Opinion ID: 1126771
Heading Depth: 1
Heading Rank: 3

Heading: The historical development of the tied-house restriction.

Text: In order to understand the relationship of sections 25502 and 25506, we must examine the origins of these two sections in particular, and the legislative background of the California Alcoholic Beverage Control Law in general. Following repeal of the Eighteenth Amendment, the vast majority of states, including California, enacted alcoholic beverage control laws. These statutes sought to forestall the generation of such evils and excesses as intemperance and disorderly marketing conditions that had plagued the public and the alcoholic beverage industry prior to prohibition. (See United States Department of Commerce, State Liquor Legislation (1941) at p. 20; Wilke & Holzheiser, Inc. v. Dept. of Alcoholic Bev. Control (1966) 65 Cal.2d 349, 360 [55 Cal. Rptr. 23, 420 P.2d 735]; Neel v. Texas Liquor Control Board (Tex.Civ.App. 1953) 259 S.W.2d 312, 316-317; Bus. & Prof. Code, § 23001.) By enacting prohibitions against tied-house arrangements, state legislatures aimed to prevent two particular dangers: the ability and potentiality of large firms to dominate local markets through vertical and horizontal integration (see Neel v. Texas Liquor Control Board, supra, 259 S.W.2d 312) and the excessive sales of alcoholic beverages produced by the overly aggressive marketing techniques of larger alcoholic beverage concerns (see Allied Properties v. Dept. of Alcoholic Beverage Control (1959) 53 Cal.2d 141 [346 P.2d 737]; Affiliated Distillers Brands Corp. v. Sills (1970) 56 N.J. 251 [265 A.2d 809]). [7] The principal method utilized by state legislatures to avoid these antisocial developments was the establishment of a triple-tiered distribution and licensing scheme. (See Affiliated Distillers Brands Corp. v. Sills, supra, 56 N.J. 251; Downer v. Liquor Control Commission (1948) 134 Conn. 555 [59 A.2d 290].) Manufacturing interests were to be separated from wholesale interests; wholesale interests were to be segregated from retail interests. In short, business endeavors engaged in the production, handling, and final sale of alcoholic beverages were to be kept distinct and apart. (25 Ops.Cal.Atty.Gen. 288, 289 (1955).) In the era when most tied-house statutes were enacted, state legislatures confronted an inability on the part of small retailers to cope with pressures exerted by larger manufacturing or wholesale interests. [8] (See Pickerill v. Schott (Fla. 1951) 55 So.2d 716, 718; Weisberg v. Taylor (1951) 409 Ill. 384, 390 [100 N.E.2d 748] see also 32 Ops.Cal.Atty.Gen. 75, 76 (1958); 48 C.J.S., § 197, at p. 329.) Consequently, most of the statutes enacted during this period (1930-1940) manifested a legislative policy of controlling large wholesalers; the statutes were drafted in sufficiently broad terms, moreover, to insure the accomplishment of the primary objective of the establishment of a triple-tiered system. All levels of the alcoholic beverage industry were to remain segregated; firms operating at one level of distribution were to remain free from involvement in, or influence over, any other level. Thus, although the most significant development in the industry since the 1950's has been the growth of large retail chains, the alcoholic beverage statutes enacted in the 1950's are sufficiently broad to control industry-wide domination by large retail chains as well. [9] In addition, most statutes placed more stringent requirements on interests dealing in distilled spirits than on those dealing exclusively in beer and wine. Legislatures were especially concerned with the prevention of intemperance in the consumption of distilled spirits, since distilled spirits, of course, contain a significantly higher alcoholic content than beer and wine. Further, since distilled spirits may not deteriorate as rapidly as some beer and wine, legislatures were particularly fearful of the possibility that wholesalers of distilled spirits would foist even greater inventories upon local retailers. (Cf. Ralphs Grocery Co. v. Reimel (1968) 69 Cal.2d 172, 186, fn. 1 [70 Cal. Rptr. 407, 444 P.2d 79] (dissenting opn. of Burke, J.).) With this historical background in mind, we turn to an examination of the particular California statutes at issue in this case.