Jim Caruso, CEO of Frederick, Md.’s Flying Dog Brewery, talks with Cato’s Caleb Brown about legal and regulatory issues in the craft beer business. We earlier followed Flying Dog’s successful First Amendment battle with Michigan regulators over its Raging Bitch label beer, the proceeds from which the company used to endow a speaker series on free speech.
Besides that case, Caruso discusses the “three-tier” system of alcohol distribution set up after Repeal, which is “pretty loose” in much of the West but far stricter in many Eastern states where memories of rum-running lingered on (“organized crime was basically created by Prohibition”). In some states, so-called franchise laws lock manufacturers permanently into an initial choice of distributor for a territory. Some of the laws even authorize distributors to sell brand rights to each other without consulting the original maker, which thus winds up with a distributor it did not have even a notional original role in picking. Originally rationalized as a way to shield small distributors from the clout of giant national brewers, these laws live on into an era in which small craft producers may face well-heeled, politically powerful state distributors.