CARE Act Undermines the Free Market and Constitutional Principles, New Report Finds

Lee Doren, 202-331-2259

Nicole Ciandella, 202-331-2773

Washington, D.C., July 25, 2011 – Today, CEI releases a report on the federal alcohol legislation–the so-called CARE Act–that reveals the special interest nature of this legislation. Rep. Jason Chaffetz (R-UT) offered the Community Alcohol Regulatory Effectiveness (CARE) Act (H.R. 1161) to reinforce a government-enforced three-tier system for distributing alcoholic beverages. The Competitive Enterprise Institute’s report explains in detail why this Act will harm consumers and alcoholic beverage producers.

Through the CARE Act, wholesalers seek to reverse the pro-competitive effects of the U.S. Supreme Court’s Granholm v. Heald decision. That case struck down state laws that discriminate against out-of-state wineries for violating the Commerce Clause of the Constitution. The CARE Act would allow states to pass laws restricting out-of-state alcoholic beverage sales as long as those laws do not “intentionally” discriminate against out-of-state producers. In effect, it would allow state protectionist legislation as long as it is passed under some other pretext.

Angela Logomasini, Senior Fellow for CEI’s Center for Energy and Environment and author of the report, said:

“Should H.R. 1161 be approved, the courts might allow states to impose discriminatory laws against out-of-state wineries, but only if the state can argue that the impact is not intentionally protectionist. In any case, since the limited protections in H.R. 1161 apply only to producers, the bill would unleash an unbridled number of state-level protectionist policies affecting anyone else in the industry. Such laws will undermine sales of any domestic winery or importer whose brands are marketed via online retailers. It also might prevent direct shipping from producers who rent winemaking facilities because many states classify them as either retailers or distributors rather than producers. This blatantly unfair treatment may destroy many small entrepreneurial businesses, leaving fewer outlets through which wineries can reach consumers.”

– Read the CEI report: A CARE-Less Rush to Regulate, by Angela Logomasini.