The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.
Issue link: https://kentuckybenchandbar.epubxp.com/i/213936
FEATURE: BRIDLED SPIRITS monopoly system is because the state controlled the manner and method in which alcohol was sold, with the profits from those sales going to the state treasury, without injecting a profit motive. The authors were concerned that under the license system, competition among private dealers would place them under pressure to increase sales, without regard for public welfare and safety. The avoidance of the abuses that occurred in the pre-Prohibition era was of primary concern. C 6 ongress passed the Federal Alcohol Administration Act (FAA Act) in 1936,7 which is administered by the Alcohol and Tobacco Tax and Trade Bureau of the Department of Treasury. The act requires certain industry members, i.e. suppliers and wholesalers, to obtain a federal basic permit to engage in the sale of alcoholic beverages. It regulates trade practices of industry members by prohibiting them from engaging in certain activities intended to prevent "tied-houses," as previously discussed. The prohibited activities are inducements offered by industry members to trade buyers (retailers) which might result in exclusions, which occur when a practice places the retailers' independence at risk by means of a tie or link between the industry member over the retailer, or a practice by an industry member which results in the retailer purchasing less than it otherwise would have of a competitor's product. Those practices include exclusive outlets, where only the products of one industry member are sold by a retailer; "tied house," where the industry member acquires an interest in a retail license, or gains substantial control over the retailer by furnishing something of value, paying the retailer for shelf space, or by extending credit to the retailer beyond usual and customary periods, or any form of commercial bribery. In 1933, then-Governor Ruby Laffoon appointed the Kentucky Liquor Control Committee to study "the conditions resulting from the repeal of the Eighteenth Amendment and of recommending legislation to meet those conditions."8 The committee recommendations were for a licensing system to be adopted in the state. Kentucky is one of 32 states that chose to regulate alcohol by licensing system, and 18 states chose the control system. All of the license states established a three-tier system of distribution with strict separation of ownership by suppliers (distillers, vintners and brewers), wholesalers and retailers. This system has been in operation in Kentucky since 1938, when the bulk of what is our B&B; • 11.13 current comprehensive liquor control scheme was adopted by the legislature. Those laws are comprised of what is now KRS Chapters 241-244. It is interesting to note that Kentucky liquor control statutes incorporated the elements of the guidelines set forth in the study commissioned by Rockefeller in 1933. Chapter 241 deals with the administrative structure of the Department of Alcoholic Beverage Control (ABC). The ABC Board is comprised of three members, to wit: commissioner, distilled spirits administrator and malt beverage administrator. The commissioner is in charge of agency personnel (most of whom are merit employees) and the day-to-day operation of the agency, and the administrators are responsible for the issuance of their respective licenses. Those three board members officiate at administrative hearings held before the board for adjudication of violations of liquor laws. All three members are appointed by the governor for a four-year term, and are eligible for re-appointment without limit on the number of terms served. ment, but the core structure of the regulatory scheme remains intact. The biggest changes, prior to the enactment of SB 13 and HB 315 in June of 2013, have involved the imposition of the wholesale tax on alcohol sales, which was first imposed at the rate of 9 percent in 1982, and increased to 11 percent in 20059, and some liberalization of local option election laws, specifically the enactment of KRS 242.1244, which provided for a local option election on the question of allowing sales by the drink only at qualifying restaurants, which has greatly increased the number of cities and counties which have chosen to go "moist." In conclusion, I would propose raising a toast to the 80th Anniversary of the adoption of the 21st Amendment. Cheers! 1 2 3 4 Chapter 242 is devoted to local option elections, and the procedures required therefor, and permissible and impermissible activities in dry territories. 5 Chapter 243 pertains to licensing and taxation of alcoholic beverages. It sets forth the various license types and fees, both state and local. Chapter 243 also details the kinds of activities that are authorized by each license type. Additionally, it details the rate of taxes to be paid by wholesalers of distilled spirits and wine and distributors of malt beverages. According to the Kentucky Revenue Cabinet, alcohol tax receipts (beer, wine and spirits excise taxes and the 11 percent wholesale tax) for Fiscal Year 2012-13 amounted to more than $122 million. 9 Chapter 244 sets out a comprehensive list of prohibitions, restrictions and regulations for each license type. It deals with, inter alia, persons whom may not be licensed or employed by licensees, premises that may not be licensed, hours of sale, advertising restrictions, disorderly conduct, sale to minors, container sizes that are permissible, and trade practice or tied house restrictions. I In short, all of the areas of concern that were set forth in the Fosdick and Scott study are addressed in the Kentucky alcoholic beverage control laws. These laws have undergone various tweaks during the ensuing 75 years since their initial enact- 6 7 8 18th Amendment to the Constitution of the United States, effective January 16, 1920, and 21st Amendment to the Constitution of the United States, ratified December 5, 1933. Last Call - The Rise and Fall of Prohibition, Daniel Okrent, Simon & Schuster, 2010, p. 28. Id, p. 29. c. 85, Sec. I (41 Stat. 305) Last Call, p. 221. Toward Liquor Control, Raymond B. Fosdick and Albert L. Scott, Harper and Brothers, 1933. 27 U.S.C. Chapter 8, § 201 et seq. Report of the Kentucky Liquor Control Committee, p.3 KRS 243.884 Daniel R. Meyer is the executive director and general counsel for Wine and Spirits Wholesalers of Kentucky, a trade association of Kentucky wholesalers of distilled spirits and wine. He is a graduate of Western Kentucky University and received his J.D. degree from Brandeis School of Law at the University of Louisville. He is a member of the Kentucky Bar Association and the American Bar Association, and a member and former chairman of the Advisory Council of Wine and Spirits Wholesalers of America.