Hoosiers walking into a convenience store in Oklahoma are able to do something they cannot do in Indiana – reach into the cooler and get a cold beer.
An attempt to change the Indiana statute that prohibits gas stations and grocery stores from selling beer cold was put on ice in June when a federal court ruled the law that restricts beer sales is rational. Just like the foam rising in a freshly poured mug of beer, cries of frustration arose from consumers after the decision was handed down, asking why their home state has such seemingly outdated alcohol laws.
However, attorneys familiar with the beverage industry say Indiana is not quite the outlier some residents think it is. All states have laws regulating the distribution and sale of alcohol that are unique and what some might consider ridiculous.
Oklahoma is an example. Hoosiers who look closely at that cold bottle of beer will notice it is not a regular full-strength brew. Instead, convenience stores in the Sooner State can only sell so-called “near beer” – beer that contains 3.2 percent alcohol.
Some states have requirements that allow only residents to hold alcohol permits, and other states have dry counties where the sale of all alcohol is prohibited. Residents in certain states can buy spirits like bourbon and gin only in liquor stores while those in neighboring states cannot buy alcohol on Sunday. Eighteen states are control states, meaning the state government owns and operates the liquor stores.
The roots of these laws can be traced to the repeal of Prohibition. When the 21st Amendment was ratified, states were allowed to design their own regulatory schemes. Since then, the federal government has turned over the primary authority to states.
“Usually there are historical reasons why the laws developed as they did,” said Anthony Kogut, attorney with the Michigan firm of Willingham & Coté P.C. States have “developed fairly complicated regulatory systems and tampering with a piece of it creates the danger of upsetting the balance and impacting the interests of people who structured their business in the highly regulated industry.”
Brewing a balance
The convenience stores acknowledge other states have nuanced alcohol laws, but they contend that only Indiana regulates beer by temperature. The group filed a complaint in the U.S. District Court for the Southern District of Indiana, Indiana Petroleum Marketers and Convenience Store Association, et al. v. Alex Huskey, Chairman of the Indiana Alcohol and Tobacco Commission, 1:13-CV-000784, challenging the state’s alcohol laws on constitutional grounds.
They argued that Indiana’s law is irrational, in part, because it is not keeping alcohol from minors. The plaintiffs not only pointed out that children and teenagers already see the beer stocked in convenience and grocery stores, they also highlighted statistics that show liquor stores have a higher rate of selling alcohol to minors.
This argument addresses the balance states try to strike with their alcohol laws.
States make alcohol available – but not too available. No state has a policy of promoting overuse by making liquor, beer and wine widely accessible. Instead, states put up hurdles so alcohol is not available on every street corner which, the theory goes, reduces the impulse to buy.
“Because the laws have been so effective, people forget how much of a problem alcohol can be,” Kogut said. “It is still a problem but not like before Prohibition and before strong regulation.”
U.S. District Court Chief Judge Richard Young was not convinced by the plaintiffs’ argument. He described the statistics “problematic” and said the conclusion that convenience and grocery stores along with pharmacies would not sell to minors if cold beer was allowed was “pure speculation.”
Young also referred to Indiana balancing availability with oversaturation. In his ruling, he found the state “could have rationally believed” that limiting the sale of cold beer and placing more restrictions on liquor stores than other retailers furthers the goal of curbing underage consumption of alcohol.
The convenience stores and their trade association are continuing their fight to overturn Indiana’s cold beer law. They have filed a complaint in Marion County, charging the regulation violates the state constitution, and they have appealed Young’s decision to the 7th Circuit Court of Appeals on the grounds that legal and procedural errors occurred.
“The undisputed facts are that Indiana convenience stores are compliant retailers of beer and wine, and that there is no rational basis to allow liquor stores to hold a monopoly on cold beer, particularly when their compliance rate with Indiana alcohol laws is so poor,” said plaintiffs’ attorney John Maley, partner at Barnes and Thornburg LLP.
Patrick Tamm, president and CEO of the Indiana Association of Beverage Retailers, reiterated that states have the right to craft their own alcohol laws. Alcohol, unlike peanut butter, eggs, bread or milk, has significant consequences when misused so its sale should be restricted.
Tamm charged convenience stores knew the laws when they decided to do business in Indiana but now they are turning to the courts rather than the Legislature for the ability to change their business model.
“They want to sell anything and everything any way they want to sell it,” Tamm said.
The fight in Indiana is an example of how the policy of temperance is instituted.
Max Hess, attorney at Taylor Feil Harper Lumsden & Hess in Atlanta, Ga., said temperance has shifted over the years to the free enterprise system, and vested interests have been solicited to limit the availability of alcohol. By reining in the number of outlets where alcohol is available and by issuing permits, states have cultivated vested interests to implement public policy.
The convenience stores could have a difficult time convincing the courts to limit the latitude that has been given to Indiana to regulate alcohol as it sees fit. Two federal appellate courts have found that other states have legitimate interests in restricting alcohol in the unique ways that they do.
The 6th Circuit Court of Appeals reversed the District Court’s ruling in Maxwell’s Pic-Pac, Inc., et al. v. Tony Dehner, et al., ruling that Kentucky’s law which lets pharmacies – but not grocery stores – stock liquor is a rational way to reduce access to high-alcohol products.
The 8th Circuit Court of Appeals upheld Missouri’s wholesaler residency requirement in Southern Wine and Spirits of America, Inc., et al. v. Division of Alcohol and Tobacco Control, et al. The wholesaler, Southern Wine and Spirits, challenged the state’s law that allows only “resident corporations” (businesses that have been incorporated under Missouri laws and have officers and directors who legally reside in the Show Me State) to sell alcohol to retailers.
States are fiercely protective of their own alcohol laws, Kogut said, and they do not let the laws of other states affect how they regulate the intoxicants.
And with the courts affirming the patchwork of laws, Hoosiers may have to be satisfied with the warm beer they get at the convenience store.•