

Ms. Michele Simon, Research and Policy Director, Marin Institute 

Oral Testimony ..................................................................................................... 145 

Prepared Statement ............................................................................................. 147 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable George Radanovich, a Representative 

in Congress from the State of California ........................................................... 21 

Material submitted by the Honorable Mike Thompson, a Representative in 

Congress from the State of California ................................................................ 40 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Chairman, Committee on 

the Judiciary ......................................................................................................... 52 

Prepared Statement of the Honorable William D. Delahunt, a Representative 

in Congress from the State of Masachusetts, and Member, Committee on 

the Judiciary ......................................................................................................... 60 

(1) 

COMPREHENSIVE ALCOHOL REGULATORY 

EFFECTIVENESS (CARE) ACT OF 2010 

WEDNESDAY, SEPTEMBER 29, 2010 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 11:12 a.m., in room 

2141, Rayburn House Office Building, the Honorable John Conyers, 

Jr. (Chairman of the Committee) presiding. 

Present: Representatives Conyers, Watt, Delahunt, Johnson, 

Quigley, Deutch, Gonzalez, Schiff, Maffei, Polis, Smith, Sensenbrenner, Coble, Goodlatte, Lungren, Issa, King, Poe, Chaffetz, Rooney, and Harper. 

Staff present: (Majority) Danielle Brown (Counsel); Travis Chapman (Detailee); Anant Raut, Counsel; Reuben Goetzl, Staff Assistant; (Minority) Stewart Jeffries, Counsel. 

Mr. CONYERS. The Committee will come to order. 

Good morning, colleagues—so good to see all of you. Only six 

Members here today—not much interest in this measure here, apparently. 

We are hearing, today, the Comprehensive Alcohol Regulatory 

Effectiveness Act, H.R. 5034. And we are delighted to have Gary 

Miller, Edolphus Towns, Pete Defazio, George Radanovich, Bruce 

Braley. And we will start with Mike Thompson, of the 1st District 

of California. 

Welcome to the Judiciary. 

[The bill, H.R. 5034, follows:] 

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TESTIMONY OF THE HONORABLE MIKE THOMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. THOMPSON. Thank you, Mr. Chairman, Ranking Member 

Smith, and other Members—— 

Mr. CONYERS. Turn on your microphone. 

Mr. THOMPSON. Thank you, Mr. Chairman, Ranking Member 

Smith, and other Members of the Committee. I appreciate the opportunity to be here this morning to testify. 

I was here just a few months ago to testify before the Courts and 

Competition subcommittee that the wholesalers’ legislative proposal would do serious harm to thousands of American businesses 

that make beer, wine, and spirits. 

Since that bill was introduced, these businesses have been joined 

by more than 100 major organizations, like the American Farm Bureau, the National Association of Manufacturers, the American Bar 

Association’s Antitrust Section, and, believe it or not, the Progressive Policy Institute and FreedomWorks—two groups that you rarely see on the same page. 

The NFL and Major League Baseball all joined in opposition to 

this bill because it would discriminate against producers, and limit 

the choices for American consumers. 

Today, we are back discussing a rewritten version of the same 

bill, which I can tell you, without question, is just as damaging as 

the original version. The bill is still opposed by beer, wine, spirits 

producers. And it has all those major organizations that represent 

them. 

It still allows states to discriminate against producers in ways 

that promote economic protectionism. It would still seriously harm 

American businesses and take choices away from American consumers. 

You will hear today from legal scholars and industry experts who 

can tell you the broad, negative implications of the bill, but I am 

here to explain who if this bill were to be passed into law, it would 

hurt the lives and the livelihoods of people across our Nation. 

I can tell you about the family-run winery that is only in business because of the following that they have been able to develop 

through online sales; the small vineyard that wouldn’t be in business, and that the Ag-land that it occupies would probably be lost 

in wineries couldn’t sell directly to retailers and restaurants; the 

rural consumer who can’t get her favorite spirit unless she can buy 

in online; the brewery that can’t get the wholesalers to pay attention to their microbrew, but it is the business that they built 

through a nationwide-cult following that allows them to stay in 

business. 

These are the people that this bill still hurts. Those entrepreneurs and farmers are scared that Congress is going to irreparably harm their business by passing this bill. Small businesses 

are struggling in every one of our districts. Times are equally tough 

for the wineries in my district, but they have all been able to reach 

out and find customers. 

Many of these wineries are small, with a very limited production, 

and they have had to be innovative, because many wholesalers 

won’t give them the time of day. This bill, if passed into law, would 

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keep them from selling an American product to American consumers and, as a result, would threaten thousands of good jobs. 

Is this bill needed to solve a problem? No. Is the current system 

broken? No. State-based, three-tier alcohol-distribution systems are 

working extremely well. Are states being treated unfairly? No. A 

state’s right to pass alcohol laws is fully protected by our Constitution. In fact, there are over 4,000 state alcohol laws on the books. 

And there is no evidence and no avalanche of litigation to suggest 

otherwise. 

Are wholesalers being treated unfairly? No. In California, our 

wineries can distribute to anyone—consumers, restaurants, even 

Costco. And our wholesalers are thriving. The top two wine-andspirits wholesalers in California brought in over $10.5 billion in 

2009. They are estimated to bring in $10.7 billion in 2010, a more 

than $200 million increase in the middle of the worst recession that 

we have ever seen. 

In the U.S. wine business, the top 10 wholesalers control over 60 

percent of the market. Clearly, they are doing well. This bill is, at 

best, Mr. Chairman, a solution looking for a problem. But if passed, 

it would be a huge problem for U.S. businesses and consumers. 

The Commerce Clause of our Constitution, from which the alcohol industry would be exempt, would this bill to become law, was 

designed to ensure a fair national marketplace. A state can pass 

their own laws. They just can’t discriminate against out-of-state 

producers, nor out-of-state products. 

Congress and the Supreme Court have upheld this principle. 

Why would Congress want to turn back these decisions and deprive 

family businesses of their constitutional rights? 

Mr. Chairman and Members, this bill is not needed, and it would 

unfairly discriminate against producers and retailers, and limit the 

choices of consumers purely to give a competitive advantage to 

wholesalers. I urge you to oppose this bill, and I thank you again 

for your time. 

[The prepared statement of Mr. Thompson follows:] 

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PREPARED STATEMENT OF THE HONORABLE MIKE THOMPSON, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA


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Mr. CONYERS. Thanks, Mike Thompson. 

I now turn to Pete DeFazio—Oregon. 

TESTIMONY OF THE HONORABLE PETER DeFAZIO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. DEFAZIO. Thank you, Mr. Chairman—always good to see 

you. I just wish it wasn’t for this issue today. 

You know, I appreciate the opportunity to speak here today. I actually have the honor of being the co-founder and co-chairman of 


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the House Small Brewers Caucus. But my remarks could, as well, 

reflect the concerns of the more than 400 vintners in my state; and 

I am a member, also, of the Wine Caucus. 

There are over 1,600 small breweries in this country. The brewers working in them are true craftsmen, creating a uniquely American product. They are also small-business men and women, creating thousands of jobs in local communities across the country. 

They all this in one of the most highly regulated business sectors. 

Small brewers are, for the most part—they are not rich men and 

women; and they operate with small margins, higher costs than the 

large corporations. And they compete against those large corporations every day. Even small, miniscule changes in their client base, 

particularly in this economy, can have a massive impact on their 

ability to survive. 

H.R. 5034, the CARE Act, is a direct threat to their success. The 

bill would demolish the constitutional balance and Federal oversight over alcohol regulation. The effect would be devastating to 

America’s small brewers. The CARE Act would virtually eliminate 

the role of Federal courts in stopping states from enacting discriminatory laws, violating antitrust laws, and even undermining acts of 

Congress. 

There are dozens of cases, stretching back decades, where Federal courts have relied on the Commerce Clause to strike down blatantly discriminatory state alcohol laws. 

One example: In New York, Federal courts struck down a state 

law that required all beer to have its own unique UPC code. Now, 

that is not a problem for Miller or Bud or any of those other foreign-owned giant corporations. But it is a problem for small brewers, who operate on small budgets and tight margins. And they 

would have had to spend thousands of dollars on new labels just 

to be required to sell in one state, which would mean someone 

would go under or they wouldn’t sell there, or they might not add 

employees—a really bad and perverse result that was justifiably 

struck down. 

If H.R. 5034 is enacted, this type of law can and will return. 

Even worse, states would have free reign to come up with new 

ways to discriminate against small brewers or vintners. They could 

pass laws giving all in-state brewers or vintners preferential treatment—tax breaks for using in-state ingredients. States would, 

then, retaliate against other states over unfair laws, and we could 

have a real mess on our hands. 

This bill is anti-consumer, special-interest legislation of the worst 

sort, and it undermines the basic economic principles of our Constitution. 

You know, why do we need this? Well, some would have us believe there is a flood of litigation out there. There is not. And it 

would protect state interests. State interests are protected today. 

Small brewers in Oregon and elsewhere have to obtain licenses, 

register their brand, and file tax returns in every state in which 

they do business. There has been no flood of lawsuits contesting 

these legitimate state interests, and no need for this legislation. 

Mr. Chairman, I would ask that the Committee not act on this 

legislation. I appreciate the opportunity to testify. 

[The prepared statement of Mr. DeFazio follows:] 

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PREPARED STATEMENT OF THE HONORABLE PETER DEFAZIO, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON


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Mr. CONYERS. Thank you, Pete DeFazio. And you are unusually 

brief this morning. We appreciate that. 

Bruce Braley—Iowa. Greetings. 


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TESTIMONY OF THE HONORABLE BRUCE BRALEY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA 

Mr. BRALEY. Thank you, Mr. Chairman. It is a pleasure to be 

here. And I want to thank the Ranking Member, also, for allowing 

me the opportunity to testify today. 

I respect both of my colleagues who have already testified. I have 

a slightly different perspective that I wish to share with the Committee. And I am here in support of the CARE Act, because congressional silence on the ability of a state’s right to regulate alcohol 

is being misused in Federal court system by private interests. 

The 2005 Supreme Court decision in Granholm v. Heald struck 

down some state regulation of alcohol. These regulations are necessary to ensure that alcohol is used safely by adults, and kept out 

of the hands of children. Since then, it may not be a ‘‘flood’’ to Mr. 

DeFazio, but there have been at least 20 lawsuits challenging state 

regulations that put into jeopardy the current system, and create 

a burden for states like mine, Iowa. 

Alcohol, as we all know, is a unique product in American history. 

Wine, beer, and spirits need to be regulated differently than toothpaste, soda, or other consumer goods. Unlike other products, regulations are needed to promote moderation, as well as to abide by 

drinking-age laws so that responsible adults can enjoy alcoholic 

beverages responsibly. 

People in Iowa may have very different opinions than those in 

other parts of the country about how alcohol should be consumed, 

sold and supplied, and it is essential to maintain the authority 

each state has been granted to regulate as they see fit. 

The simple fact of the matter is that states such as mine are 

seeking to protect the public interests, have been under attack 

from private interests that are seeking to provide personal gain for 

themselves. Iowa and 26 other states have been sued, and the opponents of state-based regulation and the special interests that 

fund them have been quoted as saying they, ‘‘won’t stop suing until 

there is no law left standing.’’ 

The private interests filing these lawsuits are not members of 

our community, but they are out-of-state corporate interests who 

bear no responsibility to our safety, our cities or our constituents. 

In addition to 18 other states, Iowa is a control state, which 

means that it manages the wholesaling of liquor as a state-run enterprise. Our regulator is a member of the National Alcoholic Beverage Control Association, which unanimously voted to endorse the 

CARE Act. My attorney general, Tom Miller, also signed a letter 

asking for congressional action on this issue, citing the significant 

time and resources required by states from unprecedented legal 

challenges. 

There has been exponential growth in the wine, beer, and spirits 

industry over the past 30 years, not in spite of a system of local 

control, which has always sought to balance socially responsible 

business practices on all tiers with robust competition in the marketplace, but because of it. 

Iowa also has a vibrant craft-beer, micro-distillery, and nativewine industry that I support wholeheartedly. And I am pleased 

that this bill will do no harm to them and, in fact, protect their 

right to self-distribute. 

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Volume caps have recently come under attack using the Dormant 

Commerce Clause as justification. And I believe that it is necessary 

to defend the right for these business, and look forward to working 

with small businesses to help them thrive and grown. 

So, again, Mr. Chairman, I would like to voice my support for the 

CARE Act, and hope that you can find time to move this bill to the 

floor at your earliest opportunity. And I yield back. 

Mr. CONYERS. Thank you so much. 

From Brooklyn, New York—chair of the Committee on Oversight 

and Government Reform—Edolphus Towns. Welcome. 

TESTIMONY OF THE HONORABLE EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW 

YORK 

Mr. TOWNS. Thank you very much, Chairman Conyers and Ranking Member Smith, and Members of the Judiciary Committee. 

Thank you for the opportunity to express my support for H.R. 5034, 

the CARE Act. 

States need assistance in defending laws which protect the public 

interest from those who are seeking to line their pockets by deregulating the alcohol industry. My home state, New York, has been 

sued not once, but twice, in the past 4 years. 

Attorney General Cuomo and 38 other attorneys general wrote to 

me in the spring seeking congressional action to assist them in 

stemming the tide of these lawsuits. And I am proud to help. 

On a more personal level, I believe that our constituents know 

better than anyone the terms of how they want alcohol to be sold 

and supplied in their community. Alcohol is different than any 

other consumer good, and should be regulated as such. And our 

constituents know this and want the ability to control this product 

to protect public health and the public interest. 

Here are two examples of how this bill will help to protect our 

communities. First, laws that mandate identification checks have 

recently come under attack in court by online liquor stores who 

view them as discriminatory. I believe that I.D. laws assist retailers and communities to keep alcohol away from minors, and are 

vital components in protecting public health and safety. 

Second, New York City and communities across the country have 

begun using alcohol control zones to stop the practice of single 

sales, and the sales of certain products such as malt liquor. These 

products are not conducive to public health or public safety. These 

control zones have made my community safer. And law enforcement has testified to this result. 

I fear that without congressional action, these laws will be challenged as well, erasing a great deal of progress that we have made. 

I would leave you with one last thought to gauge how I am doing 

back in Brooklyn. I use what we call ‘‘The Church Test.’’ This basically involves me speaking directly to my constituents outside their 

houses of worship. 

As I conduct this test, I regularly hear the need for better 

schools, a better economy, more police presence, and a better 

health-care system. What I do not hear from any of them is about 

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the need for cheaper, more accessible alcohol. And that will be the 

end result if we fail to act on this legislation. 

I want to thank you, Mr. Chairman, for the opportunity to come, 

and to indicate my support. And on that note, I yield back the balance of my time. 

[The prepared statement of Mr. Towns follows:] 

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PREPARED STATEMENT OF THE HONORABLE EDOLPHUS ‘‘ED’’ TOWNS, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. CONYERS. Thank you, Edolphus. 


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Which side would we be on to get cheaper and more available alcohol? Would you clarify that for some of the Members up here? 

Mr. TOWNS. My side, Mr. Chairman. I would be against cheaper. 

I mean, I think that—— 

Mr. CONYERS. Oh. 

Well, you just slid into invisible minority there, buddy. 

Too bad, Brother Towns. 

George Radanovich, 19th District, California—welcome and good 

morning. 

TESTIMONY OF THE HONORABLE GEORGE RADANOVICH, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. RADANOVICH. Thank you, Chairman Conyers. 

And thank you, Ranking Member Smith, and Members of the 

Committee. 

I appreciate being able to testify. As you know, I am co-founder 

of the Congressional Wine Caucus, and Member of the Energy and 

Commerce Committee, which has jurisdiction over interstate commerce, I also have been an owner of a California winery. 

The business of wine is far from the splendor of the vineyards. 

It is difficult to sell wine; maybe more difficult than selling most 

other products or services in the United States. And much of that 

is due to the level and the diversity of regulation and control of all 

aspects of the business. 

Wine is a highly taxed and highly regulated business, with 50 

sets of laws, as well as oversight from numerous Federal agencies. 

In such an environment, there are great costs involved not only in 

making wine, but also in getting wine to the market. Tax rates differ; some states require licenses or permits; and, still, others require that I pay a fee to register my labels. 

One state requires that I buy a license and hire a wholesaler to 

distribute my wine, and that I designate a sales territory for that 

wholesaler, while a second state prohibits me from doing this very 

same thing. One state makes it virtually impossible for me to fire 

my assigned wholesaler, even if the wholesaler has not performed 

as represented. In most of the states we try to ship into, every bottle of wine had to pass through a wholesaler, which added cost and 

delay, even though the wholesaler was doing little, if anything, to 

help build the brand. 

For new wineries, it is always a shock to realize how difficult it 

is to acquire distribution in other states. Even for long-established 

wineries, significant resources are required to comply with varying 

state laws. In many cases, compliance with certain state laws discouraged my winery from selling in those states. This is common 

among thousands of wineries. The costs to introduce a wine in a 

market can far outweigh the potential profits. 

People in the wine business hear a lot about the three-tier distribution. But all know that a pure three-tier distribution system 

does not exist in the United States. Instead, over the years, since 

prohibition was repealed, states have chosen to exercise their powers under the 21st Amendment to create hybrid distribution systems that use three-tier principles as a framework. 

18 

In at least 39 states, state laws allow in-state wineries to selfdistribute. Self-distribution laws permit the in-state winery to act 

as its own distributor, allowing direct sales by the winery. In California, the number of wineries could not increase without self-distribution. But self-distribution stops at the state line. 

In my home state, I am allowed to sell wine directly to a consumer. I can operate a wine-tasting room at the winery, and one 

other retail location where I can also conduct educational wine 

tastings. Without this manner of distribution, most small wineries 

would find it difficult to survive. Many wineries are surviving in 

today’s economy solely on the strength of their direct-to-consumer 

wine clubs. I remember a time when some states would punish 

such sales as felonies. 

Operating a winery in this country is difficult and complex. The 

wine industry is an industry of different laws and confusing regulations, which is why I wholeheartedly disagree with the premise of 

H.R. 5034, that states’ rights are being greatly impaired by the 

Commerce Clause; that states should be able to regulate alcohol 

products even if it means that they can openly discriminate; and 

that states are on the verge of regulatory collapse, without congressional intervention. 

In my 16 years in Congress, I do not recall another time when 

an industry group has come seeking complete immunity from nothing less than the U.S. Constitution. I am interested to hear why 

today’s speakers think the only way to prevent such deregulation 

is to surgically remove that portion of the Constitution from applying to their industry. 

I wait for an explanation as to how this assault on the Constitution will better serve the industry, the states, the Nation, and the 

American consumers. H.R. 5034 is being promoted by the beer, 

wine, and spirits wholesalers. They present this Committee with a 

simple request: They want Congress to expressively give states the 

ability to regulate alcohol without limits of national fairness and 

market equity. They say that without this express permission from 

Congress, states will be unable to regulate effectively. 

As a Member of the Energy and Commerce Committee, I urge 

this Committee to listen carefully and respectfully to today’s testimony. If we allow states to set their own alcohol laws and the market ends at the state level, we lose the cohesiveness and energy of 

our national market. By allowing trade barriers that openly defy 

these concepts of an American market, we become 50 nations instead of one. Small businesses like my winery will see themselves 

shut out, and it will become harder and harder to make a profit 

and provide jobs. 

Again, I want to thank the Committee for giving me this opportunity to testify on this important legislation. And I ask that my 

full written testimony be submitted to the record. 

[The prepared statement of Mr. Radanovich follows:] 

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PREPARED STATEMENT OF THE HONORABLE GEORGE RADANOVICH, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA


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Mr. RADANOVICH. I would also like to submit for the record a recently released analysis by the FreedomWorks Foundation, along 

with a resolution that recently passed the California legislature opposed to this bill. 

Mr. CONYERS. Without objection, so ordered. 

[The information referred to follows:] 


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Mr. CONYERS. And thank you George Radanovich. 

And, now, we turn to Gary Miller of California. Welcome, sir. 

TESTIMONY OF THE HONORABLE GARY G. MILLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. MILLER. Thank you, and so as not to offend the Chairman— 

I am not against lower prices for legal consumers, nor Members of 

Congress. We are on the same side, here. 

Mr. Chairman, Ranking Member Smith—thanks for the opportunity to testify before you today about the impact of H.R. 5034, 

the CARE Act. 

While the issue of alcohol regulation is complex, I would like to 

focus my testimony on the impact of this proposed legislation on 

underage drinking. According to the National Alliance to Prevent 

Underage Drinking, every day 7,000 children under the age of 16 

take their first alcoholic drink. Youth who start drinking before the 

age 15 are five times more likely to develop alcohol dependency or 

abuse later in life than those who begin drinking at or after the 

age of 21 years. 

And, according to the Center for Disease Control, although drinking by persons under the age of 21 is illegal, people aged 12 

through 20 years drink 11 percent of all alcohol consumed in the 

United States. With the nearly $170 billion annual market for alcoholic beverages, underage drinking comprises a significant part of 

this market. 

One of the most important ways we can limit underage drinking 

is by reducing illegal access and increasing enforcement. We must 

require a strong regulatory structure that balances the free market 

with public-health concerns with respect to alcohol. The system of 

state-based regulation has served our Nation well because states 

and localities know their own communities’ needs best. A one-sizefits-all strategy does not work with alcohol. 

What is socially acceptable in one part of my congressional district, much less the country, won’t work in another. All alcohol regulation is a balance between competition, price, and availability on 

the one hand, and appropriate control to mitigate and moderate an 

underage consumption on the other. Each state must determine 

how this balance should be achieved, and where the appropriate 

balance points should be fixed. 

States view alcohol differently from the authority of each state 

to regulate according to its own norms and standards—must be 

safeguarded. Surely, it is not in the public interest to advocate for 

weak regulation and an unrestricted marketplace. While I understand that some of our Nation’s small businesses rely on the Internet to widen their marketplace, we must ensure that appropriate 

precaution and regulations are followed so that the enforcement of 

state underage drinking laws can be adequately enforced. 

No one will argue that it is not the states’ responsibility to monitor alcohol sales and consumption by instituting and enforcing age 

restrictions. Indeed, minors on the Internet can purchase wine, 

beer, or grain alcohol with the click of a mouse, and have it delivered to their house. 

34 

Sting after sting by law enforcement and media consumer-protection advocates have shown just how easy it is for minors to buy alcohol online with no I.D. check or age verification. Many online 

businesses rely on interstate carriers to verify the legality of an alcohol shipment. It is commonplace for the buyer to self-certify that 

they are of age. It is up to the individual UPS or FedEx employee 

delivering the shipment to verify the age of the recipient. The problem is that the Supreme Court has ruled that the states cannot require interstate carriers to verify the recipients’ age. This, of 

course, raises questions as to whether legal liability would lie if, indeed, a carrier delivered alcohol to a minor without first verifying 

age. 

Many of the legal decisions rendered in the Granholm have been 

conflicting, leaving regulators, attorneys general and legislators in 

a dilemma with regard to their authority to regulate the unique 

product. We need to clarify congressional intent that the states are 

the primary authority to regulate alcohol sales, and that they 

should exercise the authority to protect the public interest. 

In a narrow-balance fashion, the revised version of H.R. 5034 accomplishes these goals. H.R. 5034 keeps in place the states’ authority to regulate alcohol, but upholds the high standard of the 

Granholm decision to ensure interstate commerce. 

The CARE Act expressly prohibits a state from enacting discriminatory laws that favor in-state producers of alcohol to the detriment of out-of-state producers. In fact, the bill reserves the right 

of states to enact strict regulations if such regulations advance legitimate local purpose. Ensuring that minors do not have inappropriate access to alcohol is an example of such a purpose. In the 

end, the bill would force retailers to be responsible not only to their 

bottom line, but to the communities they serve as well. 

While the confusion in the court system spurred by the 

Granholm decision creates regulatory inconsistencies based on judicial jurisdiction, this alone makes it necessary for Congress to clarify intent. However, according to the Concerned Women for America, the authority for states to manage the distribution and sale of 

alcohol is especially critical for society to effectively regulate access 

to alcohol to minors. 

As a conservative, I am regularly on the side of lessening the 

regulatory burden on our businesses across America, but I will not 

endorse a strategy that weakens state law and helps underage access to alcohol. 

I yield back. 

[The prepared statement of Mr. Miller follows:] 

35 

PREPARED STATEMENT OF THE HONORABLE GARY G. MILLER, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA


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Mr. CONYERS. Thank you very much. 

Did any of you here—any of your colleagues say something that 

you felt like you would like to make a comment on? 

Mike Thompson? 

Mr. THOMPSON. Thank you, Mr. Chairman. 


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I could go on and on disputing some of the things that have been 

said. But a couple of folks have referenced state attorneys general 

positions on this bill. And I think it is important for the record, if 

you would allow, to take these 10 letters from 10 different state attorney generals who are stating that, in fact, their support for this 

bill was misrepresented, and they have no position on that. I would 

like to submit that. 

And I would also like to submit for the record, the American Bar 

Association’s Antitrust Section opposition, and the Progressive Policy Institute’s position of opposition as well. 

Mr. CONYERS. We will accept them into the record. 

[The information referred to follows:] 

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Mr. THOMPSON. Thank you, Mr. Chairman. 

Mr. CONYERS. Anyone else feel disposed to make any comment 

before I excuse and thank all of you for your statements? 

Okay. Thanks so much. 

Let me start the hearing by calling this the last hearing of Bill 

Delahunt, so that we will have this dedicated appropriately. And 

this is also his bill. So I just want to take this moment to thank 

Bill Delahunt for his many years of service not only on this ComVerDate Aug 31 2005 09:54 Dec 08, 2010 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6601 H:\WORK\FULL\092910\58477.000 HJUD1 PsN: 58477

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mittee, but as a prosecutor in Massachusetts, and all the friends 

that he has garnered on both sides of the aisle. 

And I think I will put the rest of my statement into the record 

and yield to my dear friend, Mr. Smith. 

[The prepared statement of Mr. Conyers follows:] 


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Mr. SMITH. Thank you, Mr. Chairman. I certainly agree with 

you, and want to thank our colleague, Bill Delahunt, for his years 

of service to his constituents and to his state, and to our country, 

as well as his dedication to this particular Committee. 

Bill Delahunt is one of the most able, most effective Members of 

Congress who I know. And he and I have worked on a number of 

pieces of legislation together, showing that bipartisanship can work 


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and, particularly, with someone like Bill Delahunt, who is well motivated in so many areas. And we wish him well. 

And I have a hunch that we will be able to stay in touch with 

him, and keep up with him, and look forward to hearing from him 

as we go into the next Congress, even though he may not be 

present. We will certainly remember all of his contributions and 

continue to appreciate him and his service. And I do hope he stays 

in touch with all of us. 

Mr. CONYERS. Howard Coble? 

Mr. COBLE. Mr. Chairman, I know time is important. I will be 

very brief. But my fellow Coast Guards and I would be remiss if 

I didn’t echo what you and the gentleman from Texas just said. I 

will put Bill—— 

Mr. CONYERS. All right. 

Bill Delahunt? 

Mr. DELAHUNT. Hello, and it is nice to be present when you are 

hearing your own obituary. People tend to say very positive things 

when you are leaving. 

Just a quick anecdote, Mr. Chairman—during the course of the 

primary, I was asked to endorse a particular candidate to succeed 

me. And I said, ‘‘I am not going to get involved.’’ And this particular candidate said, ‘‘Well, it is absolutely essential.’’ And I said, 

‘‘Why is it essential?’’ He said, ‘‘Because your numbers are through 

the roof.’’ And my response was, ‘‘They are through the roof because I am leaving.’’ 

Let me just say that it has been an honor to serve on this Committee. This Committee has a tremendous record. I think, oftentimes, the public is unaware that despite the policy disagreements 

that are obvious on a number of issues—that the personal relationships are such that it has allowed this Committee to perform admirably. 

I consider every Member of this Committee a friend. And those 

friendships—with you, with Lamar, with Howard Coble, and with 

every Member—I will truly cherish. And those friendships will endure long after the campaigns are over. 

You know, political life is difficult. I don’t think the American 

people really understand the sacrifices that Members make. I can 

say that now, because I am leaving. But each and every Member 

of Congress—each and every Member of this Committee worked 

diligently. They work because they are here to serve. We have a 

different understanding sometimes in terms of what is the best for 

public policy. But people here are committed. They are committed 

to their country; they are committed to their district; and they 

make tremendous sacrifices. 

This is a job that never ends. When we leave here, we go back 

to our district and communicate with our constituents. But every 

Member of this Committee can be very proud of what we have accomplished, at least during my 14 years and, I dare say, as we look 

forward. 

But let me just end by saying the friendship—your friendship, 

Lamar Smith’s friendship, and everyone’s friendship—is a memory 

that I will take with me and enjoy and savor and cherish for the 

rest of my life. 

59 

You said, Mr. Chairman, this is the last bill and the last hearing. 

I want you to understand that I drafted or offered this bill because 

I believe it is an issue that demands immediate attention to prevent the, in my judgment—the unraveling of America’s system of 

alcohol regulation. It has an important goal. It is a very simple one. 

And that is to protect communities, protect children, and protect 

families. 

My granddaughter was with me this morning when we took the 

pledge of allegiance to the flag, on the floor of Congress. I want to 

make sure that she is protected, you know, so many different ways. 

I have witnessed, as a former prosecutor, the ravages of alcoholism 

and alcohol abuse, and what that can do, and what that can lead 

to. And that is why I sponsored this legislation. I want that to be 

known to my constituents back in the Massachusetts 10th District. 

And I have a more lengthy statement that I will submit for the 

record. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Delahunt follows:] 

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Mr. CONYERS. Thanks, Bill Delahunt. 

I want you to know that the picture we have of you in the hallway is going to remain up, even after you are gone. So that is 

about the highest tribute that we can offer anybody in this Committee. 

Mr. DELAHUNT. Thank you, Mr. Chairman. 

Mr. CONYERS. You are welcome. 

Lamar Smith? 

Mr. SMITH. Thank you, Mr. Chairman. 


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As you have noted, our Judiciary colleague, Mr. Delahunt introduced H.R. 5034, the Comprehensive Alcohol Regulatory Effectiveness Act of 2010, on April 15th. Since that time, the bill has acquired 146 co-sponsors, which represents a remarkable level of bipartisan support. However, it has also generated a great deal of 

controversy among wineries, breweries, and distilleries. They believe that the bill, as introduced, could lead to discriminatory state 

regulation and legislation that could hurt some small businesses. 

Most states have enacted some form of the three-tier system for 

alcohol distribution. This system separates alcohol producers, alcohol wholesalers and alcohol retailers into three distinct tiers. Inclusion of wholesalers as middle men in the transaction makes it easier for states to regulate alcohol. It makes it possible for states to 

ensure that alcohol is safe. It makes it simpler to ensure that alcohol is sold only to individuals over 21 years old. And it provides a 

straightforward alcohol tax-collection system for states. 

These are all laudable goals. And for those reasons, I support the 

three-tier system. And I feel it is important to help the states 

maintain and defend the system, and the benefits it brings. 

At the hearing in March, we were told that the three-tier system 

was under assault by lawsuits from producers and retailers. It was 

claimed that these suits are a drain on states’ finances, and diminish their ability to effectively maintain the safety of the alcohol-distribution system. 

The CARE Act was designed to limit these lawsuits; however, as 

I have told many of the wineries in my home state, I also recognize 

that the legislation perhaps went too far to achieve those laudable 

goals. And I am pleased that Mr. Delahunt has offered and is preparing a manager’s amendment that I think addresses many of the 

producers’ complaints about the original language. I appreciate his 

efforts and those of the Chairman to create and improve piece legislation. 

I am also well aware that the producers, as well as some retailers, still oppose this modified proposal. To that end, I would like 

to use this hearing to get at the facts of the matter. First, how 

many lawsuits are there? How does the number of lawsuits compare with the historical average? How much do these lawsuits cost 

states? What other priorities do the states have to forego to defend 

these suits? 

The revised bill provides that states cannot discriminate against 

out-of-pocket producers. Are there examples of states discriminating against out-of-state commerce? Are there any examples of 

statutes that have been overturned, even when there was no evidence of intent to discriminate? What additional specific suggestions can those who oppose this bill make that will enable us to address their concerns without hampering this effort to preserve the 

three-tier system that has served us so well? 

These are some of the questions I hope our panel of witnesses 

can help us answer. And I hope these answers will help us construct a bill that will be acceptable to all stakeholders. 

With that, Mr. Chairman, I will yield back the balance of my 

time. 

Mr. CONYERS. Thank you. 

62 

We will take a couple more opening statements when we return. 

But right now, we will recess until 12:30 in the afternoon. Thank 

you. 

[Recess.] 

Mr. CONYERS. The Committee will come to order. Thank you for 

your patience. We welcome our second panel—Michele Simon, Ms. 

Tracy Genesen, Professor Elhauge, Professor Diamond, Mr. Richard 

Doyle; Ms. Nida Samona, chair from Michigan, and the Attorney 

General from Utah, Mark Shurtleff. 

We are happy to start off with the attorney general, who has, 

among other things—and I don’t know how he finds time—written 

a book of—I think it is going to be very well received not only on 

the Hill, but in government as well. 

Is Mr. Chaffetz here? We would like to recognize him for any further introductions. 

Mr. CHAFFETZ. Thank you, Mr. Chairman. I appreciate it. It is 

an honor to have all of the panel here; but, in particular, the attorney general from the great State of Utah. 

Mark Shurtleff was reelected as the Utah attorney general in 

November of 2008, with a strong 70 percent of the vote. He is now 

serving as the first three-term attorney general in the history of 

Utah. In his first 8 years in office, the number of meth labs in 

Utah was reduced by 98 percent. And he has talked to thousands 

of students and parents about the dangers of drugs, and led an effort to obtain millions of dollars in funding in education and rehabilitation. 

Attorney General Shurtleff was born and raised in Utah, graduated from Brigham Young University and the University Of Utah 

College Of Law. He served in the U.S. Navy Judge Advocate General Corps as an officer and attorney from 1985 to 1990. Mr. 

Shurtleff returned to Utah to serve as the assistant attorney general from 1993 to 1997. 

He is the past chairman of the Conference of Western Attorneys 

General. And he has served in the executive committee from the 

National Association of Attorneys General. He also served on the 

board of directors of several national and local organizations. He is 

the author of ‘‘Am I Not a Man?: The Dred Scott Story,’’ a historical 

novel about the man behind the landmark legal case. 

And, most importantly, he and his wife, M’Liss, have been married for 27 years and are the proud parents of five children and two 

grandchildren. And we are honored to have him here today. And 

I appreciate the Chairman for allowing me to say a few words. 

Thank you 

Mr. CONYERS. Welcome. 

TESTIMONY OF THE HONORABLE MARK L. SHURTLEFF, 

ATTORNEY GENERAL FOR THE STATE OF UTAH 

Mr. SHURTLEFF. Thank you very much. 

Congressman Chaffetz, thank you—good friend. We worked together when he was chief of staff for Governor Huntsman, now Ambassador Huntsman. Good to be here. 

Mr. Chairman, Members of the Committee, thank you very much 

for the invitation. It took me 7 years, Mr. Chairman, to write that 

book, so start writing yours now. 

63 

It is an honor to testify, truly. I really appreciate this invitation 

to talk about things that are so important to my heart, including 

the United States Constitution, states’ rights, the role of Congress 

vis-a-vis states, and the protection of the public. 

Utah knows a thing or two about the 21st Amendment. You may 

not know that it was Utah, after all, that was the 36th deciding 

state to ratify the 21st Amendment. And the reasons why Utah and 

this Nation endorsed the 21st Amendment remained as relevant 

today, in 2010, as they did back in 1933, when it was ratified by 

Utah. 

The relevance of the 21st Amendment stems from the 

undisputable fact that alcohol or, as the Constitution calls it, ‘‘intoxicating liquor,’’ is a unique product both constitutionally and 

physically. Alcohol, clearly, isn’t for everyone. We know this. It is 

age-restricted for good reason. 

Science, every day, is coming out with more information as to 

why youth access to alcohol and the harm that alcohol causes to 

the developing brain. It causes harm to society. The costs to states 

and local communities are extensive. So states do have a compelling interest in using their police power and all their regulatory 

tools to mitigate those costs. 

When people of Salt Lake City feel differently about alcohol than 

the people in Detroit—that is the beauty of the American system; 

and, as the historian, I will tell you that the part that the Federal 

Government—intervention in alcohol policy has not been really successful, whether it is the Whiskey Rebellion or the failure of Prohibition. 

The 21st Amendment and the state-based regulation of alcohol 

has been a stunning success these many years. Well, there is still 

too much misuse and abuse, no doubt. Our problems pale in comparison to those of other countries like United Kingdom. Every 

state has tools to regulate this industry. They cannot be slowly 

whittled away in court, which is what is happening, and why we 

are concerned. 

Now, Utah takes alcohol regulation very, very seriously. We are 

a control state, as you may know. The state controls the sale of distilled spirits, certain malt-beverage products. Any profits go to the 

state to offset the cost of government. We have other alcohol laws 

not found in other states. That is a function of state-based regulation that we should not be hauled into Federal court to defend our 

efforts to protect our citizens. 

Now, as a past chair, many years for the Youth Access to Alcohol 

Committee of the National Association of Attorneys General, we 

worked very hard over the years to work to reduce underage drinking. We have collaborated and worked effectively with industry in 

these efforts to keep alcohol out of the hands of those who should 

not have it. 

But concerns over states’ rights is something that unites all of 

us as attorneys general. From liberal to conservative, Republican 

to Democrat, alcohol regulation under the 21st Amendment is ‘‘a 

state rights on steroids,’’ you may say. Over 35 different lawsuits 

in 27 states, challenging the right of the state to regulate alcohol 

has been filed since that Granholm decision in 2005. Now, there 

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has been more uncertainty due to that decision, by creative lawyers, who I am sure we will hear from later. 

In a close 5-to-4 vote, as you know, the court believed that the 

Michigan system impermissibly harmed a poor artisan out of a outof-state winery. Now, fast-forward 5 years later and ask, ‘‘Where 

are the states in trying to understand what this decision meant?’’ 

The answer is: The legal waters are muddier. They are not clearer. 

We are all over the place in this country. 

And, now, instead of a small, aggrieved winery struggling to get 

to market, we now have Anheuser-Busch InBev—$84 billion global 

company—using the same theory in Granholm to say they are 

being discriminated against in Illinois. Last I checked, AB InBev 

beer was everywhere. How they compare to a small winery or similarly situated is beyond me. 

As you will hear from the regulator from Michigan, Michigan has 

been hauled into Federal court on this very issue of retailer shipping. Texas and New York were sued, too. Michigan lost in the district court. Texas and New York won at the 5th and 2nd circuits. 

So what am I supposed to tell the legislature in the State of 

Utah? Go with Texas and New York ruling, or race to the bottom 

and abandon regulation to be safe from a Michigan or Washington 

decision, where the circuit court—the 9th circuit overturned a 

judge’s ruling and only left one regulation they said was impermissible. And, yet, the judge still awarded over $1 million in attorney 

fees to the cost of the taxpayers of the State of Washington. 

We have lawsuits that twist the Granholm decision—from treating small businesses differently than big business. This needs to be 

resolved and, so, we are coming to you. We are asking for your 

help. We need to have you clarify this. 

Now, true, there were 40 AGs who signed a letter, but that was 

before the bill was passed. The letter is there. The wording is clear. 

They didn’t say they endorsed this bill. But they are asking for 

help the same way we are in this bill, and that bill provides it. 

We need you to clarify that. You can do that. We beg of you to 

say what is meant by the Dormant Commerce Clause, so that when 

the Supreme Court gets this again, Congress has spoken, and they 

are going to receive that information. 

The revised CARE Act would capture the essence of Granholm’s 

decision by preventing wanton discrimination against out-of-state 

suppliers. It will also provide clarity to state legislators and will 

strengthen states to keep the ability to regulate alcohol according 

to local customs. So thank you very much for the opportunity to be 

heard on this. 

[The prepared statement of Mr. Shurtleff follows:] 

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PREPARED STATEMENT OF THE HONORABLE MARK L. SHURTLEFF


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Mr. CONYERS. Thank you for starting us off. 

Our next witness has been before us before. She is the chair of 

the Liquor Control Commission of Michigan—lawyer, former prosecutor—and has put in a great deal of time working to make sure 

that Michigan has a safe and effective alcohol marketplace. 

Welcome, again, Ms. Samona. 


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TESTIMONY OF NIDA SAMONA, CHAIRPERSON, 

MICHIGAN LIQUOR CONTROL COMMISSION 

Ms. SAMONA. Thank you, Mr. Chairman. 

Thank you very much to the Committee for listening to us. 

Thank you to all of that have taken the time and the opportunity 

to recognize how important this issue is to the State of Michigan, 

and to all states, actually, in regards to the 21st Amendment, 

which gave plenary power to the states to regulate alcohol. 

The State of Michigan was the very first state in 1933 that ratified that 21st Amendment. And like Utah, we saw the need—we 

understood the need for it, and the recognition that the state has 

to intervene. This is not milk we are talking about here. This is 

a product that can be enjoyed that is very beneficial and lucrative 

to the State of Michigan; that can also be in the wrong hands at 

the wrong time, with kids that are minors, with overconsumption 

of alcohol, and with doing things with alcohol and mixing it in a 

way that can be lethal. We understand that. I understand that as 

the only regulator sitting up here on the panel. 

Now, Ranking Member Smith asked, ‘‘How many lawsuits are we 

talking about here?’’ Twenty-five to count, and still going—two of 

them have been within the last 7 years of the State of Michigan. 

That is the Granholm case. That is my boss, Governor Granholm— 

who sends her best to all of you—that started it, and 24 lawsuits 

later that came after that. 

There was a lawsuit that dealt with wineries. ‘‘Why can’t 

wineries be treated the same out-state as in-state?’’ We modified 

our state laws so that we can do that, and created a permit system 

because it went all the way to the Supreme Court; and in a very 

narrow, 5-4 decision was in favor of the wineries. 

Then, several years later, we have a case of Siesta Village. This 

time, it is not about wineries. It is about retailers that say, ‘‘An 

out-state retailer should be able to sell and ship alcohol into the 

State of Michigan to anyone that they want to, at any time.’’ 

When we regulate our own retailers—and we have 17,000 retailers in the State of Michigan—and, certainly, you know that, Mr. 

Chairman—that they are very active. They are small, independent 

businesses, as well as large chain stores throughout the State of 

Michigan. We make these retailers have to go through server-training classes so that they understand they have to ask for I.D. They 

have to look and determine if a person is intoxicated; if it is an onpremise licensee, to determine when they can cut them off. 

The have to go through violations and penalties up to being suspended and/or revoke their license. These are all these retailers 

that are within my state, that we regulate to ensure that they follow the laws of the State of Michigan and the rules of the Michigan 

Liquor Control Commission. But Siesta Village would have you, in 

that lawsuit, say, ‘‘A retailer in California, Florida, Ohio, Indiana, 

anywhere else, should be able to sell this product and ship it to a 

home, not knowing, ‘‘Is that person of age to receive it?’’—not having any identification processes.’’ 

And this thought about the UPS system or delivery system 

checking for I.D. is just not one that works. What if they don’t? 

What power do I have over that licensee that is not in the State 

of Michigan? Because my 17,000 retailers that are struggling every 

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single day—but we are hammering at them and on their back to 

make sure that they follow the rules and understand this is a commodity that is enjoyable, but can be very dangerous. Understand 

that the Liquor Control Commission means business. 

And so when we talk about these cases, I talk to you as a regulator. I am also a lawyer. I am also a former prosecutor. I understand what happens when you abuse this product. And I understand, as a regulator, that my role is to ensure that that doesn’t 

happen. 

These lawsuits, Mr. Smith, have cost millions of dollars to the 

State of Michigan—well, not one, but two lawsuits. With Siesta Village, we, in fact, had to tell our independent retailers that they 

cannot deliver to a client or a customer of theirs any of the product; 

that they must come in—not just purchase them, but pick them up 

at that time, as a result of that lawsuit. We didn’t want to continue 

incurring additional millions of dollars in taking it up to a higher 

court. 

That is why it is so essential for Congress to act on this; so that 

this silence does not lead to all these ambiguous rulings across this 

great country of ours. The 21st Amendment and Commerce Clause 

has given us the power for each state to regulate, based on the fit 

and the need of that state. That is the beauty of it. It should not 

be a one-size-fits-all. 

The rules exist, and we are here to follow them. But I, as a regulator, surely know what is in the best interest of my state and 

those that are living in my state and consume this product in my 

state. That is my duty. And I ask for you, Mr. Chairman, and all 

of you, as the Committee Members, to please act on this bill. Thank 

you. 

[The prepared statement of Ms. Samona follows:] 

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PREPARED STATEMENT OF NIDA SAMONA


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Mr. CONYERS. Thank you very much. 

The next witness is the chairman and CEO of Harpoon Brewery, 

a member of the Brewers Association and the Beer Institute. 

And we are glad to have you here, Mr. Doyle. You may proceed. 


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TESTIMONY OF RICHARD A. DOYLE, CHAIRMAN AND CEO, 

HARPOON BREWERY 

Mr. DOYLE. Thank you. 

Mr. Chairman, and Members of the Committee, my name is 

Richard Doyle, and I am the chairman—founder and CEO of the 

Harpoon Brewery. We operate breweries in Boston, Massachusetts 

and Windsor, Vermont. 

On behalf of the Brewers Association, I appreciate the opportunity to speak today. I am here to give you a small-brewer’s view 

of H.R. 5034. You are entrusted to make the rules, and I want to 

provide you with my perspective on what it would be like to try to 

successfully play by those rules, if H.R. 5034 is enacted. 

The wholesale, or middle tier, of the three-tier system of beer distribution is very important to small brewers. We do not have the 

scale to establish our own distribution network and need wholesalers to reach markets, particularly in other states. A successful 

and vibrant middle tier is vital to the interests of small brewers 

and our consumers. 

The current system has served the public well for the last 77 

years. There is a delicate balance between state-based regulation 

that reflects the needs of individual states and a Federal role to 

protect interstate commerce. Passage of H.R. 5034, even in its 

amended form, risks exposing that delicate balance to unintended 

consequences. 

Our brewery sells beer in 25 states. The wholesalers we sell to 

typically do business in only one state. State franchise laws, with 

the stated goal of protecting wholesalers from dominant large brewers, are also used to dictate the terms of trade between small brewers and wholesalers. 

I have worked through franchise agreements mandated by state 

laws with dozens of wholesalers, and we have developed beneficial 

relationships, and even friendships. But those negotiations are always tough because state laws provide wholesalers with strong leverage. We are always the ‘‘away team,’’ playing in a state system 

that favors the home-team wholesalers. H.R. 5034 would undeniably make that situation worse. Not only would we be playing 

away, but the state-based referee would not have any concern 

about being tempered by Federal oversight. 

Small brewers are also concerned about the diminution of Federal role in another area. State label regulation is a good practical 

example of how subtle discrimination could work. If we are required to have 25 different labels for the 25 states where Harpoon 

sells beer, that cost would be prohibitive. We would not be able to 

manage the inventory and keep our beer fresh. We would need to 

sell in fewer states, and our brewery and our customers would be 

worse off. 

Small brewers also tend to make many different styles of beer, 

which only compounds any state-based labeling requirements. This 

is not a hypothetical situation. In the last 2 years, wholesalers 

have lobbied successfully in Michigan and New York for unique labeling requirements. The New York law was struck down as a violation of the Commerce Clause, and the Michigan legislation had 

to be amended to exempt small brewers. Under H.R. 5034, those 

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laws could stand, and we would be at a great disadvantage in both 

states. 

We appreciate the threat that wholesalers feel to their businesses from a change in the status quo, and more power flowing 

to large retailers. However, we do not think that solving a problem 

for wholesalers by creating a problem for brewers makes sense. It 

is very unfortunate that after more than a year of discussion between wholesalers and suppliers, we could not reach a compromise. 

Brewers large and small worked very hard, and in good faith, to 

reach a compromise, despite the fact there was nothing we would 

gain from the legislation. 

Each version of H.R. 5034 that we have seen this year is detrimental to small brewers in three aspects. First, it repeals the Wilson Act of 1890, which prohibits discrimination against out-of-state 

producers and products. Second, the new language in H.R. 5034 encourages states to adopt laws that discriminate in subtle ways. Finally, the bill diminishes the Federal role in regulating interstate 

commerce. 

As a small brewer in Massachusetts, I do not have the resources 

to fight every discriminatory state statute and regulation that restricts my ability to compete and grow in other states. I spend 

thousands of dollars every year attempting to comply with state 

laws, many of which were clearly intended to protect local economic 

interests. 

I make great beers, and I want to sell them to your constituents. 

Great principles of limited government and free enterprise are 

often ignored when local economic interests and legal authority are 

combined with no checks and balances. The Federal courts provide 

that constitutional check, and they have exercised it responsibly in 

decisions concerning alcoholic beverages. 

The Supreme Court and appellate courts have overturned the 

relative handful of unconstitutional state laws. Those policies clearly favored state and local interests, or reduced competition in ways 

that had nothing to do with temperance or public safety. 

In closing, I respectfully urge the Committee to refrain from reporting H.R. 5034. Our industry is already adequately regulated at 

the Federal and state level. No credible group or industry organization is attempting to deregulate the sale and consumption of beer, 

wine, and spirits. Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Doyle follows:] 

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Mr. CONYERS. You are welcome. 

Professor Stephen Diamond is professor from the University of 

Miami. He has both a Ph.D. and J.D. from Harvard University. He 

is co-chair of the American Bar Association Committee on Beverage 

Alcohol Practice. 

We welcome you here this afternoon, sir. 


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TESTIMONY OF STEPHEN M. DIAMOND, PROFESSOR OF LAW, 

UNIVERSITY OF MIAMI 

Mr. DIAMOND. Thank you for the opportunity to appear before 

you. 

I would like very briefly to make several observations about H.R. 

5034; observations which I have developed at greater length in my 

written submission. 

The Supreme Court has made it unquestionably clear that the 

final authority on the relationship between state alcoholic-beverage 

law and the Dormant Commerce Clause is Congress. Congress can 

protect state alcoholic-beverage laws to the extent it sees fit. 

From 1880 onward, Congress did attempt to do so. But until 

1917, when the Supreme Court upheld the Webb-Kenyon Act, its 

efforts to support and protect state alcoholic-beverage regulation 

were constantly frustrated by the courts. But decades after repeal, 

Congress had no need to speak further to maintain its support of 

state alcoholic-beverage laws, as the Supreme Court interpreted 

the 21st Amendment to protect those laws from challenge. 

In Granholm, however, the Supreme Court limited the protective 

effect of the 21st Amendment, and of the Webb-Kenyon Act, holding that the latter was limited by the Wilson Act. This interpretation of Webb-Kenyon is at odds with this history of the enactment. 

An analog of the Wilson Act supposed to be included in the WebbKenyon had been withdrawn during consideration of the bill, as inconsistent with what was ultimately enacted; that is, the Wilson 

Act was explicitly detached from the Webb-Kenyon Act. 

There was, moreover, no congressional discussion during the 

Webb-Kenyon debates about the importance of preventing discrimination against producers. There was, on the other hand, lots of talk 

about the need to shield state alcoholic-beverage regulation so that 

it might be effective. 

The court’s interpretation of the Webb-Kenyon Act is, of course, 

not binding on Congress. Congress can now do what it thinks right. 

Misunderstandings of Granholm are rampant. The court did not 

declare that interstate commerce in alcoholic beverages could not 

be burdened. The Dormant Commerce Clause does not do that for 

any products. 

The court held only that the 21st Amendment and the WebbKenyon Act, as the court interpreted it, did not protect intentional 

or facial discrimination against other state producers. Contrary to 

some claims that have been made, the Dormant Commerce Clause, 

as articulated and as applied, is not exactly clear and unequivocal. 

In the so-called canonical expression of Dormant Commerce Clause 

doctrine in the Brown-Forman decision, the court immediately concedes that it has proved impossible to apply the doctrine consistently. This is not a bad thing. 

The court has, in effect, cautiously refrained from treating the 

Dormant Commerce Clause as one-dimensional. It has looked to 

many factors in cases where it has held that no discrimination was 

demonstrated, and that state laws should, therefore, be upheld. In 

Exxon v. Maryland, the court rejected the claim that state law discriminated in favor of in-state retailers, declaring that the Dormant 

Commerce Clause protects interstate commerce, but not the business strategies of particular out-of-state sellers. 

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In General Motors v. Tracy, the court rejected an intentional discrimination claim because to accept it would threaten a highly regulated system of local utility. In Kentucky v. Davis, the court rejected the facial discrimination claim because the distinction was 

one which many, or all, states had made for many decades. 

H.R. 5034 is a modest step, consistent with constitutional jurisprudence, and respectful and protective of 75 years of state regulatory practices. The terms and conditions of distribution and sale 

of alcoholic beverages must be controlled by law, and not left up 

to the desires of thirsty drinkers and profit-maximizing sellers. 

State alcoholic-beverage regulations, since repeal, have attempted to constrain overselling and, thus, overconsumption and 

abuse. It has conversely attempted not to over-regulate and, thus, 

stimulate elicit and, therefore, unregulated manufacture, distribution and sales. 

It has aimed for moderation and regulation to achieve moderation in selling and moderation in consumption. This regulation has 

worked well. Congress should continue to support it. 

Thank you for your consideration. 

[The prepared statement of Mr. Diamond follows:] 

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Mr. CONYERS. Thank you. 

Also, from Harvard, is Professor Einer Elhauge, the Petrie Professor of Law at the Law School. And he is testifying on behalf of 

the Beer Institute. He is a former clerk for Justice William 

Brennen, and has taught previously at the University of California 

Berkeley, before coming to Harvard. 

Welcome this afternoon, sir. 


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TESTIMONY OF EINER ELHAUGE, PETRIE PROFESSOR 

OF LAW, HARVARD LAW SCHOOL 

Mr. ELHAUGE. Thank you, Chairman Conyers, Ranking Member 

Smith, and other Members of the Judiciary Committee. 

I am, as the Chairman said, Einer Elhauge, the Petrie Professor 

of Law at Harvard Law School, where I specialize in antitrust and 

statutory interpretation. I have been asked to present my views of 

the bill by the Beer Institute. 

Proponents of this bill argue that it is necessary to correct three 

problems: Case conflicts, deregulation, and excessive litigation. But 

when I reviewed the cases, I found that none of those three concerns was well founded. 

First, the alleged case conflicts largely reflected differences in 

case facts, or had been largely resolved by the courts through the 

common law process. Second, none of these cases actually resulted 

in deregulation. Third, because the courts have already clarified 

the issues, and state legislatures have responded with legally 

sound laws, the initial stream of cases has dwindled to a trickle. 

Today, there appears to be only one active case in this arena that 

has not already been substantively resolved by the trial courts. 

Even if those three concerns were justified, the proposed act 

would be a poor remedy for them. The act would greatly increase 

legal uncertainty, and could be expected to spawn new legal conflict 

and litigation. 

For example, ambiguities in proposed act, section 3a, mean that 

courts might variously interpret it to either have no effect, or to inversely preempt some, or perhaps even, all Federal statutes that 

conflict with state alcohol regulation. Those ambiguities are likely 

to induce a spate of new lawsuits. Only, this time, for the courts 

to figure out what section 3a means. Further, decisions that interpreted section 3a to inversely preempt Federal statutes could allow 

state regulations that permit anti-competitive conduct contrary to 

Federal antitrust policy. 

Section 3b would also create three new harmful exceptions to 

current Dormant Commerce Clause doctrine. First, section 3b 

would eliminate protection against state alcohol laws that have discriminatory effects on out-of-staters. This would allow states to discriminate by picking some seemingly neutral factor that has discriminatory effects. 

For example, the state could restrict sales by producers who sell 

a type of alcohol that is not made in the states; or who meet a production threshold that no in-state producer meets. Section 3b 

would, then, require sustaining such laws unless an affirmative 

discriminatory intent could be proven—a test which is difficult to 

meet, is likely to generate new case conflicts, and would not address the core concern that discrimination prompted by indifference 

to harms in other states is just as undesirable. 

Second, section 3b would allow discrimination in any form, even 

facial and intentional discrimination against anyone who is not a 

producer. Thus, states could pass laws that explicitly discriminate 

against out-of-state consumers. That would seem contrary to Congress’ strong pro-consumer policy. 

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er taxes on beer that will be sold to out-of-state consumers. Third, 

section 3b would permit a state to directly regulate interstate commerce. For example, the proposed act will allow a state to enact a 

law that requires producers to affirm that they will not charge future prices in other states below the price charged in the first 

state. 

The Supreme Court held such price-affirmation laws to be unconstitutional decades ago, observing that such laws interfered with 

the ability of those other states to regulate alcohol in ways that 

those states feel optimally advance their own 21st Amendment interests. 

These examples are not fantastic or theoretical; rather, most 

come straight from the pages of existing judicial decisions. Thus 

the—proposed by the proposed act is real and substantial. 

I am a big believer in states’ rights. But those rights also include 

the right of states to be free from regulatory interference and discriminatory effects from other states. I also strongly believe in protecting children. But I see no reason why states cannot protect children with non-discriminatory laws, given the ample powers they already have under the 21st Amendment. 

So far as I can tell, the only two concrete issues that proponents 

point to is that current case law might threaten either laws requiring in-person consumer purchases or in-state residency requirements for retailers. In my view, the current case law has already 

evolved to fairly clearly sustain such laws. But if those are the real 

concerns, the solution would be a much more narrow bill, not a bill 

that creates vast new exceptions to the constitutional jurisprudence 

that protects states from discrimination and interference from 

other states. 

The Dormant Commerce Clause may seem like an obscure technical topic, but it is the constitutional jurisprudence that really 

united this Nation into the world’s greatest free-trade area, preventing states from engaging in the sort of beggar-thy-neighbor 

protectionism that nations often use against each other. It is a vital 

part of what made America a great Nation, and its principles 

should not be unnecessarily cast aside. 

[The prepared statement of Mr. Elhauge follows:] 

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PREPARED STATEMENT OF EINER ELHAUGE


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Mr. CONYERS. Thank you very much. 

Ms. Tracy Genesen from Kirkland & Ellis is testifying on behalf 

of the Wine Institute. She has litigated Commerce Clauses challenging state regulations, including the Granholm case in the Supreme Court. 


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We welcome you this afternoon. 

TESTIMONY OF TRACY K. GENESEN, PARTNER, 

KIRKLAND & ELLIS, LLP 

Ms. GENESEN. Thank you very much, Mr. Chairman. 

I am Tracy Genesen, and I will pretty much focus my remarks 

today on Mr. Delahunt’s new language. I represent the Wine Institute, a public-advocacy association of California wineries, which includes more than 1,000 wineries and affiliated businesses. 

Those wineries represent a vital sector of the United States economy. America’s 6,700 wineries—the vast majority of which are family-owned farms, are responsible for more than $20 billion in sales 

in the United States, and support more than 1 million jobs. The 

passage of H.R. 5034 will greatly imperil this dynamic agricultural 

industry. 

Today’s wine-distribution system is shaped like an hourglass, 

with thousands of producers at the top, and millions of consumers 

at the bottom; but only a few wholesalers in between to distribute 

their product. United States’ wineries have an interest in evenhanded, robust state regulation, permitting them to ship wine directly to consumers and retailers. But wholesalers have an interest 

in maintaining this exclusive grip on the bottleneck between alcohol producers, wine retailers and consumers. 

H.R. 5034 is a piece of special-interest legislation for the benefit 

of those wholesalers, at the expense of retailers, producers, and 

consumers—literally, everyone else. In particular, H.R. 5034 would 

harm millions of American consumers—to reduced access to wine, 

increased prices, and reduced wine selection. 

And contrary to the rhetoric advanced by the wholesalers, 99 percent of these alcohol regulations are not vulnerable to Federal challenge. The only state regulations that are truly vulnerable in court 

today are the anti-competitive ones that discriminate against outof-state businesses or products. 

H.R. 5034, however, would eviscerate Commerce Clause challenges that protect the national union from states that discriminate 

in this way. And the Commerce Clause is the cornerstone of our 

national economic union. It applies to products and entities in the 

stream of commerce. It prevents state legislatures from affording 

in-state local market participants a competitive advantage or benefit without extending that privilege to out-of-state alcohol-market 

participants. 

Through legislative efforts, and when forced through litigation, 

states have cured this discrimination in two distinct ways. One, 

they have leveled up, which means they have extended the privilege to out-of-state interests as well. And, from our standpoint, this 

is the best pro-consumer remedy. But states can also level down. 

If they want to take the privilege away from the in-staters, then 

they have also cured the discrimination there. 

In short, the Commerce Clause requires evenhandedness, and so 

do Federal statutes concerning alcohol regulation, such as the Wilson Act. When a state regulates evenhandedly, or when it proves 

a legislation interest that cannot be met through non-discriminatory means, it will survive Commerce Clause scrutiny. 

134 

Since the Supreme Court’s Granholm decision, courts regularly 

uphold state statutes when plaintiffs fail to meet their substantial 

burden of showing impermissible state discrimination. And we 

have recent examples of state statutes being upheld in such cases 

in the 1st, 7th and 9th Federal circuits. 

Discriminatory laws basically fall into several categories. And I 

will mention a few here. Some state laws are facially discriminatory, like the Michigan statute. The Supreme Court struck that 

down in Granholm. Those statutes, on their face, apply to companies differently, depending on where they are located. Other state 

laws appear to be geographically neutral, but they might require 

an in-state presence, like the New York statute in Granholm; or exempt a local product from a tax, such as the Bacchus case; or impose wine-production tax that only in-state wineries can meet, and 

out-of-state wineries can’t. 

These statutes discriminate in purpose and effect. Under the 

Commerce Clause, such state statutes can be invalid for either of 

these reasons. H.R. 5034 would immunize these kind of alcohol 

statutes that do discriminate against out-of-state businesses in purpose and effect. Critically, the bill sweeps away the existing Commerce Clause standards and amends the Wilson Act to abolish 

evenhandedness. 

H.R. 5034 really allows only one kind of limited challenge for one 

type of wine business. It preserved challenges against statutes that 

intentionally or facially discriminate against alcohol producers. But 

even as to producers, states could escape H.R. 5034 by discriminating against out-of-state products. A good example of this is: A 

state like New York, where no zinfandel is produced, could ban a 

sale and shipment of zinfandel to New York residents. That would 

discriminate against California zinfandel producers, without incurring scrutiny under H.R. 5034. 

In place of the current legal standard that focuses on multiple 

factors to determine whether a state is discriminatory in purpose 

and effect, this bill calls for a narrow, intrusive inquiry into what 

state legislators intended. This is both highly speculative to prove 

and extremely difficult for courts to divine. 

As the Supreme Court in Bacchus pointed out, it could always 

be said that there was no intent to discriminate. Instead, the state 

legislatures couch it as an effort to help in-state industries; an effort to insulate them. H.R. 5034 confines courts to a narrow, second-guessing-like probe into legislative intent. 

Commerce Clause cases are not common. In fact, there is only 

one of them left. And if you compare these Commerce Clause challenges to civil-rights cases, in 2008, there were 32,000 civil-rights 

challenges in Federal court; compared to the initial 25 here, down 

to one, as we speak. 

When a state discriminates against out-of-state businesses without justification, Congress should want that discrimination invalidated. Such statutes are a blow to the economic union of 50 states. 

They undermine our Federal system. To put it bluntly, Mr. Chairman, the rule against economic non-discrimination among states 

prevents what our founders envisioned—interstate trade wars. 

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state wholesalers and retailers from market access. If passed, the 

bill would exempt specific types of wine businesses from Commerce 

Clause protection. This is virtually unprecedented in the law. 

Today, state-regulated, robustly regulated interstate wine shipping is available in 37 states and the District of Columbia. These 

permits in the states that allow direct shipping require I.D. checks. 

They require licensing. They require that the wine seller submit to 

the jurisdiction of the state. They require strict reporting requirements. And, if a winery or retailer runs afoul of one of these laws, 

under the 21st Amendment Enforcement Act, its state attorney 

general can take them into Federal court. 

There is more and clearer regulation of wine than ever before. 

Simply put, H.R. 5034 is a drastic solution to a problem that does 

not exist. In its original or amended form, it is a transparent attempt to maintain a lucrative anomaly for a few by eviscerating the 

Commerce Clause. 

And, finally, my last point: As the Bacchus court put it, and as 

Justice White so eloquently stated, ‘‘If we abandon the Commerce 

Clause in this way, the trade and business of our country would 

be at the mercy of local regulation; having, for their object, to secure exclusive benefits to citizens and products of particular 

states.’’ 

This Committee should decisively reject H.R. 5034. 

[The prepared statement of Ms. Genesen follows:] 

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Mr. CONYERS. Very persuasive. 

Michele Simon is research and policy director of the Marin Institute; has a master’s in public health from Yale School of Medicine, 

and a law degree from Hastings College of Law; and has worked 

extensively on the prevention of alcohol-related public-health concerns. 

Welcome. 


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TESTIMONY OF MICHELE SIMON, RESEARCH AND 

POLICY DIRECTOR, MARIN INSTITUTE 

Ms. SIMON. Thank you very much, Chairman Conyers—and to 

the Members of the Committee—for the opportunity to testify today 

in support of H.R. 5034. 

I am a public-health lawyer and the research and policy director 

at Marin Institute, a non-profit whose mission is to protect the 

public from alcohol-related harm. 

While the discourse of this bill has pitted different sectors of the 

alcohol industry against each other, that fight is irrelevant to us. 

Our only interest is what is in the best interest for the public’s 

health and safety. Indeed, Marin Institute often disagrees with the 

industry proponents of this bill and other policy matters, and will 

likely continue to do so. 

Our goal is to advance prevention policies to reduce the tremendous harm caused by alcohol consumption. Far from being a benign 

substance, alcohol use causes a wide variety of harm, even when 

consumed at what the Federal Government defines as moderate 

levels. 

In the United States today, alcohol remains the third-leading 

cause of preventable death. At least 85,000 deaths are attributable 

to alcohol consumption each year. Also, the economic costs of alcohol are estimated to have been $220 billion in 2005. Much of that 

cost is from lost productivity; meaning that businesses and our 

economy also suffer greatly. 

And while my organization is based in California, Marin Institute has always been a national leader, and we work closely with 

policymakers and public-health advocates at the state and local levels throughout the Nation. I can attest to the critical role that state 

regulation of alcohol plays in giving policymakers and advocates 

the tools they need to protect the public. 

Indeed, I just returned speaking from Wisconsin and Massachusetts, where state and local lawmakers, along with public-health 

advocates, were gathered to learn how they can help advance effective prevention policies to reduce alcohol harm in their communities. At both events, it was well understood that states have the 

authority to regulate alcohol; and, yet, this authority, which has 

largely been taken for granted, is increasingly coming under attack 

by those who want to see Federal law trump well-established state 

authority. 

The current state-based system of alcohol regulation has been in 

place for a long time because, for the most part, it works well. 

Moreover, due to the severity of alcohol problems throughout our 

country, numerous Federal agencies work to assist states in addressing alcohol-related prevention, treatment, law enforcement, 

and research; therefore, the CARE Act would go a lot way to help 

ensure that such Federal programs are not undermined by current 

legal threats to state-based regulations. 

I want to share three specific examples of state regulation to protect the public’s interests through prevention. The first is access to 

alcohol. The research is abundantly clear that the more access people have, especially youth, to alcohol, the greater the number of 

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sociated with increased availability. And states are in the best position to evaluate and address problems facing their communities 

and restrict access when and where it is needed. 

Another area where states need to be able to regulate is pricing. 

For example, policies that prohibit volume discounts make good 

sense from a public-health perspective. Substantial research shows 

that higher alcohol prices are associated with reduced alcohol consumption, especially in youth. 

Marin Institute is very concerned about legal challenges and 

pricing policies by certain chain stores in the retail sector. Cheap 

prices for consumers should not be the only consideration. In fact, 

such consideration should be secondary to public health and safety. 

A third important aspect of state regulation is the three-tier system. Requiring that alcohol be sold from producers to distributors, 

and then to retailers, has proven to be a necessary policy for protecting the health and safety of the public. The three-tier system 

helps to ensure that the state has adequate oversight of alcohol 

sales, helping to prevent aggressive marketing and sales tactics. 

Although how to best regulate alcohol might seem like any other 

rhetorical debate over balancing the interests of private industry 

with government, there is an important difference; diminished 

state authority will most certainly result in more lives lost, higher 

costs, and more families forever changed by alcohol consumption. 

Odds are that most people in this room know someone who has 

been negatively impacted by alcohol use. Make no mistake; this is 

not a rhetorical debate. This is about saving lives. 

For decades, alcohol has been recognized as being different because it is. The cornerstone of that recognition is a state’s authority 

under the 21st Amendment to regulate the sale of alcohol to ensure 

an orderly marketplace. I urge the Committee to strengthen the 

regulatory authority of states to ensure that the public health and 

safety of the American people remain a top priority, and to continue to seek additional ways to support state-level efforts to reduce alcohol harm. 

Thank you very much. 

[The prepared statement of Ms. Simon follows:] 

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PREPARED STATEMENT OF MICHELE SIMON


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Mr. CONYERS. Thank you, Ms. Simon. 

Before I yield to Lamar Smith, I would like to ask anyone—starting with our first witness—if anything that was said here would 


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lead you to want to remark about it by your fellow panelists, or any 

other final thoughts you might have about the subject matter that 

brings us here today. 

Mr. Attorney General? 

Mr. SHURTLEFF. Thank you, Mr. Chairman. 

You know, the only thing that strikes me is that there is all 

this—obviously, the Commerce Clause. I support and love the Constitution of the Founding Fathers. The 21st Amendment was an extraordinary time in our history where, for over a decade, we saw 

mostly failed Federal policy, and what it did to tear apart this 

country. It was a well-reasoned—well thought out. It was current. 

It was dealing with the problem. It was taken back to the states. 

And it gave back to the states what traditionally was theirs; and 

that is the regulation of alcohol. 

It is a unique product. It was a unique amendment. It is just as 

important a part of the Constitution as the Commerce Clause—as 

any other part of that Constitution. And that is why this is so 

unique. No other constitution dealt with any other products and 

services in this country. But this is different. It is unique. And we 

all know why. It has been spoken very clearly—the negative effects 

that alcohol can have on our society and, particularly, our youth. 

And so—would remind you that this is—this is particularly 

unique. It is the 21st Amendment. But the courts have now made 

it clear that you have the—you, as Congress, have control in defining the extent of the Dormant Commerce Clause. And that is why 

we are coming back to you, to ask for your help. 

Mr. CONYERS. The enforcer from Michigan—— 

Ms. SAMONA. Thank you. 

Mr. CONYERS. What have you to say? 

Ms. SAMONA. I like that title. Thank you, Mr. Chairman. 

Mr. CONYERS. Regulator, perhaps? Okay. 

Ms. SAMONA. I just want to comment on what Professor Elhauge 

had indicated about these losses—some of these losses have led to 

deregulation. Should we wait until the bottom falls out for us to 

act? Every lawsuit chips away at our ability to regulate this highly 

regulated product—every single lawsuit. 

Of the 20 losses that have existed, one state or another had to 

act in one way or another to comply with what happened in regards to that lawsuit. And what happens when Michigan gets sued 

with Siesta Village, and we lose that lawsuit, but then two neighboring states, Texas and New York—the same identical issues and 

lawsuits—get that lawsuit and—well, they are not neighboring in 

that sense, but the results are exactly the opposite. 

So when the Utah attorney general says, ‘‘What am I supposed 

to tell my regulators or other states? Who do you follow?’’—are you 

extra cautious because Michigan lost, or do you follow the New 

York model? Do you follow the Texas model? That is why Congress 

really needs to come in here—the fact that none of these have led 

to deregulation—they have absolutely led to every regulator in that 

state to make some kind of change, or that legislature to comply 

with that lawsuit. 

So this is a public-interest issue. This is public interest versus 

the private sector. This is money versus protecting the health, safety, and welfare of the general public of the citizens of the State of 

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Michigan or any other state. That is the bottom line here, what we 

are talking about. All these projections about ‘‘a zinfandel is not 

made by New York, but New York discriminates’’—why in the 

world would the State of New York discriminate against a product 

they don’t make, when they could make money for their state? This 

is a multimillion-dollar business for all of us in one form or another. But as the regulator, I don’t just carry the money that I 

bring to the states. I carry the responsibility that it comes with. 

And that never goes away. Thank you. 

Mr. CONYERS. I wonder what he does tell them. 

Mr. SHURTLEFF. Litigate—spend more taxpayers’ dollars litigating the question—litigating the question—more money spent— 

taxpayers’ dollars that could be going to educational programs like 

our parentsempowered.org, where we are giving information to parents in order to provide more information to their kids. That is the 

problem. 

Mr. CONYERS. Mr. Doyle? 

Mr. DOYLE. When I hear calls for Congress to back away from 

states’ regulatory authority, and to provide them with even more 

primacy, I think about the important role that Congress has 

played, and the Federal Government has played—and I also stated 

that I don’t want the Federal Government to back away. 

I want to point out some of the important things the Federal 

Government role played in alcohol regulation and things like underage drinking. As a 19-year-old in 1979, it is certainly emblazoned on my mind what an important role the Federal Government 

had in passing effectively a 21-year-old drinking age nationally. 

And without that role, that certainly wouldn’t have happened as 

quickly, and may not have happened at all, but everyone can conjecture. The 0.08 national blood-alcohol level effectively was also 

something that the Federal Government had a lot to do with. 

So I think there is a Federal role. It isn’t to say that the states 

don’t have primary role. Look, I just want to remind everyone that 

it isn’t all bad what the Federal Government does. And in this 

realm, in particular—and that people like me look for protection. 

So, thank you. 

Mr. CONYERS. Did you feel that way when you were 19 and the 

law kicked in? 

Mr. DOYLE. No, but I will tell you, sir—I registered to vote. And 

I voted the next time around—not for the guy who didn’t—well, 

whatever. You know what I am saying. 

Mr. CONYERS. Well, I think I get your drift. But—— 

Mr. DOYLE. At the time, I wasn’t in favor of it. Let us put it that 

way. 

Mr. CONYERS. Professor Diamond? 

Mr. DIAMOND. Thank you. I would like to make three points. 

First, we have been told that there is a problem because there 

will be no longer a possibility to bring a case purely for discriminatory effects. Donald Regan, a professor at the University of Michigan wrote a very long article in 1986, in which he showed that 

there had never been, up to that point—and I believe it is still the 

case—a Supreme Court case—in which the Dormant Commerce 

Clause was used to reject a state law in the absence of either intentional or facial discrimination. 

157 

Indeed, if you look at how the Supreme Court is beginning to describe Dormant Commerce Clause jurisprudence—in United Haulers and in Kentucky v. Davis—two recent cases—they no longer go 

through what they used to—the old-fashioned incantatory repetition of three kinds of discrimination—facial, intentional, and effectual. They do not mention effectual anymore. 

We have been told that there is a problem. As a matter of fact, 

this doesn’t mean that discriminatory effects will become irrelevant. They will be very important as evidence on the question of 

whether there is intentional discrimination. We are told that that 

won’t work because, as in Bacchus, the State of Hawaii said—denied that they were trying to intentionally discriminate. Well, the 

important point about Bacchus is the United States Supreme Court 

didn’t believe them. 

Secondly, we were told that price affirmation—the striking down 

of price affirmation would now be in jeopardy. This is simply false. 

And it is not false—it could be false on the grounds that BrownForman was a case of extra-territorial regulation, which does not 

really depend on the Commerce Clause. But more importantly, in 

the subsequent case, Healy, the court said that ‘‘Price affirmation, 

both prospective, simultaneous, and retrospective, constituted facial 

discrimination.’’ That would still be invalid. 

And, thirdly, we have been given several tone poems about the 

importance of the national union, and I certainly share those. But 

we are not a single-market system. We are a Federal system. And 

I would like to—I can’t quote it, unfortunately—I didn’t bring it 

with me. But I can refer to another tone poem from a famous Harvard professor, who said, ‘‘It is only the fact that we are a Federal 

system where states still get to make laws that distinguishes us 

from Soviet totalitarianism.’’ Thank you. 

Mr. CONYERS. Professor Elhauge? 

Mr. ELHAUGE. Thank you. 

So, one statement I would like to respond to is the claim not only 

that the amount of litigation has been excessive, but that it has increased. Now, I don’t know exactly what the normative standard is 

for whether 20 to 30 cases is excessive or not—it is less in some 

other areas. But the one thing that is clear to me is that the rate 

has declined. There is far fewer cases now than before; so that if 

this is really the concern, it is just too late. It might have been a 

good reason a few years ago. It is not a good reason now for legislation. 

Second, the claim was made that, ‘‘They haven’t resulted in deregulation yet, but the cases might.’’ I don’t think any of the cases 

pose any serious threats of general deregulation. The language is 

quite clear about the 21st Amendment powers of the states. They 

can ban alcohol. They can impose any tax they want to raze alcohol. They can take over the sale of alcohol. And they can have a 

three-tier system and require, I think, in-state residence for retailers, crucially. 

Now, Ms. Samona, I think, I have some sympathy with, because 

she suffered from the Siesta Village district court case, which I 

think was wrongly decided. It was mooted on appeal. And, actually, 

there is not just two, but there is three appellate courts that, since, 

have come out the other way. So I think the law is actually now 

158 

fairly clear that in-state residency requirements for retailers are 

fine, because it is inherent in defining who the retailer is in the 

three-tier process. 

But if that is really a concern—and there are two areas where 

I identify small, technical conflicts that I think were largely moot, 

but Congress could act—one of those is that area. But that would 

require, simply, a statute that said, ‘‘The Dormant Commerce 

Clause should not be construed to invalidate in-state residency requirements for retailers,’’ not this much broader statute. 

The claim was also made that the discriminatory-effects test has 

never been used independently of intent. I mean, certainly, the 

courts have articulated it as separately. There is some controversy 

on this issue, I think, mainly because there is ambiguity about 

what ‘‘intent’’ means. Is ‘‘intent’’ subjective intent? Or is it an objective intent that we infer from effects? 

Sometimes commentators think that, really, in all cases where 

courts are talking about effects, they are saying, ‘‘Well, we infer the 

objective intents do what you have actually had the effects of.’’ 

That actually creates a new ambiguity—a problem with this statute, because, right now, that is not a problem because effects or intents suffice. 

With this statute, the courts would have to deal with this new 

question of, ‘‘Well, when they tell us we can only go on intents and 

not effects, are we allowed to infer the court will ask the intent 

from the effects anymore? Or are we not allowed to do that?’’ I 

would anticipate a new round of court splits on that issue, if this 

bill is passed. 

And, then, finally, the claim was made that the price-affirmation—the notion of the price-affirmation laws will be sustained 

under this statute is simply false. The statute does get rid of the 

direct-regulation prong, which is what Brown-Forman relied on. 

There are some cases that talk about those laws as also being discriminatory. But what they say is they are discriminatory against 

out-of-state consumers. And the one thing that is clear from this 

act is it doesn’t cover discrimination against consumers. 

Mr. CONYERS. Attorney Genesen? 

Ms. GENESEN. Thank you, Mr. Chairman—just a few quick 

points. 

First, I worked with the wine-producer and retailer industry for 

about 10 years now. And I can tell you two things about them. 

First, they are deeply committed to preventing underage access. 

We all have children. We are all concerned that the state alcohol 

regulations are in place, and they are effective. And, second, they 

have both been deeply committed to working with state legislatures. 

The first effort is always, ‘‘Can we work something out at the 

state legislative level for a balanced, evenhanded regulation? And 

if, you know, at the last resort, we have to litigation in those states 

that stubbornly insist on discrimination, then we go to court.’’ 

And I have to respectfully disagree with Professor Elhauge on 

the issue of wine retailers being allowed limited regulated market 

access into states. The only case that I have brought has to do with 

the State of Texas, where in-state wine retailers are given the auVerDate Aug 31 2005 09:54 Dec 08, 2010 Jkt 000000 PO 00000 Frm 00162 Fmt 6633 Sfmt 6601 H:\WORK\FULL\092910\58477.000 HJUD1 PsN: 58477
159 

thority, by statute, to remotely sell and ship wine to Texas consumers. 

An Arkansas wine retailer, on the other side of the border, cannot do that—precluded from being able to do that. The Commerce 

Clause protects articles—wine—in interstate commerce. Producers 

are selling wine; wine retailers are selling wine. If the State of 

Texas wants to put very intense regulatory teeth into a evenhanded wine-retailers bill, we are all for that. But to preclude wine 

retailers from selling wine across state borders violates the Commerce Clause. 

Mr. CONYERS. Ms. Simon? 

Ms. SIMON. Thank you—just two quick points. 

One—I think, just to take a step back and look at the other picture, in response to the minimization we are hearing about the litigation, and how many lawsuits there are—and, of course, many of 

these lawsuits are working their way up to higher levels, so that 

means they will have even broader impact in those jurisdictions. 

But it is important to remember that litigation is really just one 

strategy being waged in what I think of as a larger march toward 

deregulation by many sectors—by different corners of this industry, 

frankly. And this is something that we are very concerned about 

at Marin Institute. We just did a whole report about the efforts to 

privatize and control states. And I know that is not what we are 

discussing here, but it is relevant to the company Costco, which 

has brought litigation in the State of Washington, and is currently 

funding a initiative there to privatize the system. 

And so, you know, litigation is one—these companies will use any 

tools at their disposal. And what we are asking for here is for Congress to help limit this one particular strategy of litigation while, 

of course, they will continue to use other forms to get the deregulation that they ultimately want. 

Second quick point is this idea of the baseball analogy that was 

made about the away team versus the home team—there is a reason—and it is not about discrimination—that we make sure that 

licensees have a local presence in states. And that has to do with 

accountability. 

And that brings me to the point that it is important to remember 

that while we are hearing a lot about small producers, most of the 

alcohol sold in this country is, in fact, manufactured by foreign 

multinational companies. So Anheuser-Busch was taken over by a 

Belgian-based company, InBev; MillerCoors is a joint venture 

owned by two foreign companies. We did a whole report, in California, about the wine industry there, which is increasingly—these 

so-called small family wineries are increasingly being bought out 

by multinational companies that are certainly not based in California and, in some cases, not even based in the U.S. 

So the point is we need state-based regulation to require local 

presence, because we can’t get at it. As this industry becomes more 

and more consolidated, more and more globalized, it is critical to 

be able to regulate as much as we can at the local level. And not 

just retailers, but wholesalers, sort of are our last gasp at maintaining a local accountability over this industry. Thank you. 

Mr. CONYERS. Well, I thank you all, and recognize my friend, 

Lamar Smith. 

160 

Mr. SMITH. Thank you, Mr. Chairman. 

Professor Diamond and Professor Elhauge—is that correct? 

Mr. ELHAUGE. Elhauge—yes. 

Mr. SMITH. Elhauge—let me go back to the question of the scope 

or extent of the problem, particularly with regard to lawsuits. 

Could you give us an idea of how many lawsuits are pending, 

and how they compare, say, to the historical average, so that we 

can put them in perspective? 

Mister—Professor Elhauge? Yes. 

Professor Diamond? 

Mr. DIAMOND. There have been three times in—since repeal— 

when there have been bursts of litigation, I think. One was in the 

1930’s, at the time when the Supreme Court finally and clearly 

said that the 21st Amendment protected state law. The second was 

in the 1970’s and 1980’s, when there was a series of challenges to 

state laws, claiming that they were preempted by the Sherman Act. 

And the recent one was in the last 7 years—starting before 

Granholm, and including Granholm. And I want to second what Michele Simon said. It is not a matter simply of counting lawsuits. It is a matter of people saying that 

what they want to do is to be able to sell beer, for instance, like 

they could sell potato chips. It is a matter of a general sense that 

this—which has been referred to by many people—that, ‘‘Prohibition was a long time ago; alcohol really isn’t so different. Why can’t 

we just treat it like anything else?’’ 

It is a view which is reflected when the FTC, sometimes talks as 

if the only issue with alcohol is, ‘‘Is the price as low as possible, 

and is the availability as wide as possible?’’ But, as we all know, 

that is not the point with alcohol. 

Mr. SMITH. Thank you, Professor Diamond. 

Professor Elhauge, you have anything to add to that? 

Mr. ELHAUGE. Yes, just in terms of an actual count of cases now. 

The count has varied for different people. But I think in the mid 

20’s is overall—since Granholm. But in the last 12 to 18 months, 

there is only been three filed. So that is a declining rate. One of 

them was dismissed; one of them had facial discrimination—they 

ruled in favor of the plaintiff; and one of them is still awaiting actual substantive resolution. 

There are five other sort of cases that—two which were resolved 

on appeal, with issues like attorney’s fees still. But there are other 

cases—three cases that are on appeal that were in trial. But in 

terms of actual active trial litigation, there seems to be only one 

right now. And the new filing rate does not suggest an increasing 

rate. 

Mr. SMITH. I see. Thank you. 

Next question—Professor Diamond and Ms. Genesen—the revised legislation says that the states cannot discriminate against 

out-of-state producers. Are there any examples of that occurring 

now? 

Mr. DIAMOND. Well, there is a lawsuit—— 

Mr. SMITH. Except—yes. 

Mr. DIAMOND. There is a lawsuit—— 

Mr. SMITH. Right. 

Mr. DIAMOND. I am not—— 

161 

Mr. SMITH. Anything, Ms. Genesen? 

Ms. GENESEN. Yes, Mr. Smith, there are still laws on the books 

that require an initial visit by a consumer to a winery before that 

consumer can, then, purchase a wine. So if you live in Oregon, say, 

you know, Indiana is going to require that, as a consumer, you fly 

all the way out to Indiana in order to purchase the wine. And, 

then, you may be able to purchase it over the Internet. 

So that is still on the books. There are several states that still 

have production caps in place. And these production caps—they 

discriminate against wineries by the amount they produce every 

year. And they don’t—that there is no relationship to any activity 

that they are doing in the concerned states. And so they just—they 

let their own wineries ship—they usually set the gallonage cap at 

the highest winery in their own state. 

Mr. SMITH. Okay. 

Ms. GENESEN. And then they preclude others. 

Mr. SMITH. Right. Thank you. 

Mr. Chairman, I would like to sneak in one more question. 

And this would be for you, Ms. Genesen, Professor Elhauge and 

Mr. Doyle. Just very quickly, what suggestions do you have for improving the pending legislation? 

And, Ms. Genesen—if you want to start? 

Ms. GENESEN. Yes. Thank you, again, Mr. Smith. 

We really do have in place a very, very sound, workable framework for analyzing these cases, which really strikes the appropriate 

balance between robust 21st Amendment regulation, which is still 

intact—alive and well—and entry for wineries and retailers. 

Mr. SMITH. Okay. Thanks. 

Professor Elhauge? 

Mr. ELHAUGE. I would say, one, eliminate section 3a, because, 

right now, it either means nothing, or it means something quite 

unclear and ambiguous. And usually if the best thing you can say 

for a section is, ‘‘Maybe it means nothing,’’ we should get rid of it, 

I think. 

Mr. SMITH. Okay. 

Mr. ELHAUGE. Then, with section 3b, I just think it needs to be 

drastically narrowed or eliminated. As far as I can tell, the main 

concern that has come out of this hearing is really protecting children, having I.D. checks. Again, I think that the law is allowing 

in-person sales requirements and in-residency requirements. But 

those two things could be clarified so Congress could say, without 

having this broad permission of discrimination—simply say, ‘‘States 

are allowed to require an I.D. check—in-person sales—if they want, 

or in-state residency requirements for retailers.’’ 

Mr. SMITH. Okay. Thank you. 

And Mr. Doyle? 

Mr. DOYLE. I think there is a lot of things that small brewers 

would like to see help with. But if you look at my testimony, the 

two things that I speak about are labeling laws that might discriminate; so Federal labeling requirements that trump state labeling requirements would be something. 

And we also talked about state franchise laws, which are used 

to, you know, dictate the terms of trade with small brewers. And 

that is not really what the laws were made for. So state franchise 

162 

law—a Federal franchise law exemption for small brewers would be 

something else that would help. 

Mr. SMITH. Okay. 

Those are helpful answers. I thank you. 

Mr. Chairman, thank you. 

Mr. CONYERS. Gentleman from New York, Mr. Dan Maffei? 

Mr. MAFFEI. Hi, Mr. Chairman. I thank you, and I thank the witnesses for being here. 

This is a very interesting debate. It seems that there is some 

agreement on the panel that current three-tiered system does 

work, and that the key thing is to maintain it. It is very interesting—I have never heard quite such a spirited debate on how to 

best maintain the status quo, with half the panel saying that the 

best way to maintain the status quo is to pass this new law, and 

the other half saying, ‘‘Oh, gosh. We don’t want to do that.’’ 

But it is very interesting. Also, it seems the crux of this is 

whether anti-discriminatory practices would be hurt or helped by 

the new law. 

So I guess I will start by—and I don’t have a lot of time, so I 

can’t ask everybody. 

But, Mr. Doyle, since you are an actual practitioner, what is your 

fear in terms of how this would encourage states to pass anti-discriminatory laws that would, say, discriminate against your product? And to the extent that you can be specific, I would ask you 

to be specific about—what is your fear? 

Mr. DOYLE. What am I worried about? 

Mr. MAFFEI. Yes. 

Mr. DOYLE. And, again, I talked about franchise laws. I talked 

about labeling laws. I gave you some examples of a couple of 

states—— 

Mr. MAFFEI [continuing]. Have—that is already happening, and 

you can challenge them in court now. But you think if this law 

were passed, you wouldn’t be allowed to do that? 

Mr. DOYLE. Yes. It think that is, in fact, part of the reason for 

the law. And the other thing would be differential taxation rates. 

That is something else that we would be concerned about. Those 

are three examples. 

Mr. MAFFEI. Professor Diamond, do you think the CARE Act 

would lead to those issues? And, if now, how do you think it would 

prevent those sort of things from happening? 

Mr. DIAMOND. Well, first of all, as far as labeling goes, states 

have control now to pass any labeling laws they want. The Federal 

labeling statutes are not preemptive. The only Federal labeling 

statute that is preempted—that claims preemption is the healthwarning label that was passed when—in the 1980’s or much, much, 

later—and that has actually never been litigated to see if the 21st 

Amendment has any relation to that. 

But the Federal labeling law does not trump state law in the— 

I can just refer you to the Broncher case, among others. Differential treatment of taxation—Federal Government does it. States do 

it. The question is—we can envisage schemes in which something 

might be done, and we are quite confident is only being done in 

order to hurt—people at—to the benefit of inside people. If that is 

the case, it would be vulnerable; otherwise, not. 

163 

Mr. MAFFEI. I mean, do you think the CARE Act would promote 

more of this or—— 

Mr. DIAMOND. I think the CARE Act would help prevent continued erosion. Judge Calabresi, in the 2nd Circuit, in the case in 

which they upheld the state law, insisting on physical presence for 

retailers, in effect intimated that the Supreme Court is beginning 

to—has been limiting the scope of the 21st Amendment, and what 

he delicately suggested was not particularly a principled way. 

And while you can’t change what the Supreme Court does—and 

neither can a circuit court of the United States—you can, in Congress, under your Commerce Clause powers, make clear that you 

still wish to support state laws. I might just say that the language 

about primary responsibility being in the state is language which 

has, in the sense of Congress, was mentioned not so many years 

ago, in the STOP Act. 

But, more importantly, in the 1930’s, Congress repealed the Reed 

Amendment, which was passed in 1917. The Reed Amendment said 

that if a state banned the sale of alcoholic beverages, the Congress, 

then, said it was illegal to ship alcoholic beverages into that state. 

This was passed because—this was proposed by Senator Reed, the 

senator from Missouri, who was known, then, as ‘‘The Senator from 

Anheuser-Busch,’’ because he was hoping to embarrass the anti-saloon league because he thought that they wouldn’t want to make 

states decide that if they banned sale within the state, they 

couldn’t let people buy from other states. The anti-saloon league 

took him up on the bet. 

The important point is, in the 1930’s, Congress said, ‘‘We are repealing this because it is inappropriate for us to be attaching conditions to how states regulate.’’ I think that shows a congressional 

recognition of primary responsibility being in the states. 

Mr. MAFFEI. Thank you, Professor Diamond. 

I do want to ask Ms. Genesen one question. We have been talking about preferences, and you mentioned wine from other places. 

It does seem to me that there might be some valid reason to have 

some preference some, you know, local content or local control, particularly when it comes to alcohol consumption. Now, I say this as 

somebody who has local beer wholesalers who are family businesses that go back generations that employ hundreds of people; 

but also local wineries in Upstate New York and the Finger Lakes. 

I have small craft breweries. And I have an Anheuser-Busch brewery locally. 

So, on this issue, by the way, you might note that there is a hard 

place here, and a rock here, and I am caught between them. 

But I do want to ask you: I mean some of the Internet examples 

you used—I mean, is there any reason why you would want to have 

some sort of bias toward local or, you know, somebody who—as opposed to being able to order wine from across the country or even 

across the world? 

Ms. GENESEN. Well, interestingly—thank you for the question. 

And, interestingly, the in-state wine industries across the country, including places like Massachusetts and New York, have welcomed these evenhanded bills and laws. They have, you know— 

they feel that their in-state legislatures help them in other ways, 

by promoting their industry; that they don’t need to be shielded 

164 

from competition, because, what they would like to do is they 

would like to ship wine all over the country, in a regulated way, 

too. 

And so if each state starts protecting its own wineries, then nobody can ship anywhere. And so our work with the in-state wine 

industries around the country has been very valuable to demonstrate to us that they are very open to competition. In fact, a lot 

of their wines are award-winning wines. And they feel like they 

can compete on the same shelf, and with the same consumers as, 

say, California wines. 

With respect to alcohol consumption, which was the other part 

of your question, we very much in agreement that states ought to 

engage in robust alcohol regulation regarding consumption. And 

that each state should be able to do that with I.D. checks, sting operations—whatever it takes to control the local underage-access 

problems. 

But just as far as insulating states from competition—our experience is that wineries welcome it, and they really are ready to compete. 

Mr. MAFFEI. Ms. Simon, I am out of time, but you look a little 

skeptical with—— 

Ms. SIMON. Sorry—hard to hide that. 

So we are opposed to Internet shipping. And the reason for that 

is concerns over—you know, youth don’t need any more ways to get 

access to alcohol. And this idea of requiring, you know, IDs—I 

mean, there are a lot of problems with third-party I.D. checks. We 

can’t expect FedEx to be checking IDs when these, you know, bottles get delivered to who knows where. 

So, you know, it is disingenuous to me to separate, you know, 

saying that we really want—support states to control youth access, 

but, you know, we don’t want—you know, this word ‘‘discrimination,’’ I think is being tossed around a little too freely, when these 

aren’t mutually exclusive—this idea of giving states the ability to 

control access and, yet, you know, opening up state borders to be 

able to ship wine all over the country. 

And, you know, wine isn’t a benign product either. I think the 

wine industry likes to kind of think of wine as not benign, and it 

is 14 percent alcohol in most cases. And also, we are very concerned about opening the floodgates. So if you let wine be shipped 

all over the country, you know, what is next? 

And so, to me, it is really about restricting as much as, you 

know, reasonably feasible, access to alcohol. 

Mr. MAFFEI. Thank you, Ms. Genesen, 

I think you made your point very well. And I do want to thank 

the Chair and the Ranking Member for their indulgence. 

Mr. CONYERS. Senior Member of the Committee, from Virginia, 

Bob Goodlatte. 

Mr. GOODLATTE. Thank you, Mr. Chairman. I appreciate your 

holding this hearing. And I appreciate the testimony of all the witnesses. This has been very, very interesting. 

I believe that the 21st Amendment gives the states special authority to regulate the importation and transportation of alcohol 

within its borders. And, thus, I am naturally inclined to give great 

deference to state laws regulating alcohol. 

165 

However, when H.R. 5034 was originally introduced, I had concerns that the legislation went too far. I thought the language was 

too broad and could be read to pave the way for allowing states to 

pass facially discriminatory laws that went beyond the ruling in 

the Granholm decision. And I thought it was unnecessarily—that 

it unnecessarily stifled the enforcement of antitrust law. 

However, I am very pleased with the changes in the proposed 

manager’s amendment. I believe that these changes go a long way 

toward striking the right balance between the strong right of states 

to regulate the sale and importation of alcohol and the interest of 

out-of-state businesses seeking to sell product in the state. 

While I still have some concerns, and will continue to work with 

the beer producers and the wine producers, some of whom are in 

my congressional district in Virginia, I think that we can work on 

those as we move forward. 

I also think that the number-one concern that we should have is 

the same concern that this Congress had when it passed the 21st 

Amendment back in the 1930’s. And that is to make sure that we 

are doing everything we can to protect this unique product from 

being abused. And, therefore, I think the states should be entrusted, first and foremost, with that authority. And any changes 

that we make in the law should be geared toward making sure that 

we are keeping alcohol out of the hands of children, and are allowing the states the maximum authority that they need to make sure 

that it is properly regulated. 

So nonetheless, I have heard some complaints from various 

sources about ways that this law could be burdensome upon beer 

producers and wine producers. 

I would like to ask Mr. Doyle—one of the concerns I have heard 

is that the State of New York has a desire to require state-specific 

labels, UPC labels, on all bottles entering the state. I think that 

is because they have a deposit on their bottles. And so if you don’t 

have some kind of identifying indication, and you buy beer and 

wine or something like that in Pennsylvania, and they don’t know 

that it was not purchased in New York—they take it across the 

line and they get reimbursed for all these bottles. 

And so proposals have been made to impose some pretty severe 

restrictions on out-of-state producers. And opponents of H.R. 5034 

say that the current Delahunt draft would give states the ability 

to enact such laws. 

And I am wondering if you believe that the amended language 

would still allow a law such as the proposal in New York, requiring 

state-specific UPC codes to move forward? And, then, I will see if 

anybody else wants to comment on that, too. 

Mr. DOYLE. Well, as you know, I am a business person. I am not 

an attorney. But the attorneys that I have spoken to have told me 

that, yes, that is a concern. 

Mr. GOODLATTE. And I know that the water-bottling industry— 

it is either through legislation in New York, or through a lawsuit— 

been able to argue, under the Interstate Commerce Clause, that 

that is an unfair burden on interstate commerce to require out-ofstate bottlers of water to put these special UPC codes on, and so 

they are exempt from the law. 

166 

And I am wondering, since this is not an issue that relates to the 

actual regulation of alcohol—actually, we are talking here about 

the empty containers afterwards—isn’t there some easy solution to 

this problem that would make it clear that the law simply doesn’t 

cover the containers that might be shipped from out of state? 

Mr. DOYLE. Well, in 5 minutes, I had a couple of examples. And 

that was, you know, a very recent one. But I will give you an example. 

Professor Diamond was talking about government warning labels, and the fact that the—you know, there is no statutory reason 

why the Federal-Government warning label would trump state-government warning labels. We now have a situation where the various localities have asked retailers to put calorie counts and other 

nutritional information for each particular city or town you might 

be in. 

My concern would be something like this—you could have 50 government warning labels necessary on—or 25 in 25 different states. 

Mr. GOODLATTE. Since my time is running short, and we have 

got a vote—— 

Mr. DOYLE. Yes. 

Mr. GOODLATTE.—I am going to turn to Professor Diamond, because he is shaking his head, and doesn’t agree with that. 

Mr. DIAMOND. Well, I think I was misunderstood. I said that the 

Federal warning label is the only act of Federal regulation involving alcoholic beverages which specifically claims to preempt state 

laws. The laws involving the labeling regulations in the original 

FAA do not. 

Ms. SAMONA. May I jump in on that, please? 

Mr. GOODLATTE. Sure. Yes. 

Ms. SAMONA. Because labeling is an issue that states have an absolutely right to control at this point, because the Federal Government—has given states that authority and power to do that. In 

fact, in Michigan, just a few weeks ago, we took a motion to reconsider labels of this alcohol energy drinks that are—— 

Mr. GOODLATTE. But let me interfere. We are not talking about 

the content of the bottle. We are talking about the bottle itself 

here. So what I am asking you is, because I am supportive of the 

effort to protect the states’ rights under the 21st Amendment—— 

Ms. SAMONA. Yes, sir. 

Mr. GOODLATTE [continuing]. Can’t we find a way to take off the 

table an issue like whether or not a state would discriminate between a bottle that is used to put alcohol in it, and a bottle that 

is used to put water in it, as to the recycling process that that state 

wants to enact for recycling. That seems to be the issue here that 

we need to find a way to resolve. 

Ms. SAMONA. I think that may be an issue in Mr. Doyle’s state. 

It isn’t an issue in our state. I think there is a number of factors 

that come along with that. You know, it is the green initiative; it 

is the recycling initiative. It is a control mechanism. 

Michigan has Wisconsin as a border state. Wisconsin’s return laws are only $0.05 a can. Some of them don’t even have a return—— 

Mr. GOODLATTE. I understand the problem. It just seems to me 

that, in the context of this legislation, that issue could be—and we 

167 

probably ought to focus, moving forward, to make sure that that 

issue is off the table on this. 

And let me ask one other question. Under the Delahunt amendment to H.R. 5034, would a state be able to enact a law that is 

facially neutral but, in effect, discriminates against out-of-state 

producers? 

And I will start with you, Professor Diamond, and then we will 

go to Professor Elhauge. 

Mr. DIAMOND. Yes, if it is deemed to be intentionally discriminatory. 

Professor Elhauge, in his written testimony, said that that is unlikely to occur because courts are reluctant to tell legislatures that 

they have been, indeed, just playing cute, and being artful. I don’t 

happen to agree that is the case. And if it is the case, that would 

suggest that maybe courts should do that and not overly intrude 

on the legislative process by claiming that they find discriminatory 

effects. 

Discriminatory effects is a very problematic issue in the academic literature, because it so easily, as Lisa Heinzerling and others have pointed out, turns into abusive and Lochner-like supervision of legislative decisions by the courts. They could simply, if 

they believe—and, as Professor Regan says, ‘‘Judges decide questions of motive all the time.’’ 

If they believe that this was done for the purpose of discriminating against—— 

Mr. GOODLATTE. Got to give it to him because time is of the essence here. 

Mr. ELHAUGE. So I think that courts are reluctant to look at the 

subject of motive of legislators. There is this complicated question 

I alluded to earlier—whether effects tests really differs from looking at objective intent—the one inferred from the effect. 

But I do think if a court does not find intent, this statute clearly 

would allow laws that have discriminatory effects—and that that 

is, in fact, harmful because part of the point of the Dormant Commerce Clause is also to police states’ laws that are indifferent to 

the harms that they cause out of state. 

So—political process is—accountable to everybody who is benefitted and harmed by what they do. And if it is non-discriminatory, 

they weigh those benefits and harms well in the political process. 

But if many of the harms are on the outside—with out-ofstaters—that their discriminatory effects and all the benefits are 

in-state—even if they don’t care about the—effects, it still distorts 

the political process. 

When I think about the issue, I think, ‘‘Well, how would we feel 

if China passed a law that discriminated against U.S. producers 

and said, ‘It is fine because we didn’t really care about U.S. producers. We are not trying to harm them; we just don’t take them 

into account.’ ’’ 

Well, I think we would still have just as big a problem with that. 

And the fact that we are only accountable to domestic interests 

are—is what caused that—whether or not they are intentionally 

thinking about harming out-of-staters. 

Ms. SAMONA. May I jump in here, please? 

168 

Mr. GOODLATTE. That is up to the Chairman. My time has expired. And Ms. Genesen wants to comment, too. 

Mr. COBLE. Mr. Chairman, may I ask the Chair a question? 

I have been here all day, since you have—since the rooster 

crowed. Do we still have time to put questions to the panel? 

Ms. JACKSON LEE. Mr. Chairman—— 

Mr. CONYERS. We are going to have everyone here. The time will 

be divided evenly between the last three members of the panel. 

And, then, all other questions will be submitted. 

Mr. COBLE. I could come back, Mr. Chairman, if you want us to. 

Mr. CONYERS. Well, I want you to, but the other seven don’t want 

you to. 

Mr. CONYERS. So let us just divide it up. And Rick Boucher is 

very—let me recognize Ms. Genesen, and then Rick Boucher, subcommittee Chair in Energy and Labor. 

Ms. GENESEN. A statute like existed in Massachusetts, which— 

the effect of which was to prevent 98 percent of interstate commerce in wine from Massachusetts’ market access—that was the effect. That kind of statute would be immunized from challenge if the 

amended version were to pass. 

Mr. CONYERS. Chairman Boucher? 

Mr. BOUCHER. Mr. Conyers, thank you very much. I appreciate 

your having this hearing today. I am going to be very brief. 

Professor Elhauge, I am—and I am sorry if I have mispronounced your name—I am viewing this through the lens of what 

is in the consumer interest. And I would like to have your commentary on whether—if the bill, as amended by the manager’s 

amendment, becomes law—that would advance or harm the consumer interest. Would it limit choice? Would it raise prices? How 

would the consumer be affected? 

Mr. ELHAUGE. Thank you. 

I think it is likely to harm consumer interests; 3a is a bit of a 

wild card. I think the most likely reading is that it has no effect. 

But precisely because it seems to have no—I don’t have to tell 

you—precisely because it seems to have no meaning, there is—a lot 

of court interpretation documents are likely to interpret it to inversely preempt some unclear set of Federal statutes, one of which 

might well be the Federal antitrust laws. And that would be very 

harmful to consumers. 

In addition, because it will allow various forms of laws that—in 

particular, laws that are even intentionally or facially discriminatory against out-of-state consumers—that will clearly be harmful. 

Mr. BOUCHER. Out-of-state shippers? 

Mr. ELHAUGE. What is that? 

Mr. BOUCHER. You said, ‘‘Out-of-state consumers.’’ 

Oh, you mean out-of-state consumers of the product, with regard 

to the state where it is manufactured. 

Mr. ELHAUGE. Right. 

So the state is allowed to discriminate under this statute against 

anybody who is not a producer. You can discriminate if they are 

out of state. And that would be a—— 

Mr. BOUCHER. That would limit choice in terms of what is available to the consumer in a given state. 

Mr. ELHAUGE. Yes. 

169 

Mr. BOUCHER. And that could raise prices? 

Mr. ELHAUGE. I think that would likely raise prices. 

Mr. BOUCHER. All right. In keeping with the Chairman’s suggestion that we be brief, I will just have on other question. 

And, Ms. Genesen, let me pose that to you. 

The legislation has been criticized by some on the basis that it 

might enable states to provide special preferences to in-state manufactured products or other products that are tied, in some way, to 

that state, to the disadvantage of products manufactured in other 

states, and shipped into that state. 

Would you care to comment on that? 

Ms. GENESEN. Yes, sir. I—— 

Mr. BOUCHER. And could you turn your microphone on? 

Ms. GENESEN. I think I just need to get closer. Thank you. 

I would like to comment on that, because one great example is 

discriminatory taxes, like in the Bacchus case, where a state could 

exempt its own local industry from taxation, but require that taxes 

be levied on out-of-state products. And that was the case in Bacchus. And if this bill, as amended, were to pass, in my view, it 

overrules Bacchus. It does not protect the product. So any state 

could literally put that kind of tax, or some kind of unique labeling 

requirement or a bar code, where out-of-state products would be 

unfairly disadvantaged. 

Mr. BOUCHER. All right. Thank you very much. And I appreciate 

your questions. 

Thank you, Mr. Chairman. I yield back. 

Mr. CONYERS. Thank you very much. 

We now turn to Howard Coble, gentleman from North Carolina. 

Mr. COBLE. Thank you, Mr. Chairman. I, too, will be brief. 

Thanks to the panel for being here. 

Mr. Chairman, I am a member in good standing with the Wine 

Caucus. I hope I still am in good standing. But I was surprised 

when small wineries came to me recently and said this bill will 

jeopardize direct shipping. 

Professor Diamond, is there any provision in this bill that will 

jeopardize direct shipping, because I assured them that was not my 

intent, nor the intent of the bill. 

Mr. DIAMOND. There is nothing in this bill that would jeopardize 

direct shipping if a state has it or a state could decide to have it. 

What this bill does is preserves the physical-presence requirement 

for wholesalers and retailers from Dormant Commerce Clause challenge, and does remove a pure effects challenge at the producer 

level. 

By the way, the Bacchus case was an intentional-discrimination 

case, and that would have been overturned. 

Mr. COBLE. I thank you, Professor. 

Mr. Doyle, I assume that—well, strike that. Maybe I shouldn’t 

assume. Do you agree with me when I say that gallonage caps benefit small wineries and small breweries? 

Mr. DOYLE. Gallonage caps? 

Mr. COBLE. Yes. 

Mr. DOYLE. Gallonage caps that allow them to do what—are exempt—— 

Mr. COBLE. To self-distribute. 

170 

Mr. DOYLE. Oh, to self-distribute. Well, it depends on what side 

of the cap you are on, I guess. 

Mr. COBLE. Well, in your brewery, have you gained revenue or 

lost revenue in the last couple years? 

Mr. DOYLE. Yes. I mean we self-distributed when we had no 

sales, and we self-distributed 24 years later, when we have more 

sales. 

Mr. COBLE. But have you gained—— 

Mr. DOYLE. It has certainly helped us tremendously. 

Mr. COBLE. That was my conclusion as well. 

I have more questions, but I will yield back, Mr. Chairman. 

Thank you. 

Mr. CONYERS. Well, that is very generous of you. 

The Chair recognizes Sheila Jackson Lee, the gentlelady from 

Houston, Texas. 

Ms. JACKSON LEE. Mr. Chairman, thank you very much. 

And I thank the witnesses. This is a time that is calling us in 

different locations. 

Let me go to you, professor. I want to follow the line of reasoning 

of my colleague from Virginia. 

Professor Elhauge, let me ask a simple question: Why is this bill 

so broad? Why would you view it as being so broad, and could we 

narrow the bill and still be effective in some of the content that is 

necessary to provide some remedy? 

Let me just add to that—could it be more narrowly tailored to 

deal with the immediate concerns, and not interfere with consumer 

options, which you seem to suggest, from the question of the gentleman from Virginia? 

Mr. ELHAUGE. Yes, I think it could be. As I say, the big concern 

that is legitimate, I think, is protecting children from alcohol. And 

Congress could pass a statute that simply clarifies that the majority of the circuits are right. And we could codify the law—in a way 

that avoids any possible challenge. What the majority of the circuits say is that in-person sales requirements in order—so that 

people’s IDs can be checked are, in fact—— 

Ms. JACKSON LEE. Legitimate. 

Mr. ELHAUGE. Legitimate. 

Ms. JACKSON LEE. Right. 

Mr. ELHAUGE. And that could be clarified. That is a small technical issue, but that would be useful, I think; or, to the extent the 

Congress favors a majority on the rules on in-state residency requirements for retailers, it could codify that. And the theory, I 

think, of the three-tier system has been there was something important about the personal touch of retailers—that they know who 

their customers are, and are more likely to check their I.D.—can 

be more closely—in the state—— 

Mr. CONYERS. The gentlelady has 1 minute remaining before I 

will have to close. 

Ms. JACKSON LEE. Thank you, Mr. Chairman. 

Let me just say—and does that mean that we could also prevent 

online purchases if we found a narrowly tailored approach, which 

is what one of the concerns is? 

Mr. ELHAUGE. Could we—— 

Ms. JACKSON LEE. Online purchases by underage. 

171 

Mr. ELHAUGE. Could they ban—— 

Ms. JACKSON LEE. Could we find a way to craft language narrowly to provide protection there? 

Mr. ELHAUGE. So, to allow it, but have more I.D. checks for online sales? 

Ms. JACKSON LEE. No, to find a way to prevent the online usage 

by young people—underage. 

Mr. ELHAUGE. Oh, okay. 

Well, I think Congress would have to pass a law that was about 

that, to guarantee that result. But it could pass a law that simply 

authorizes the states, as long as they do it in a non-discriminatory 

way—— 

Ms. JACKSON LEE. To handle it. 

Mr. ELHAUGE. Yes. 

Ms. JACKSON LEE. Yes. 

Ms. Genesen, can I just—do you believe we can craft a bill more 

narrowly tailored to address some of the concerns, as opposed to 

the bill we now have? 

Ms. GENESEN. Honestly, madam, I do not. 

I believe that the current system—the current legal framework— 

is working very well; that states enjoy broad powers under the 21st 

Amendment, and are exercising them regularly. 

Ms. JACKSON LEE. So you are not ready for a compromise. And 

you see problems in this bill and approach? 

Ms. GENESEN. Yes, ma’am. 

Ms. JACKSON LEE. But you would be open to us looking at a narrowly crafted effort? 

Ms. GENESEN. Depending on what that is. 

Ms. JACKSON LEE. All right. 

Mr. CONYERS. The Chair—— 

Ms. JACKSON LEE. Thank you, Mr. Chairman. I appreciate it. I 

yield back. 

Mr. CONYERS. How timely. 

The Chair thanks the witnesses and congratulates them at the 

same time, and invites them to send in any further discussion that 

we may not have completed. Just send it into the Committee, and 

we will include it in the record. 

Thank you again. And the Committee stands adjourned. 

[Whereupon, at 3:18 p.m., the Committee was adjourned.] 

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