[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                        LEGAL ISSUES CONCERNING 
                        STATE ALCOHOL REGULATION

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON COURTS AND
                           COMPETITION POLICY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 18, 2010

                               __________

                           Serial No. 111-125

                               __________

         Printed for the use of the Committee on the Judiciary














      Available via the World Wide Web: http://judiciary.house.gov



                  U.S. GOVERNMENT PRINTING OFFICE
55-481 PDF                WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001








                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee               STEVE KING, Iowa
HENRY C. ``HANK'' JOHNSON, Jr.,      TRENT FRANKS, Arizona
  Georgia                            LOUIE GOHMERT, Texas
PEDRO PIERLUISI, Puerto Rico         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               TED POE, Texas
JUDY CHU, California                 JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]

       Perry Apelbaum, Majority Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

             Subcommittee on Courts and Competition Policy

           HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chairman

JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia               JASON CHAFFETZ, Utah
CHARLES A. GONZALEZ, Texas           F. JAMES SENSENBRENNER, Jr., 
SHEILA JACKSON LEE, Texas            Wisconsin
MELVIN L. WATT, North Carolina       BOB GOODLATTE, Virginia
MIKE QUIGLEY, Illinois               DARRELL ISSA, California
DANIEL MAFFEI, New York              GREGG HARPER, Mississippi
[Vacant]

                    Christal Sheppard, Chief Counsel

                    Blaine Merritt, Minority Counsel
















                            C O N T E N T S

                              ----------                              

                             MARCH 18, 2010

                                                                   Page

                           OPENING STATEMENTS

The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Georgia, and Chairman, Subcommittee 
  on Courts and Competition Policy...............................     1

The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Ranking Member, Subcommittee on 
  Courts and Competition Policy..................................     2

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michiigan, Chairman, Committee on the 
  Judiciary, and Member, Subcommittee on Courts and Competition 
  Policy.........................................................     3

The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Ranking Member, Committee on the Judiciary.    10

                               WITNESSES

The Honorable Bobby L. Rush, a Representative in Congress from 
  the State of Illinois
  Oral Testimony.................................................    12
  Prepared Statement.............................................    14

The Honorable Mike Thompson, a Representative in Congress from 
  the State of California
  Oral Testimony.................................................    17
  Prepared Statement.............................................    19

The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee
  Oral Testimony.................................................    22
  Prepared Statement.............................................    24

The Honorable George Radanovich, a Representative in Congress 
  from the State of California
  Oral Testimony.................................................    28
  Prepared Statement.............................................    30

Mr. James C. Ho, Solicitor General of Texas, Office of the 
  Solicitor General, Austin, TX
  Oral Testimony.................................................    33
  Prepared Statement.............................................    35

Ms. Nida Samona, Chairperson, Michigan Liquor Control Commission, 
  Lansing, MI
  Oral Testimony.................................................    36
  Prepared Statement.............................................    39

Mr. Stephen Hindy, Chairman and President, Brooklyn Brewery, 
  Brooklyn, NY
  Oral Testimony.................................................    45
  Prepared Statement.............................................    47

Ms. Pamela S. Erickson, Chief Executive Officer, Public Action 
  Management, Scottsdale, AZ
  Oral Testimony.................................................    51
  Prepared Statement.............................................    53

Mr. Darren Bush, Associate Professor of Law, University of 
  Houston Law Center, Houston, TX
  Oral Testimony.................................................    84
  Prepared Statement.............................................    87

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, 
  Chairman, Committee on the Judiciary, and Member, Subcommittee 
  on Courts and Competition Policy...............................     4

                                APPENDIX

Material Submitted for the Hearing Record........................   157

 
                        LEGAL ISSUES CONCERNING 
                        STATE ALCOHOL REGULATION

                              ----------                              


                        THURSDAY, MARCH 18, 2010

              House of Representatives,    
                 Subcommittee on Courts and
                                 Competition Policy
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:10 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Henry 
C. ``Hank'' Johnson, Jr. (Chairman of the Subcommittee) 
presiding.
    Present: Representatives Johnson, Conyers, Gonzalez, 
Jackson Lee, Quigley, Maffei, Coble, Chaffetz, Smith, 
Sensenbrenner, Goodlatte, and Issa.
    Staff present: (Majority) Christal Sheppard, Subcommittee 
Chief Counsel; Anant Raut, Counsel; Rosalind Jackson, 
Professional Staff Member; and (Minority) Stewart Jeffries, 
Counsel.
    Mr. Johnson. This hearing of the Committee on the 
Judiciary, the Subcommittee on Courts and Competition Policy 
will now come to order. Without objection the Chair is 
authorized to declare a recess.
    Let me start off by saying that as Chairman of the 
Subcommittee on Courts and Competition Policy, I strive to keep 
all of our hearings balanced. I like for our Members to hear a 
variety of views, so that they can make informed decisions. So 
you can imagine my disappointment when a number of groups whom 
we invited to testify declined the opportunity.
    My staff reached out to the Wine Institute, Wine America, 
and the Specialty Wine Retailers Association. Collectively, 
they represent more that 1,000 wineries, yet they couldn't find 
a single person to come here today and testify.
    This would have been an excellent opportunity for them to 
express their point of view. If I were one of their members, I 
would not be happy.
    We also solicited the input of a number of trade 
associations and retailers, including Costco. I thank them for 
their cooperation.
    Let me assure all of you that my door remains open. I 
invite all of the institutions whom we talked to that were 
unable to participate today to submit statements for the 
record.
    The central question of this hearing is: What is the ideal 
balance between state regulation and Federal oversight over the 
alcoholic beverage industry? Now, I have heard that some people 
already have legislation in mind. I think that is premature.
    A system that is working should continue as it is, so if 
there is a compelling reason to change the applicable laws in 
this country let us hear it. Let us bring everything out from 
behind closed doors.
    In the early part of the last century, this country 
prohibited alcohol. Ultimately, we reversed course. The 21st 
Amendment overturned prohibition and affirmed the important 
role of states in the regulation of the alcoholic beverage 
industry.
    A number of states developed a three-tier system for 
alcoholic beverage distribution: licensed manufacturers sell 
exclusively to licensed wholesalers, who in turn sell 
exclusively to licensed retailers. Some say that this system 
has been responsible for minimizing alcohol abuse and 
consumption by minors. There are others who say that this 
system favors distributors and reduces choice and increases 
prices for consumers.
    The three-tier system has been challenged on antitrust and 
constitutional grounds in a number of states. In one of these 
decisions, Granholm v. Heald, the Supreme Court struck down 
discriminatory treatment of out-of-state wineries under the 
dormant Commerce Clause of the Constitution. This decision 
allowed for the direct shipment of wine from out-of-state 
vineyards, providing a huge sales boost to small wineries 
lacking the scale or resources to work with large national 
distributors.
    In another case, Costco v. Marin, the Ninth Circuit upheld 
a number of Washington State alcohol regulations but struck 
down the post and hold pricing system. The court of appeals 
held that unlike the other state regulations, this one fell 
outside of the traditional antitrust immunity enjoyed by state 
regulations because it allowed private parties to fix the 
retail prices of certain alcoholic beverages in violation of 
Federal antitrust laws.
    So today we ask our experts, why do we need to change 
anything? Aren't these decisions just clarifying the applicable 
law or are they creating ambiguity?
    Yes, Congress had one intent in mind when it passed the 
21st Amendment, but it also had a specific intent in mind with 
every antitrust law it passed, just as the original framers had 
an intent in mind when they wrote the Commerce Clause of the 
Constitution. I hope that today's hearing will shed some light 
on what the proper balance among these laws should be.
    And I now recognize my colleague, Howard Coble, the 
distinguished Ranking Member of the Subcommittee, for his 
opening remarks.
    Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman, for calling this 
hearing. We have two full panels so I will be brief, Mr. 
Chairman, but today's hearing, as you know, is on the legal 
challenges to state alcohol regulation.
    I am an advocate for state regulation in this area. States 
are generally, without--perhaps an occasional exception--but 
generally the states are in the best position to determine what 
the appropriate level of regulation is for their citizens.
    I am also an advocate of the three-tier system because I 
believe that it provides an efficient means to maintain quality 
control on alcohol and helps to ensure that alcohol is sold 
only to adults. These are important and laudable goals, and 
anything that Congress does in this area should be done with an 
eye to ensuring that we are keeping our constituents safe.
    That said, I am also an advocate in competition and giving 
consumers more choices. Fortunately, in the last few decades we 
have seen a proliferation of small wineries and breweries. 
These new players have helped expand Americans' palates.
    I have heard from some of my constituents in the producer 
industry, and they support alcohol regulation, particularly 
those requirements--strike that--those regulations that promote 
quality and safety. I think this is encouraging to be aware of 
that.
    However, they express concern that some alcohol state laws 
serve not to protect consumers but rather to protect the 
business interests of in-state producers, wholesalers, and 
retailers, sometimes at the expense of competition from out-of-
state vendors. Others who are small producers of beer and wine 
depend on the ability to market their products directly to 
consumers throughout the country. While they may have become 
regional economic engines we should not overlook their 
interests simply because they cannot operate like other mass-
produced.
    December 25, 2008, Mr. Chairman, marked the 75th 
anniversary of the 21st Amendment, and since that time they 
have taken their responsibility to regulate alcohol very 
seriously and should be recognized for this.
    I expect our distinguished panels to highlight instances 
within the three-tier system that warrant our attention. These 
are complicated matters, and as we begin to wade through these 
issues we should not overlook the significance of the 21st 
Amendment and remember there is always room for improvement, 
particularly in the area of safety. I am grateful that we have 
such an excellent panel of Members to begin with, and then 
expert witnesses following, here today who can shed some light 
on the complicated legal and factual issues that surround state 
alcohol regulation.
    Mr. Chairman, we have all heard many stories--some 
humorous, some sad--involving alcohol. One of the towns I 
represent back home has long been a traditionally dry town. The 
voters, however, voted to approve the lawful sale and 
consumption in that town a few months ago. It is reported that 
one of my constituents once said, ``There will be beer and wine 
sold in Asheboro when pigs fly.'' Well, there is a pub in 
Asheboro now entitled ``The Flying Pig,'' so one never knows 
what will happen.
    Thank you, Mr. Chairman. I yield back.
    Mr. Johnson. Thank you, Mr. Coble.
    I will now recognize Mr. John Conyers, a distinguished 
Member of this Subcommittee and also Chairman of the full 
Committee on the Judiciary.
    Chairman?
    Mr. Conyers. Thank you very much, Chairman Johnson. I ask 
unanimous consent to put my remarks in the record.
    Mr. Johnson. Without objection, so ordered.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
  in Congress from the State of Michigan, Chairman, Committee on the 
  Judiciary, and Member, Subcommittee on Courts and Competition Policy



                               __________

    Mr. Conyers. And, you know, as Chair of the Committee I am 
supposed to know a lot about everybody on the Committee, and it 
is only appropriate that I announce that today is the birthday 
of Howard Coble. He is now 40 years old. [Laughter.]
    Mr. Coble. Mr. Chairman, would you yield? [Applause.]
    Thank you. I thank you very much.
    Mr. Chairman, I thank you.
    And thank you all for the generous reception, but for the 
gentleman from Michigan's information, I am only 39. 
[Laughter.]
    Mr. Conyers. This is an issue before us about the 21st 
Amendment and the Commerce Clause, and I have just mentioned to 
some friends earlier today that there is something happening in 
our digital age that more and more modern machines, and 
techniques, and Web pages, and Internets, and Web sites are 
creating new challenges. In intellectual property, for example, 
we spend a lot of time here trying to persuade not just 
youngsters in college but a lot of people that you may not be 
able to download property that is not your own without the 
permission of the creator.
    And so here, in this area, we now find out that there are 
some people in the business that are saying, ``The rules that 
you have in this state are different from the people that are 
outside trying to do business and the people that are inside 
trying to do business,'' and so we--I just feel I am just 
redescribing the nature of the challenge before us. And so I 
look forward to this panel.
    Thank you so much.
    Mr. Johnson. Thank you, Mr. Chairman.
    And I think I should note for the record that two of our 
witnesses before us have green on today, so--even the Chairman 
does--so I believe that the activities of yesterday have 
continued on into today and will continue tonight as well.
    Next, I would like to recognize the Ranking Member of the 
full Committee on Judiciary, Mr. Lamar Smith, out of Texas.
    Mr. Smith. Thank you, Mr. Chairman. Let me confess that the 
Chairman of the full Committee beat me to it because I was 
going to thank you, Chairman, for holding this hearing to help 
celebrate Howard Coble's birthday, but I am glad it was 
recognized earlier, and better to have it recognized twice than 
not at all. Glad to have Howard here.
    Mr. Chairman, America has a long and complicated history 
with alcohol. In 1794 President George Washington sent troops 
to western Pennsylvania to quash the Whiskey Rebellion, which 
was fought in opposition to the Federal Government's tax on 
alcohol to pay for the American Revolution.
    Of course, America's most famous battle with alcohol was 
the prohibition era, from 1920 to 1933, which began with the 
adoption of the 18th Amendment in 1918. While the ban on 
alcohol was well-intentioned, in practice it led to flaunting 
of the laws, with many citizens patronizing speakeasies and 
consuming bathtub gin. Further, while prohibition was meant to 
promote public safety, the proliferation of illegal alcohol 
distribution by organized criminal enterprises led to an 
increase in alcohol-related violence.
    In 1933 Congress passed, and the states ratified, the 21st 
Amendment, which repealed prohibition. Section 2 of the 21st 
Amendment sets forth the power of states to regulate alcohol 
providing that ``The transportation or importation into any 
state, territory, or possession of the United States for 
delivery or use therein of intoxicating liquors in violation of 
laws thereof is hereby prohibited.''
    The 21st Amendment, in conjunction with the Wilson Act and 
the Webb-Kenyon Act, supplies the basis for state regulation of 
alcohol. The Wilson Act provides that alcoholic beverages 
transported into a state are subject to the state's laws to the 
same extent and in the same manner as those such liquids or 
liquors have been produced in such state or territory. The 
Webb-Kenyon Act prohibits the transportation of alcoholic 
beverages into a state from outside the state if received, 
possessed, sold, or in any manner used in violation of the 
receiving state's laws.
    I say all this for a number of reasons: In response to the 
21st Amendment most states have enacted several--some form of 
the three-tier system for alcohol distribution. This system 
separates alcohol producers from alcohol wholesalers from 
alcohol retailers. The inclusion of wholesalers as middlemen in 
the transaction makes it easier for states to regulate alcohol; 
it makes it possible for states to ensure that alcohol is safe; 
it makes it simpler to ensure that alcohol is sold only to 
individuals over 21 years old; and it provides a 
straightforward alcohol tax collection system for the states. 
These are all laudable goals, and for those reasons I am 
supportive of the three-tier system.
    Naturally, some alcohol producers and retailers are 
concerned about state liquor regulations that they perceive 
hurt their ability to compete in a particular state. Such 
concerns have led to a number of legal challenges to various 
states' laws on antitrust and dormant Commerce Clause grounds.
    This hearing gives us the opportunity to examine these 
current legal challenges to the Post-Prohibition practices of 
state regulation of alcohol. In doing so we are forced to 
reconcile the 21st Amendment, Federal statutes, state laws, and 
judicial doctrines.
    Mr. Chairman, these are complicated legal questions and not 
susceptible to quick solutions. However, I hope that this 
hearing will start to give Congress the information necessary 
to ensure that state regulation of alcohol remains robust. 
Those regulators are best-positioned to determine that alcohol 
consumption in their states is both safe and lawful.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Johnson. I thank the gentleman for his statement.
    And now I will start with introductions, and I am pleased 
to introduce the first panel for today's hearing, which 
consists of four distinguished Members of Congress. The first 
is Representative Bobby Rush, representing the first district 
of Illinois; next is Representative George Radanovich, 
representing California's 19th district; and after that we have 
my esteemed colleague from the Judiciary Committee, the 
Chairman of the Subcommittee on Commercial and Administrative 
Law, Mr. Steve Cohen; and finally we have Representative Mike 
Thompson, representing California's first district.
    Thank you all for your willingness to participate in 
today's hearing. Without objection, your written statements 
will be placed into the record. We ask that you limit your oral 
remarks to 5 minutes. You will note that we have a lighting 
system that starts with a green light; at 4 minutes it turns 
yellow; then red at 5 minutes.
    Congressman Rush, will you begin your testimony, please?

 TESTIMONY OF THE HONORABLE BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. Thank you, Mr. Chairman, and Ranking Member 
Coble, and Chairman of the full Committee, Chairman Conyers, 
and Ranking Member of the full Committee, Ranking Member Smith. 
I see my colleague from Illinois----
    I am delighted to see you here this afternoon.
    And I want to thank you for granting me the opportunity to 
testify today on state alcohol regulation. I want also to 
acknowledge my colleagues who are participating on this first 
panel with me.
    Mr. Chairman, as I considered coming before this 
Subcommittee to testify I certainly came to recognize that this 
is not a matter that has been at the forefront of the issues 
that I am normally associated with in the Congress. However, as 
I began to examine this matter with greater scrutiny I quickly 
discovered that there existed many underlying causes that are 
or could be greatly impacted by the undertaking of this 
Subcommittee as it seeks to examine state-based regulation of 
alcoholic beverages. This Subcommittee's decision to review 
this matter in light of the 2005 Granholm Supreme Court case is 
both wise and necessary.
    Mr Chairman, in my state of Illinois we have a three-tier 
system of distribution in which, as you are aware, 
manufacturers or producers sell to licensed wholesalers or 
distributors, who in turn sell to licensed retailers such as 
bars, packaged-good stores, and restaurants. This system in 
Illinois is currently under attack in Federal court as a result 
of a decision last week by the Illinois Liquor Control 
Commission to deny a wholesaler license to an alcohol 
manufacturer who was seeking to acquire 100 percent of a 
Chicago alcohol beverage distributorship.
    While alcohol laws vary by state, Illinois law is viewed as 
one of the strongest in the Nation as it relates to the three-
tier system of alcohol distribution. Many observers believe 
that this case and others like it will have a profound effect 
on the regulation of the industry in Illinois and beyond. While 
regulation or deregulation may be viewed by many through the 
lenses of what is in the best ``competitive interests'' of 
industry, I submit that there are broader aspects of this issue 
to consider as well.
    Prior to my election to Congress in 1992 I served for 9 
years as a member of the Chicago city council. As a local 
alderman I cam to appreciate the value of local control of the 
sale and consumption of alcoholic beverages. Indeed, an 
effective tool of local neighborhoods in Chicago has been the 
ability to, through ballot referendum, to vote an area dry. 
Communities plagued by bad actors in the alcoholic industry at 
the retail level have the ability to, absent local liquor 
control action, to seek remedies as a result of the ability of 
states to regulate the industry.
    My objective is not to protect wholesalers or hurt 
producers, but rather to protect the people of my community who 
are, in many cases, disproportionately overwhelmed with 
marketing and promotional advertising designed to get them to 
drink.
    Additionally, I would express a concern about the direction 
the industry is going relative to deregulation and its impact 
on minority ownership at the wholesaler-distributor level.
    Certainly there is strong belief in Illinois--and I suspect 
this would be the case elsewhere in our Nation--that regulation 
or the removal of state regulatory authority of the alcohol 
industry would have an adverse, negative impact on minority 
ownership, and I certainly would be in opposition to such a 
move.
    I believe while there may be some imperfections with the 
levels of regulation state by state, there is significant value 
to having an aggressive not passive role--state role--in the 
regulation of the alcohol industry.
    The 21st Amendment, which provides states the authority to 
regulate alcohol within their own boundaries, has been 
operating since the 1930's, and I believe should Congress 
decide to act it should be to more fully clarify its intent 
that states be allowed to regulate alcohol sales within their 
borders.
    With that, Mr. Chairman, I thank you and I yield back the 
balance of my time if I have any.
    [The prepared statement of Mr. Rush follows:]
          Prepared Statement of the Honorable Bobby L. Rush, 
        a Representative in Congress from the State of Illinois



                               __________

    Mr. Johnson. Thank you, sir.
    We will next go with the seating order, so Representative 
Thompson, please proceed with your testimony, yes.

 TESTIMONY OF THE HONORABLE MIKE THOMPSON, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Thompson. Well, thank you, Mr. Chairman and Ranking 
Member Coble, and Members of the Committee. I appreciate the 
opportunity to testify today, and I appreciate, Mr. Chairman, 
your opening comments when you mentioned that you are going to 
be with open mind to see if there are any compelling reasons 
why we should change existing law. And I know some will try and 
make that compelling argument--I know some would like you to 
believe that this is an issue between beer wholesalers and beer 
producers, but by opening remarks of the different Members of 
the Committee, I know that you understand that the reach is far 
greater than that.
    You will hear testimony today regarding the power of the 
21st Amendment versus other constitutional rights. Wholesalers 
will argue for a proposal that would tip the scale completely 
in the favor of state control over alcohol. I have, in my 
prepared testimony--written testimony that I submit for the 
record--an address on that regard, but I would like to spend my 
time trying to explain how adopting this type of proposal 
would, in real time, disadvantage two groups that all of us in 
Congress are very concerned about: American businesses, 
particularly small businesses, and American consumers. This 
proposal is asking Congress to pick them, the wholesalers, as 
winners, and America's consumers, wineries, and breweries as 
losers.
    My district is home to hundreds of wineries, and I have 
more microbreweries than any other congressional district, and 
I can tell you firsthand that state regulation of alcohol is 
alive and well. States can and states do regulate alcohol 
sales.
    Few products, if any, come under such heavy regulation. But 
the Supreme Court has ruled that while states can regulate they 
cannot discriminate. Unfair and discriminatory regulation hurts 
producers and it directly hurts consumers.
    We have seen this movie before, and in the sequel, a return 
to past practices, the ending is not going to be any better. 
Hawaii used to charge in-state wineries a penny per gallon tax 
and out-of-state wines 85 cents for tax. Arkansas would only 
allow Arkansas wine to be sold in grocery stores. And in Rhode 
Island they disallowed retailers from advertising the prices of 
their products.
    A return to these practices means less choice for consumers 
and unfairly hurts producers. Take wine as an example: All 50 
states make wine now. There is more than 500 percent growth in 
wineries over the past 30 years. They support well over 1 
million jobs, and I don't believe we should be discriminating 
against business and reduce competition that has made our great 
country and American enterprise so fantastic.
    Mr. Chairman and Members, the 21st Amendment does not trump 
the rest of the Constitution; 40 years of court decision has 
made that clear. The 21st Amendment must be balanced with the 
Commerce Clause, Due Process Clause, First Amendment, and it 
can't violate the Sherman Act.
    Congress backed this up in 2003 when we passed legislation 
that said states can go to Federal court on the 21st Amendment 
but must be consistent with other provisions of the 
Constitution. States have strong rights under the 21st 
Amendment, but states cannot discriminate. I urge you, don't 
give one side--the wholesalers--license to harm American 
consumers and other businesses. It is unconstitutional and it 
is wrong.
    And I want to reference something that I understand is 
going to be mentioned today, and that is this U.K. study that 
was done. And I want to urge the Members of this Committee, 
please don't compare apples to lemons. Our system is very 
different than that of the U.K. The idea that wholesaler 
control reduces underage drinking is pretty farfetched.
    The entire industry is interested in preventing underage 
drinking, but don't forget kids get alcohol from adults. They 
get alcohol from parents and from friends who buy it legally. 
And kids who are drinking aren't drinking $80 or even $20 
bottles of wine that are made in my district or any other wine-
producing area in the country. Any mention of kids' access to 
alcohol and its relationship to state control is no more than a 
smokescreen.
    I appreciate you taking time to hear these concerns and I 
urge you to move with caution in trying to change a system that 
is working fairly well. Thank you very much.
    [The prepared statement of Mr. Thompson follows:]
          Prepared Statement of the Honorable Mike Thompson, 
       a Representative in Congress from the State of California



                               __________

    Mr. Johnson. Thank you, Representative Thompson.
    Representative Cohen?
    Mr. Cohen. Thank you, Chairman Johnson, Ranking Member 
Coble, and the full Committee Chairman and the Ranking Member, 
Mr. Smith, who deserves recognition that he didn't receive 
yesterday properly on the floor.
    Mr. Johnson. And I see we are still receiving the effects 
of St. Patrick's Day on the panel also.

  TESTIMONY OF THE HONORABLE STEVE COHEN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mr. Cohen. Thank you for the opportunity to testify today 
on this important topic. I served as a Tennessee senator for 24 
years, and 22 of those years were on the State and Local 
Government Committee, which regulates alcohol, and for 15 of 
those years I chaired that committee. From that position I 
learned about the three-tier system and a great appreciation 
for the need to regulate alcohol.
    America has had a relationship, I think, as Mr. Smith 
mentioned, since our Nation's earliest days, but that 
relationship has not been without significant challenge. The 
marketplace has changed a lot in 100 years, and 100 years ago 
we had temperance movements and attempts to get involved and 
change the way we imbibed alcohol or the opportunity.
    Much of the attention in the United States was paid to the 
growing problems, real or perceived, that alcohol consumption 
might of had, and possible abuse. Significant concern about how 
the product was sold in retail arose around saloons and 
taverns, largely unregulated, and it became the focus of public 
ire, and I think those saloons and taverns of those years were 
nothing like what we know today.
    On-premises establishments not known as ``family friendly'' 
venues 100 years ago were becoming what the journalists of the 
time referred to as dens of iniquity. Retail outlets were often 
owned by out-of-town people or out-of-state people who really 
didn't care too much about the community values, they only were 
concerned about selling alcohol.
    Because there was no effective system of regulation in 
place a grassroots movement began to take hold that focused on 
the problems associated with alcohol and the proposals that the 
sale, manufacture, and transportation of intoxicating beverages 
should be prohibited. As a result of this, in 1920 America 
began a 13-year failed experiment known as prohibition.
    In 1933, due to a need to collect revenue through taxation 
and a period of lawlessness that had given rise to organized 
crime--Mr. Quigley, I know in his city they had Al Capone and 
the Untouchables, Eliot Ness and all that--and to decriminalize 
the behavior many Americans had continued to participate in 
illegally because Americans like to drink and to end much 
hypocrisy and much governmental corruption that we looked the 
other way about prohibition was repealed through the 21st 
Amendment.
    Prohibition was a serious mistake and an attempt at 
controlling adult behavior, which governments really shouldn't 
be doing and continue to do in Mr. Thompson's districts and 
throughout this country with other products. But nevertheless, 
that was a problem, and then the repeal took place, and we had 
certain problems we wanted to cure.
    Prohibition had certain reasons that it arose because 
problems do exist with alcohol and they were ameliorated--there 
was a desire to ameliorate them after prohibition. Two goals 
that they had in repeal: one was to promote temperance, which 
is another way to say moderation, and the second was to 
maintain an orderly market.
    These goals continue in the U.S. today as we work to 
facilitate a healthy marketplace for alcoholic beverages 
through effective regulation. In order to promote temperance 
states can use a variety of laws that work to control alcohol 
consumption and levy taxes to collect revenue. Giving states 
primary authority over alcohol ensures those attitudes about 
the product can be more directly reflected in community 
standards.
    Citizens in my home state of Tennessee have different 
thoughts about alcohol than citizens do, say, in Nevada or 
Louisiana, even though sometimes that is regrettable to me. 
When policy problems arise around the alcohol sale or 
consumption states are better equipped to deal with those 
problems than the Federal Government is.
    Additionally, having states regulate alcohol helps 
facilitate an orderly market. The state-based alcohol 
regulatory system in place, known as the three-tier system, has 
done a good job of achieving those 21st Amendment goals of 
promoting temperance and an orderly market. Alcohol suppliers, 
distributors, and retailers have operated successful businesses 
within this scheme for more than 75 years, and at the same time 
consumers of alcoholic beverages had an unrivaled selection of 
products available to them at fair prices.
    Effective regulation strikes a balance between competition 
in the marketplace and the concerns of public health and 
safety. Unfortunately, over the last several years many states 
have begun facing deregulatory challenges that cease to strike 
down effective, time-tested state alcohol regulations.
    If we allow the systematic deregulation of the alcohol 
industry to continue we already have an idea of what our 
regulatory system could look like a few more years down the 
road. I won't go into details about the dangers of alcohol 
deregulation the United Kingdom experienced, but Ms. Pamela 
Erickson, who is going to appear on the next panel, will be 
discussing that; I will let her fill in the details, but it 
doesn't seem like it has been very effective or good in the 
United Kingdom.
    I am troubled that we are looking at stopping a system that 
has worked for 75 years, that has been effective, and that the 
public at large has not complained about. In Tennessee there is 
an expression, and I think it is other places as well, ``If it 
ain't broke don't fix it.'' And this one is not broke, and it 
doesn't need fixing.
    I commend the Subcommittee for holding today's hearing and 
look forward to the outcome of this matter in this Committee, 
and thank you for the opportunity to testify.
    [The prepared statement of Mr. Cohen follows:]
           Prepared Statement of the Honorable Steve Cohen, 
        a Representative in Congress from the State of Tennessee



                               __________

    Mr. Johnson. Thank you, Mr. Cohen.
    Next, Mr. Radanovich? We have 5 minutes and 50 seconds of 
votes with 41 people having voted already.
    Proceed, sir.

TESTIMONY OF THE HONORABLE GEORGE RADANOVICH, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. Thank you, Chairman Johnson.
    Thank you very much, Chairman Conyers, Ranking Member 
Coble, and Ranking Member Smith of the full Committee. Thank 
you for the opportunity to testify.
    The business of wine is far from the bucolic splendor of 
the vineyards. It is difficult to sell wine--perhaps more 
difficult than selling most other products or services in the 
United States--and much of that is due to the level of 
diversity--and diversity of regulation and control of all 
aspects of the business.
    The U.S. Department of Treasury's Tax and Trade Bureau's 
production regulations establish uniform baseline standards of 
identity and allow wineries from any state to know where their 
product is categorized on the Federal level. TTB's permitting 
system for wineries and distilleries, their antitrust-based 
trade practice laws, and their label approval processes all 
provide a uniform framework from which state laws build.
    Despite the current diversity in state control I truly 
believe that the inconsistencies among state control systems 
would be much greater without this important Federal framework. 
People in the wine business here a lot about three-tier 
distribution, but all know that a pure three-tier distribution 
does not exist in the United States.
    Instead, over the years since prohibition was repealed, 
states have chosen to exercise their powers under the 21st 
Amendment to create a hybrid distribution systems that use 
three-tier principles as a framework. In at least 39 states, 
for example, state laws allow in-state wineries to self 
distribute.
    Self-distribution laws permit the in-state winery to act as 
its own distributor, allowing sales by the winery directly to 
retail on-and off-sale licenses. In California the number of 
wineries could not proliferate without self-distribution, but 
self-distribution stops at the state line and the privilege is 
only available for in-state wineries.
    Self-distribution and winery direct sales are not three-
tier concepts. They are methods of distribution that would not 
be categorized as three-tier. In California as well as in some 
other states these methods of distribution exist in addition to 
the three-tier distribution method, and wineries can choose to 
exercise any combination of methods in California to sell their 
wine. Even in the Granholm state of Michigan laws have been 
changed to allow out-of-state wineries to sell wine direct to 
retailers.
    There is draft legislation floating around the House that 
is associated with this hearing today. It is being promoted by, 
I believe, the beer wholesalers, and it is a very long, broad, 
and quite frankly, outrageous wish list.
    Number one, they want Congress to grant states an antitrust 
exemption. They also want states to allow--they want state laws 
to override Federal and constitutional mandates. They want 
Congress to overturn a long line of judicial decisions that 
have consistently recognized states' rights to regulate alcohol 
beverages as long as they don't discriminate. And they want 
states to be relieved from having to prove that their own 
statutes and regulations are constitutional.
    As a Member of the Energy and Commerce Committee, I urge 
this Committee to listen carefully and respectfully to today's 
testimony, especially to see if what is being proposed here is 
innovation or monopoly protection, whether the marketplace or 
the government is to decide winners and losers, and whether 
free market economy or one that is controlled by promoting 
discriminatory legislation to state legislatures will determine 
how a legal product is marketed to legal consumers.
    I ask you to be on the side of states' rights, but states' 
rights that are measured by the principles of our country's 
Constitution and antitrust laws. It is right that they have 
access to Congress to make their request and it is right to 
allow them a forum to express their fears about the holdings in 
the current series of judicial decisions. They ask a lot, but 
what they ask is not justified.
    What they fear is nothing less than the U.S. Constitution 
and antitrust laws. There must be extraordinary reasons why 
states should be allowed--or should get a free pass from the 
Constitution or antitrust laws, and I predict that you will not 
hear any such reasons in your hearing today.
    Thank you, Mr. Chairman. I yield back.
    [The prepared statement of Mr. Radanovich follows:]
        Prepared Statement of the Honorable George Radanovich, 
       a Representative in Congress from the State of California



                               __________

    Mr. Johnson. Thank you.
    With that, we will take a recess. We have got about 35 to 
40 minutes worth of votes, and I appreciate you all testifying 
and look forward to hearing the persons on the second panel. We 
shall return.
    [Recess.]
    Mr. Johnson. We now turn to our second panel and ask them 
to prepare to testify. I draw the gallery's attention to the 
first seat, which is an empty seat which is for the wine 
industry, and so unfortunately no one being here from the wine 
industry means that they will not need to prepare to testify.
    Our first witness is Mr. James Ho. Mr. Ho is the solicitor 
general for the state of Texas, the first Asian-American to 
hold the office.
    Welcome, Mr. Ho.
    Next is Ms. Nida Samona, chairperson of the Michigan Liquor 
Control Commission.
    Welcome, Ms. Samona.
    Next, Steve Hindy, cofounder, chairman, and president of 
the Brooklyn Brewery.
    Welcome, Mr. Hindy.
    Next we have Pamela Erickson, president and CEO of Public 
Action Management. She was formerly the executive director of 
the Oregon Liquor Control Commission.
    Thank you for being here, ma'am.
    And finally, we have Professor Darren Bush. Professor Bush 
is an associate professor of law at the Houston Law Center. He 
as also a consulting member of the Antitrust Modernization 
Commission, a bipartisan taskforce established by the Judiciary 
Committee to critically evaluate antitrust law.
    Welcome, Professor Bush. Any relation, just for the record?
    All right, without--but you would still be welcome.
    Without objection your written statement will be placed 
into the record. And as before, we ask that you limit your oral 
remarks to 5 minutes, and our lighting system starts with the 
green light, then the yellow light with 1 minute left, and then 
red.
    So with no further adieu, Mr. Ho?

TESTIMONY OF JAMES C. HO, SOLICITOR GENERAL OF TEXAS, OFFICE OF 
               THE SOLICITOR GENERAL, AUSTIN, TX

    Mr. Ho. Good afternoon, Mr. Chairman and Members. Thank you 
very much for the invitation to appear before the Subcommittee 
today. My name is Jim Ho. I serve as the solicitor general of 
the state of Texas under the leadership of Texas Attorney 
General Greg Abbott, but just to be clear, I am appearing today 
solely in my personal capacity, not on behalf of the state.
    I know the Subcommittee's time is short, so I am just going 
to give a shortened version of my written remarks. It is my 
understanding that there is some discussion of possible 
legislation to clarify the authority of states to regulate 
commercial activities involving alcoholic beverages.
    Mr. Chairman, you noted at the outset your--the importance 
of balance in your view. In that spirit I will just make very 
clear, I don't have a particular dog in this fight. I have no 
position on the legislation; I am certainly not here to express 
any position on the merits of the legislation. But I can 
certainly testify with respect to the constitutional issues--
the constitutionality of any proposed legislation based on my 
experiences litigating in this area.
    As the Subcommittee knows, the power of states to regulate 
commerce in alcohol has been the subject of hotly contested 
litigation in numerous courts around the country in recent 
years. Our office has handled a number of such matters on 
behalf of the state of Texas. We won the most recent round in 
the court of appeals in Texas--Louisiana, but there are similar 
cases being fought in communities across the Nation.
    These cases involve constitutional objections to state 
laws, but make no mistake, this is a unique area of 
constitutional litigation, and I say that because Congress has 
the power to step in and resolve the litigation itself at any 
time. In this unique area of constitutional litigation Congress 
can seize the reins and decide for itself whether a particular 
constitutional challenge should succeed or fail simply by 
passing a Federal statute, and that is because these cases 
involve a doctrine known as the dormant Commerce Clause.
    Courts invoke this doctrine, the dormant Commerce Clause, 
as a constitutional limit on states, but courts invoke this 
doctrine only because they are presuming that Congress would 
prefer that states stay out of a particular area of regulation.
    So let me say that again: It is only a presumption about 
what Congress wants in a particular area, and what that means 
is that Congress at any time has the power to make its actual 
views in a particular area known to the courts. And if Congress 
expresses those views courts will follow them.
    What is more, congressional action in this area would 
reinforce important constitutional values. After all, alcohol 
is the only consumer product to receive special constitutional 
status, in the form of special recognition of state authority 
to regulate under the 21st Amendment.
    Let me also add that--my conclusion here today--that 
Congress has full authority to regulate in this area if it 
chooses to. That conclusion I don't really regard as 
controversial, and if it is a controversial constitutional 
position, I look forward to hearing why. But amongst the 
community of constitutional lawyers this is pretty much a 
settled issue.
    Courts across the country, including the U.S. Supreme 
Court, have repeatedly acknowledged that if Congress speaks 
clearly it can eliminate entirely constitutional challenges to 
state laws under the dormant Commerce Clause. After all, let us 
remember the whole premise, the whole point of the dormant 
Commerce Clause is to allow courts to step in and fill certain 
gaps only when Congress has failed to speak. But if courts--I 
am sorry, if Congress does choose to speak the courts will 
listen.
    Thank you again for the invitation to testify. I would be 
delighted to answer any questions.
    [The prepared statement of Mr. Ho follows:]
                   Prepared Statement of James C. Ho



                               __________

    Mr. Johnson. Thank you, sir.
    Next, Ms. Samona?

TESTIMONY OF NIDA SAMONA, CHAIRPERSON, MICHIGAN LIQUOR CONTROL 
                    COMMISSION, LANSING, MI

    Ms. Samona. Thank you. Mr. Chairman, Ranking Member Cole, 
Members of the--Coble, I am sorry--and Members of the 
Subcommittee, I want to thank you. I am the chairperson of the 
Michigan Liquor Control Commission, and I thank you for the 
invitation to discuss Michigan's system for regulating 
alcoholic beverages and the need to preserve state control over 
the health, safety, and the welfare of our citizens.
    Experience has taught us that government regulation can be 
in the best public interest. Whether it is financial markets, 
food safety, mortgages, government has a role in protecting the 
public. This is especially true when it comes to alcohol.
    In 1941 Supreme Court Justice Jackson stated that liquor is 
``a lawlessness unto itself.'' That was true then, and it is 
certainly true today.
    Because of their potential abuse and their importance as a 
source of tax revenue for states alcoholic beverages must be 
highly regulated. History has taught us that regulation is most 
effective and accepted when it is done at the state level.
    The harmful effects on individuals, families, and societies 
as a whole that result for intemperate or underage consumption 
of alcoholic beverages are dramatically different from those 
related to the use of other products, whether they are measured 
by scale, severity, nature, or remedy. So, as a consequence 
states attempt to mitigate these problems through regulation.
    Indeed, alcoholic beverages have always been and remain one 
of the most heavily regulated products in the country, and for 
good reason. Localities and states have enacted a variety of 
restrictions on the manufacture, distribution, and sale of 
alcoholic beverages--the three-tier system.
    Alcohol is the only product that has been the subject of 
two constitutional amendments. The first was the 18th 
Amendment, which established national prohibition of alcohol; 
and the second was the 21st Amendment, which returned primary 
responsibility for alcohol regulation to the states. State of 
Michigan was the first one to enact the 21st Amendment, of all 
the states.
    Community norms and standards across the country differ 
widely regarding alcohol. This fact underscores the soundness 
of the constitutional and congressional decisions to rest 
regulatory authority primarily at the state and local level.
    Under the authority provided by the 21st Amendment the 
Michigan legislature created the Michigan Liquor Control 
Commission and granted it plenary powers to control alcoholic 
beverages traffic in Michigan, including the manufacture, 
importation, possession, transportation, and the sale of 
alcoholic beverages within the state. Among the goals of the 
commission are controlling the traffic in alcoholic beverages 
within the state, collecting tax revenue, and protecting both 
the consumer and the general public from unlawful consumption 
and use of alcohol.
    Michigan's Liquor Control Code provides for strict 
regulation and control over the alcoholic beverage industry as 
opposed to fostering the significant degree of free enterprise 
that was afforded to other products. This regulation is 
achieved through a transparent system that requires that all 
alcoholic beverages need to be distributed through the 
commission or its licensees, who are subject to extensive 
oversight and regulation.
    This system has worked remarkably well for over 75 years. 
Through the delicately balanced and historically tested 
regulatory scheme Michigan has been able to address critical 
state interests, such as preventing illegal sales to minors, 
inhibiting overly aggressive marketing and consumption, 
collecting taxes, creating orderly distribution and importation 
systems, and preventing a recurrence of the problems that led 
to the enactment of the national prohibition. These are all 
recognized as core interests of the 21st Amendment.
    In 2004 the Heald v. Granholm case struck down the 
Michigan--the New York and Michigan laws which banned wineries 
from being out--from shipping out--from allowing out-of-state 
wineries to ship directly to the doorsteps of customers. The 
Granholm decision did not invalidate the three-tier system. In 
fact, Justice Kennedy called it ``unquestionably legitimate,'' 
in his opinion.
    State regulatory systems are under siege, and these 
lawsuits are gutting out the effective state regulation that we 
are asking for Congress to come in and to address. Thank you.
    [The prepared statement of Ms. Samona follows:]
                   Prepared Statement of Nida Samona



                               __________

    Mr. Johnson. Thank you, Ms. Samona.
    Now, Mr. Hindy?

 TESTIMONY OF STEPHEN HINDY, CHAIRMAN AND PRESIDENT, BROOKLYN 
                     BREWERY, BROOKLYN, NY

    Mr. Hindy. Thank you, Chairman Johnson, Representative 
Coble--happy birthday--Members of the Subcommittee. I am 
pleased to present this testimony on behalf of 1,500 small 
brewers in the United States.
    I started my company in 1988. I employ 40 people in 
Brooklyn and am currently expanding my brewery and adding 20 
jobs. I also brew at an upstate brewery which employs 120 
people.
    I am a member of the Brewers Association, the trade 
association of small brewers, and the Beer Institute, the trade 
group representing large and small brewers and importers of 
beer in the United States. I have had the honor of serving on 
the boards of both organizations.
    Virtually all the beer produced, distributed, and sold in 
this country passes through the three-tier system. Three-tier 
has served our country well in both regulating the safe 
production and distribution of high-quality beers and in 
helping to foster the craft brewing renaissance that has seen 
the genesis of 1,500 small breweries in the past 25 years. 
There has been no comparable renaissance in many countries 
around the world where large brewing companies dominate 
production, distribution, and retailing.
    The three-tier system is not broken, but consolidation at 
the distributor level has made it difficult for some small 
brewers to get to market. Some states make exceptions to the 
three-tier system to address this problem.
    When I started Brooklyn Brewery none of the large New York 
City distributors were interested in carrying my beers. I was 
able to distribute my own beer and build my brand and 
eventually sell the rights to my brand to one of those big 
distributors.
    There have been many similar success stories among small 
breweries in other states, such as Samuel Adams in 
Massachusetts, Sierra Nevada in California. Without the right 
to self-distribute it is doubtful we could have established our 
businesses.
    We do not see any need for a drastic change in the balance 
between state and Federal authorities that has served the 
public for many years. There has been talk of ceding Federal 
control of alcoholic beverage regulation to the states. That 
would be a disaster for small brewers and consumers.
    Separate state regulations on formulation, labeling, or 
advertising would be incredibly expensive for all brewers. Last 
year in my own state of New York, for example, the courts 
wisely struck down a law that would have required brewers to 
create separate, New York-specific labels for any beer sold in 
that state. This would have effectively closed the New York 
market to smaller brewers who could not afford the expense of 
special, New York-only labels.
    The current system has also served the public interest in 
controlling the abuse of alcoholic beverages. My review of 
available national statistics shows that our Nation has made 
significant progress in reducing drinking by underage youth and 
in drunk driving. Brewers, wholesalers, and retailers alike are 
committed to making further progress in these areas. It is not 
clear--to me at least--what a radical change in the Federal-
state balance would do to these very positive trends.
    The number one issue facing small brewers is state 
franchise legislation that gives distributors virtual absolute 
control of our brands. In some states non-performing 
wholesalers sit on our brands to ensure their competitors do 
not get them. Talk about stifling competition. Beer 
distributors have significant clout in all state legislatures, 
and there is fear among small brewers that a switch to 
exclusive state regulation would only exacerbate this problem.
    In spite of challenges, the three-tier system is alive and 
well in the United States. We want to see that system continue 
without radical changes that could harm the interests of 
American consumers who responsibly enjoy our products. 
Representative Cohen, I think, said it best this morning: If it 
ain't broke, why fix it?
    Thank you.
    [The prepared statement of Mr. Hindy follows:]
                  Prepared Statement of Stephen Hindy



                               __________

    Mr. Johnson. Thank you, sir.
    Last but--not last, but next, Ms. Erickson, please?

   TESTIMONY OF PAMELA S. ERICKSON, CHIEF EXECUTIVE OFFICER, 
            PUBLIC ACTION MANAGEMENT, SCOTTSDALE, AZ

    Ms. Erickson. Thank you, Mr. Chairman and Members of the 
Subcommittee. It is a pleasure to be here and talk about this 
very important issue.
    I am a former alcohol regulator and current alcohol abuse 
prevention advocate that is deeply concerned about alcohol 
regulation issues. And I am the author of this some what 
infamous report, called ``The Dangers of Alcohol Deregulation: 
The United Kingdom Experience.''
    I would like to say that the gentleman that suggested that 
we are comparing apples and oranges is quite correct--lemons 
and oranges, however you want to say it. That is correct, and 
the reason is that in the United States we have a comprehensive 
system that does control alcohol in a way that fosters 
moderation and consumption; the United Kingdom no longer has 
such a system.
    Over a period of 4 decades they slowly deregulated to the 
point where you can sell alcohol 24 hours a day, 7 days a week 
in bars and all kinds of stores. Alcohol has become 70 percent 
more affordable in just 20 years, which means the marketplace 
is flooded with cheap alcohol that has encouraged people to 
drink.
    As deregulation occurred over 4 decades consumption rates 
went up, and up, and up. They are now paying the price for 
deregulation, and let me just give you a couple of statistics.
    Hospital admissions for alcohol liver disease and acute 
intoxication have doubled over just 10 years. Underage drinking 
rates are twice what ours are. Problems around bars and clubs 
are so severe in London that London has two buses equipped as 
field hospitals to take care of people who have been victims of 
alcohol-fueled violence or alcohol intoxication every weekend.
    Could this happen to us? Again, I want to emphasize the 
major difference with us.
    We have a comprehensive alcohol regulatory system that 
regulates the price, it keeps the price not too cheap to push 
consumption or too high that would encourage bootlegging. We 
have--usually have limits on outlets. We have limits on 
promotions that would encourage volume consumption. We have 
measures that address age. We have measures that address drunk 
driving.
    We have a really good, comprehensive system. So as long as 
we maintain that system and keep it strong we should be okay.
    Our policy is alcohol moderation--moderation in 
consumption. It is a very good policy. If we follow this 
policy, if people drink in moderation there is rarely any harm 
and there is some health benefit for some people. So it is a 
good policy.
    There are threats to our system. If we had a court system 
that determined our regulatory measures to be unconstitutional 
we could be quickly deregulated. Also, if market forces became 
so strong that there was domination by large, big box stores 
that were able to offer large quantities of alcohol very 
cheaply that could create major problems for us.
    So those are things to be concerned about. When I work with 
various states I see deregulation efforts in the retail sector, 
and it is--I worry about the slow drip-drip-drip kind of 
deregulation occurring here.
    I believe that our current system is good for business. In 
my native state of Oregon there is a strong system of 
regulation, yet a flourishing industry of small wineries, craft 
brewers that produce some of the best beer in the world--and 
that is a fact--and a growing micro-distillery business. Big 
box stores, independent grocers, convenience chains are all 
able to operate in this flourishing business environment.
    Thank you so much for your attention.
    [The prepared statement of Ms. Erickson follows:]
                Prepared Statement of Pamela S. Erickson



                               __________

    Mr. Johnson. Thank you.
    Last but not least, Professor Bush?

     TESTIMONY OF DARREN BUSH, ASSOCIATE PROFESSOR OF LAW, 
         UNIVERSITY OF HOUSTON LAW CENTER, HOUSTON, TX

    Mr. Bush. Mr. Chairman, Ranking Member Coble, and other 
distinguished Members of the Judiciary Committee's Subcommittee 
on Courts and Competition Policy, I want to thank you for 
giving me the opportunity today to speak about the 
interrelationship between antitrust laws and state regulation 
of alcohol consumption. My remarks today are my own; I speak 
for no one apart from myself. And I speak today based on my 
experience as a former antitrust division trial attorney, as an 
economist, and as a law professor whose research and writing 
has focused on antitrust issues arising in the context of 
regulated and deregulated industries.
    Rather than repeat the highlights of my written testimony I 
want to walk through the methodology the Supreme Court employs 
in examining whether a state regulation violates the antitrust 
laws or is worthy of a judicially-created exemption from the 
antitrust laws.
    The first fundamental question, as told by the Supreme 
Court in Fisher v. City of Berkeley, is whether the restraint 
in question is unilaterally imposed or is what the Supreme 
Court has described as a hybrid restraint. While state 
government is free to impose regulation which compels 
particular conduct for private actors, the regulation must not 
be ``hybrid'' in that non-market mechanisms merely enforce 
private marketing decisions. Where private actors are thus 
granted a degree of private regulatory power the regulatory 
scheme may be attacked under the antitrust laws.
    There is a relationship between the Court's description of 
hybrid restraints and the notion of what it calls active 
supervision under the State Action Doctrine cases. The Court 
stated that in order for a state to create statutory restraint 
that is exempt from the antitrust laws, one, the challenge 
restraint must be one clearly articulated and affirmatively 
expressed as state policy; and two, the policy must be actively 
supervised by the state itself.
    The history of antitrust enforcement in the realm of liquor 
is a history of state inaction in the second prong of this 
test, and thus a long list of hybrid restraints. In each case 
the conduct at the crux of the case is resale price 
maintenance, the foreboding of competition at wholesale level.
    In the bulk of these cases the state allowed private actors 
to set prices which were then enforced by a state rule. The 
typical post and hold regulation employed by states that has 
been subject to antitrust challenge involved requirements 
designed to eliminate all price competition from the market.
    With the states engaging in this ``regulation''--I place 
the word regulation in quotes here--has elected to do is to 
facilitate tacit or overt collusion. These laws serve to 
facilitate collusion by compelling transparent prices with 
notification to competitors, the ability of competitors to 
detect and punish deviations from prior listed prices, by 
increasing cost to any competitor seeking to attract market 
share via price incentives, and by barring wholesalers from 
being able to employ economies of scale. Whether tacit or overt 
collusion, states employing such devices have given carte 
blanche to coordinated anticompetitive behavior without any 
regulatory restraint or oversight.
    Antitrust challenges to such regulation do not impinge on 
the state's authority to regulate under the 21st Amendment. As 
a beginning point, I note that the cause of antitrust challenge 
here is an abdication of state regulatory authority in favor of 
the whims of a private collusive agreement, whether tacit or 
overt.
    Secondly, while according to advocates of such schemes the 
goal purportedly advanced is temperance, suggesting that the 
cheaper the cost of alcohol the more is consumed, the question 
becomes whether the goal is to eliminate alcoholism or to 
injure consumers who are social drinkers and already self-
regulate to some degree. Regardless, the constitutional 
balancing to me heavily weighs in favor of competition policy, 
particularly when there are less restrictive alternatives more 
readily available to the state, namely to actively supervise 
the regulation in question.
    In light of the foregoing, it is difficult to conceive of 
this pattern of conduct requiring or justifying any sort of 
statutory immunity. And indeed, this is the only type of 
regulation that has been successfully challenged in the courts.
    I have written elsewhere and submitted to your Subcommittee 
the standards I believe applicable in establishing any 
statutory immunity under the antitrust laws, which I and my 
coauthor submitted as consultants to the Antitrust 
Modernization Commission. There are numerous questions that 
ought to be answered in granting such an immunity, and the 
burden should be upon those seeking to alter our magna carta of 
free enterprise.
    In my opinion, no immunity is justified here. The states 
have only been successfully challenged in their regulatory 
authority to the extent they have advocated--abdicated such 
authority to private actors. Such abdication is not state 
regulation but the absence of regulation and the protection of 
private actors who may be seeking solely monopoly rents and are 
not vested in a public interest.
    I will stop here but would like to discuss at some point 
sort of what the standards might be for statutory immunities. 
Thank you.
    [The prepared statement of Mr. Bush follows:]
                   Prepared Statement of Darren Bush




                               __________
    Mr. Johnson. Thank you, sir.
    We will now move to questioning of the witnesses. It will 
proceed in accordance with the 5-minute rule.
    Ms. Samona, what does--what would you, based on your 
experience, recommend that any legislation include? We have 
already talked about an antitrust exemption. Is that something 
that you would support?
    Ms. Samona. Mr. Chairman, thank you for the question. What 
I would propose is for some law or legislation to reaffirm the 
right of states to regulate alcohol as they deem appropriate 
for their state.
    Mr. Johnson. Now, is there any particular method or 
language that you would find most appealing?
    Ms. Samona. I don't have any language that is prepared. I 
would be happy to work with--anything to that. At this point I 
would be happy if Members of this Committee are open to that 
idea and that suggestion to do that.
    Mr. Johnson. How would you see it--what exactly would you 
be seeking?
    Ms. Samona. Well, the two major cases that exist involved 
the state of Michigan. The first one was the Granholm decision, 
in Heald v. Granholm. That case, wineries--out-state wineries--
sued the state saying that in-state wineries are given this 
exclusion because they are able to deliver to consumers in the 
state of Michigan, out-state wineries are not. The argument 
that we made--and we think it is a valid argument and it 
supports the 21st Amendment--is that those wineries or those 
businesses that exist in the state of Michigan and licensed by 
the Michigan Liquor Control Commission are those that we have 
complete control over. We have--we can go and----
    Mr. Johnson. Okay, well, now let me stop you. I want you to 
respond precisely to the--the question is, how exactly--what 
exactly would you be proposing with respect to state versus 
Federal regulation? Would it be a ban on Federal regulation? 
Would it be a ban on state regulation? What exactly is it that 
you would propose?
    Ms. Samona. I would not, certainly, look for a ban on any 
kind of Federal legislation. I think that the Federal 
legislation that applies to all the states--I think that 
probably solves many of the problems that we are dealing here 
with.
    At this point we have courts that are issuing orders that 
are contrary in different areas. The----
    Mr. Johnson. Okay, so you want to try to avoid any and all 
litigation that may arise from the operation of the three-tier 
system?
    Ms. Samona. Absolutely. I think the clearer Congress speaks 
the----
    Mr. Johnson. All right.
    Ms. Samona [continuing]. The less probability of 
litigation.
    Mr. Johnson. Okay. Can I get the views of the other----
    Ms. Samona. Absolutely.
    Mr. Johnson [continuing]. Members on this?
    Mr. Ho?
    Mr. Ho. Sure. We have heard a couple of times the phrase, 
``If it ain't broke don't fix it.'' I would just modify that 
comment slightly and say, that is wonderful. If it ain't broke, 
don't sue.
    Congress has the complete authority to end all of this 
litigation and to say, ``What the states are doing, that is 
within the states' rights to engage in that regulation and you 
all just keep doing that''----
    Mr. Johnson. Do you think that----
    Mr. Ho [continuing]. Control.
    Mr. Johnson [continuing]. Any circumstance where the courts 
can anticipate any legal arguments that could be good faith 
arguments supported by evidence and a lawsuit filed? Do you 
think there are any areas where the legislature can accomplish 
that feat, or are we always going to be a litigation society 
utilizing the third coequal branch of government?
    Mr. Ho. I think I would respond by saying, the clearer 
Congress can be in setting out what it wants states to be able 
to do, and not to be able to do, the less litigation we will 
have. The laws that the courts are struggling with right now 
are really just very few words. The 21st Amendment----
    Mr. Johnson. It is pretty----
    Mr. Ho [continuing]. And some of these other laws.
    Mr. Johnson [continuing]. Pretty clear stuff, but I will 
tell you----
    Mr. Ho. Sure. I mean, you can expand it and sort of 
explain----
    Mr. Johnson. Right. And you can do that with anything.
    The other witnesses--Mr. Hindy, Ms. Erickson, and Professor 
Bush?
    Mr. Hindy. Well, you know, I am not an attorney, but from 
what I have heard there are plenty of attorneys in this town, 
so probably that is okay. It is interesting to hear Mr. Ho, who 
I believe is an attorney, calling for people not to sue.
    You know, it just seems to me that the primary role of 
regulation of alcoholic beverages right now is with the states, 
and the Federal Commerce Clause just seeks to ensure that there 
are no discriminatory laws enacted by the states. That seems to 
me to be a good foundation for regulation of alcoholic 
beverages, served us well for 75 years, and there is bound to 
be litigation on any of these arenas where there are suppliers 
who can't get their products to market.
    Mr. Johnson. Thank you.
    Ms. Erickson and Professor Bush, you all are in favor or 
opposed to an antitrust exemption for the alcohol-based 
products?
    Ms. Erickson. Let me give a brief response. I am not a 
lawyer either, so I am going to give you a layperson's 
response.
    I think there needs to be recognition that there are 
legitimate reasons for not selling alcohol in a free market, 
that the marketplace rules need to be somewhat different for 
alcohol. For example, if you are a businessperson you will put 
in your business plan a plan to identify your best customers, 
those people that buy the most of your product, and you are 
going to aggressively promote to those people. But with alcohol 
a lot of those people who are your best customers are 
alcoholics, so your promotional activities need to be somewhat 
muted.
    So I think some of those specific concerns where the free 
marketplace creates problems with the sale of alcohol there 
needs to be a clear recognition of that.
    Mr. Johnson. All right, thank you.
    And Professor Bush?
    Mr. Bush. I believe to a large degree they already have an 
immunity from the antitrust laws. It is called the State Action 
Doctrine. It is a judicially-created exemption that so long as 
the state has a clearly articulated policy and it actively 
supervises that policy it exempts them from the antitrust laws. 
Where they have run into trouble is where they have not 
actively supervised their alcohol regulation and have delegated 
that authority to private actors who are not vested in the 
public interest.
    In creating a statutory immunity there is a great concern 
that I have written on extensively, and so have others, that 
the immunity goes beyond what might be necessary. There may not 
be any reasonable justification for the immunity, and there is 
no telling what kind of harm the immunity will do. Moreover, 
there doesn't seem to be any sort of legitimate justification 
for the immunity in that the one instance of antitrust attack 
is an instance where the states have actually utterly abdicated 
their authority to private actors.
    Mr. Johnson. Thank you, Professor Bush.
    Now I will yield the floor to the Chairman of this 
Committee, Chairman Conyers.
    Mr. Conyers. I thank you for your courtesy. I only have one 
question, and it is to Nida Samona, who has been the Michigan 
Liquor Control Commissioner and chairperson of that commission.
    Here is what I would like to know: Since the Granholm 
decision has there been any noticeable effect, from your 
perspective, on Michigan's ability to regulate alcoholic 
beverages?
    Ms. Samona. Thank you for that question. I appreciate that. 
I, too, am a lawyer that sits on this panel, though, you know, 
my role is a little different, but my lawyer hat is not always 
quite removed.
    Yes, we do see a big difference in regards to what happened 
with the Granholm decision, named after our governor, my boss, 
and that was when the independent business owners--or the 
independent wineries in the state of Michigan, we had to face 
an issue of the legislature of, do we allow them to ship to 
customers in the state of Michigan, consumers or not, based on 
the fact that out-state wineries wanted to be able to do the 
same thing even though we had no control or regulatory 
authority over these out-state wineries as we did the in-state 
wineries.
    We could go to the in-state wineries and check on them 
daily if we wanted to. We licensed them; we could take that 
license away from them at any time if we suspected they did 
anything that was against the laws and the rules of the Liquor 
Control Commission in the state of Michigan.
    What we have had to do is we had to open up the door and 
allow all wineries to ship, through a permit system, to 
consumers. So if you are a winery that is--whether you are in 
California and Oregon or anywhere else, you can get a permit 
system--you fill out a form, you pay $100, and you ship the 
wine away.
    Do we have control over it as far as taxes are concerned? 
Not necessarily, because we don't know if everything is being 
reported. It is an honor system.
    Does it work? We think that we are losing millions of 
dollars of revenue as a result of that.
    And then to piggyback on that, a few years later we had 
another lawsuit that was called the Siesta Village lawsuit 
against the state of Michigan, and that one wanted an out-state 
retailer to be able to ship directly to a consumer in the state 
of Michigan.
    Again, that retailer is out-state, not licensed by our 
agency. We have not control over them. We don't know who they 
are shipping to. Are they checking ID? Are they selling 
products that would be products that we would approve in the 
state of Michigan? We really don't know.
    And again, the rule--the district court ruled against the 
state of Michigan, and so in effect what we had to do was we 
had to shut down all delivery to all customers in the state of 
Michigan by any retailers, in-state or out-state. The millions 
of dollars that these lawsuits have cost the state of Michigan 
where we could have put them in enforcement and other things 
has been dramatic and crippling, quite honestly.
    And so as a result, our in-state licensees have had to 
suffer as a result of these losses that have existed. We have 
an open market. You can bring in any product in the state of 
Michigan. If it is a beer or wine product bring it through a 
beer and wine wholesaler who is licensed by us and we have 
control and authority over them; if it is a spirits product 
bring it in through a liquor vendor that is licensed and we 
have authority over them. That is what we are talking about is 
that ability.
    Mr. Conyers. Thank you, Chairman Samona. Would you please 
keep us abreast of this--of what is happening in Michigan as a 
result of the decision and your chairing the Michigan Liquor 
Control Commission, because I think the Committee would be 
interested in that?
    Ms. Samona. I would be happy to. Thank you.
    Mr. Conyers. And I thank you, Mr. Chairman and Ranking 
Member, for your courtesy.
    Mr. Johnson. Thank you, Mr. Chairman.
    Next, we will turn to Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman.
    Good to have you all with us this afternoon.
    Ms. Samona, the Internet has changed a great deal in this 
country. How has the Internet changed your ability to 
effectively regulate alcohol at the state level and what do you 
perceive to be your greatest threat to effective regulation 
going forward?
    Ms. Samona. And that is our greatest threat, is the 
Internet, because we know that many of these companies, whether 
they are wine companies or spirits companies, are up 2 or 3 
days a week, and by the time we are ready to track them and try 
to find the source of them they are down and a new company is 
up. And we are not, you know, blind to the fact of, we know 
alcohol is coming it, whether it is beer, wine, or spirits, 
illegally through the state of Michigan.
    We know that there is millions of dollars that are lost to 
our state as a result of revenue and that there is no system of 
checking where that alcohol is being delivered to, who it is 
being delivered to. Is it a, you know, college town kid that is 
ordering it for the party that is for that weekend? We don't 
know. And we have really no way of effectively following that 
ability to do that. We need more money, more resources. 
Unfortunately, much of that is used on these lawsuits.
    Mr. Coble. Thank you, Chairman Samona.
    Ms. Samona. Thank you.
    Mr. Coble. Ms. Erickson, some states are control states, as 
we all know, that as the alcohol is dispensed through state-
administered or state-owned stores. Other states, conversely, 
allow private parties to sell alcohol.
    Have you ever conducted or have you ever seen a study that 
showed the correlation between the level of state involvement 
in the sale of alcohol and the level of alcoholism in a 
particular state?
    Ms. Erickson. Mr. Chairman--Mr. Coble--I believe that there 
are studies that show that generally consumption and problems 
are fewer in control states, and the level of problems in any 
given state is a very, very complicated formula. There are so 
many things that impact it.
    For example, the lowest drinking state in the Nation is 
Utah. Clearly the Mormon Church has a great influence over the 
drinking patterns in that state. Weather seems to have 
something to do with it because drinking tends to be higher in 
northern states.
    We don't know a lot about exactly what makes one state's 
drinking patterns a lot different, but I have seen some studies 
that generally say that problems are somewhat less and that 
drinking patterns are somewhat less in control states.
    Mr. Coble. Mr. Hindy, did you say when you opened your 
brewery you had 14 employees?
    Mr. Hindy. No. When I opened my brewery I had three 
employees----
    Mr. Coble. I thought----
    Mr. Hindy [continuing]. At the end of this year I will have 
60 employees.
    Mr. Coble. Okay, 60.
    Mr. Hindy. Yes.
    Mr. Coble. Well, that is encouraging, given the harsh 
climate that plagues us today. In your view, Mr. Hindy, should 
states be free to discriminate in favor of their own state's 
breweries?
    Mr. Hindy. No, I don't think so. In New York State I 
distributed my own product at the beginning of the company. Any 
brewer has that same right in New York State, so that exception 
to three-tier is legal and appropriate and it has not been 
challenged.
    Mr. Coble. I got you.
    Finally, Mr. Ho, you state that--you may have already 
addressed this previously--but you state that Congress has the 
power to regulation interstate commerce and put to rest some of 
the legal challenges that have been directed at state alcohol 
regulation. As a state litigator, what tools, if any, do you 
need from Congress to successfully litigate the cases that come 
before you?
    Mr. Ho. Well, I am pleased to say that the main case we are 
litigating right now we have won, so far. But having said that, 
it is burdensome, obviously, to have to go through this 
litigation process.
    Congress could pass legislation, if that is what you are 
asking me, kind of modeled on previous enactments. Just a few 
years ago my understanding is Congress passed legislation in 
the hunting and fishing area where a court of appeals had 
struck down some state regulations in that area, Congress 
disagreed with that Ninth Circuit ruling and decided to 
essentially stop that kind of litigation from taking place.
    That is the kind of legislation that, if Congress wanted 
to, it could easily pass in this area so that states wouldn't 
have to deal with the burdens of this kind of litigation.
    Mr. Coble. Professor Bush, you want to add anything to 
that? Don't want to snub you; I want to examine you as well.
    Mr. Bush. It is okay if you snub me, sir. There are a 
couple of things that I think I want to separate out. When we 
are talking about regulation of alcohol there are some pretty 
basic principles of regulation that are typically followed and 
the Federal Government has followed when it has regulation 
industries, and one of those principles has been one of open 
access and nondiscrimination so that people further up the 
bottleneck can actually get their products to market. That a 
pretty standard principle in regulation.
    And to the extent that states have sort of followed those 
principles of regulation, have actively regulated alcohol 
beverages and have followed those regulatory principles, I 
think they have been relatively safe. Where the states run into 
trouble, I think, is where they sort of don't follow those 
tenets and act more protectionist, and I am not quite sure that 
is a good tenet of regulation.
    Mr. Coble. Thank you.
    Thank you all.
    I yield back, Mr. Chairman.
    Mr. Johnson. Thank you, Mr. Coble.
    Next we will have questioning from Mr. Quigley?
    Mr. Quigley. Thank you, Mr. Chairman.
    The earlier panel mentioned that I am from Chicago and its 
unique history on such things. I will tell you, though, that 
the only hearing previous to this one in which we have talked 
about regulating alcohol was in Chicago, and the question was 
whether or not we should have more 4 o'clock liquor licenses.
    Most bars are forced to close at 2 o'clock, so the issue 
was, should more bars be allowed open later? It gets to many of 
these issues. And the first person who testified really put it 
in the right perspective. He said, if you don't know how to get 
drunk by 2 o'clock you don't know what you are doing. 
[Laughter.]
    It gets to the same point, though, Ms. Erickson, when it 
came to consumption and cost, and the price that something 
costs.
    Now, we did do smoking bans there, and we were told that 
numerous studies show that beyond good parenting the number one 
deterrent to kids smoking was cost. Can you point to anything 
that would help--or if not now, later, as it--how this could 
be--the cost issue could be more pointed as it relates to kids? 
Granted, obviously, they are not getting them--they are not 
going in, for the most part, and buying; they are getting it 
from other people. But does it still have that impact?
    Ms. Erickson. Representative Quigley, the same thing is 
true for alcohol. Professor Alex Wagner, from the University of 
Florida College of Medicine complete a review of over 100 
studies of the relationship of price to consumption and came 
out with a very strong statement that says, when the price goes 
up people drink less. And it is true for all categories of 
drinkers: heavy drinkers, moderate drinkers, very definitely 
for underage drinkers.
    Price is probably the most powerful driver of consumption, 
and there is a--research is very clear about the connection 
between high consumption and alcohol problems. So the same 
thing is true for alcohol.
    Mr. Quigley. Very good. Thank you.
    Mr. Johnson. Okay. Next we will have Mr. Lamar Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    First of all, it is nice to have a friend from Texas here 
on the panel, and Mr. Ho, let me direct my first question to 
you. In regard to the Granholm decision, that created a lot 
more litigation than it was expected to, and what was our 
experience in Texas as a result of that decision? Has it 
increased litigation, reduced litigation, and what has been the 
aftermath?
    Mr. Ho. We are definitely seeing an increase in litigation 
after Granholm, not just in Texas but across the country, and 
that is for the simple reason that different litigants and 
different courts and different states are trying to figure out 
exactly how to interpret the Granholm decision.
    We just had a case recently--so far we have won in the 
Fifth Circuit--where we were able to make clear to the court 
that Granholm talks about producers and restricts state 
authority with regard to producers, but it also holds that 
states have a lot more authority with respect to distribution.
    Mr. Smith. Okay. Thank you, Mr. Ho.
    Ms. Samona, I know you went into it in your testimony a 
little bit, but tell us a little bit in greater detail some of 
the advantages of the three-tier system, both in regard to 
protecting those underage, to health, to safety, to quality of 
liquor itself, and so forth.
    Ms. Samona. Thank you for the opportunity. Yes, some of the 
main things that we look at and that we think we believe we 
have to control the plenary power that was given to us by the 
legislature when we created our--the Michigan liquor control 
system is that ability to bring in the product, to make sure 
that that product is a safe product that can be brought in and 
we can track it, where it came from, who it came through, where 
it can go to; the ability to collect revenue on it is 
fundamental for our state and for all states----
    Mr. Smith. So it helps states collect revenue and increases 
their revenue to them, right?
    Ms. Samona. Sure. That is one factor of it. But we never 
lose the health, safety, and welfare aspect of it, and that is 
fundamental to that, is that we make sure that the licensees 
that exist in the state of Michigan are responsible, they 
understand that overconsumption, serving to minors are things 
that are critical to what we do as an agency and it hurts the 
entire, you know, industry by having licensees like that.
    We have that ability and that power to bring those 
licensees in, to suspend them for a few days if we need to, to 
take away the license, to go onsite and visit their premises to 
make sure, to have decoy operations that go in, either through 
us or that local governmental police unit, to make sure that 
they are not selling to minors, that they are conforming with 
the laws that exist in the state of Michigan and the rules of 
the Michigan Liquor Control Commission. And they understand, 
and we have hearings on a weekly basis for those that don't 
comply, that they have to come in, and understand that there is 
consequences.
    If I can just piggyback one moment on the specific case 
that Mr. Ho spoke of, we were sued--Michigan--for that, under 
the same premise, and that is the Siesta Village case in 2008, 
and that is what we speak about, is that we lost that case. 
Same argument, same principle, things Mr. Ho in Texas, the 
Fifth Circuit, they ruled in favor of the state. The Second 
Circuit, New York, ruled in favor of the state. So it is the 
incontinuity of this interpretation that courts have of these 
laws that exist that we are asking for a more fair, balanced 
way of approaching that and making it clearer.
    Mr. Smith. Great. Thank you.
    Ms. Samona. Thank you.
    Mr. Smith. Ms. Erickson, I was here for the earlier panel, 
and if you were you heard one of our witnesses say that we 
really shouldn't look to the Untied Kingdom for any lessons. 
And I think--whether you said apples and oranges or apples and 
lemons, I am not sure, but the idea was that it wasn't a valid 
comparison.
    I just wanted to know whether you agree with that or not 
and if you thought there were lessons that we should learn from 
Great Britain's deregulation of alcohol, what are they?
    Ms. Erickson. Thank you, Representative Smith.
    Actually, I think he has got a point, and that point is 
that it is not a fair comparison because of the fact that we 
currently have a comprehensive regulatory system and the United 
Kingdom no longer does. So it seems unlikely that we will 
experience the same problems that the United Kingdom has unless 
we deregulate in the way that they do.
    So, you know, it is a way to compare lemons and oranges in 
a way that gives us, I think, a good lesson.
    Mr. Smith. Okay. Thank you.
    Thank you, Mr. Chairman.
    Mr. Johnson. Thank you, Mr. Chairman.
    Now we will recognize Representative Sheila Jackson Lee.
    Ms. Jackson Lee. Mr. Chairman, thank you very much. I think 
the work of this Committee is a very important element of 
fixing and improving the laws of this Nation, but I also like 
the fact that you have presented to us a balanced perspective 
on some of the concerns dealing with this question and this 
industry.
    First of all, I would like to put on the record the 
obvious, which is that all of us--and I guess that is what Ms. 
Erickson is trying to emphasize--have concern about public 
health and safety. I was listening to a news report this 
morning where they were--I think the U.S. News Report was 
listing the top safe cities for teenage driving. Interestingly 
enough, we can all be happy that D.C. was the number one. And 
with all this powerful drinking and competition here, I am glad 
that D.C. allows us to walk the streets and not be run over by 
teenagers, so we are grateful for that.
    But we don't want to play into ignoring the power of 
alcohol, no matter what level it is, and I want to get that on 
the record, that I believe that regulation has its place. And I 
also believe that competition has its place.
    So with that in mind, Ms. Erickson, I am not going to 
demonize what is happening in Britain. I feel for them and hope 
that they will rally around their own physical and health 
issues that need to be addressed.
    But, Professor Bush, I am going to pose a question to you 
and Mr. Ho, who I understand is here on his own reconnaissance 
and not been released by the state to represent them. But, 
Professor Bush, how do I strike that balance of the question of 
state regulation where states would subject outside companies 
to their regulations, which may pose a sense of unfairness, to 
the question of the value of state regulation and to the--
juxtaposed to the value of competition? How do we strike that 
balance?
    Mr. Bush. Well, that is an excellent question, and the--
there are principles of regulation that the states could and 
should adopt that could strike that balance well. For example, 
when--I will confess that I get wine shipments from outside the 
state--I am forced to sign that I am over 21 and the UPS driver 
asks for my ID when I sign for these wine shipments, and there 
is, at least from that aspect of distribution, you know, some 
degree of detection of whether I am a minor or not.
    The problem I have is, is the purpose of the restraint to 
protect in-state interests, private interests in terms of 
creating some monopoly power or is it, in fact, some sort of 
seeking of restraint so that we have temperance? When I was 
traveling through Utah for the first time, a state that is very 
clearly not liquor-oriented, I was marking on a NPR story about 
how teenagers were consuming Nyquil as a substitution away from 
liquor, which they could not get. Probably not the most 
exciting parties.
    But the notion here is that there is substitution and you 
have to, when you look at these sort of temperance issues, what 
effects on temperance do cartel-type behaviors or collusion-
type behaviors have on those? Prices go up, and that may 
generally decrease consumption of alcohol, but is there 
substitution away to other products, perhaps more dangerous 
products?
    Those are the kinds of things I would be interested in 
knowing more about. But----
    Ms. Jackson Lee. So you could see us striking a balance to 
respecting the state's regulatory scheme and also keeping the 
opportunity for competition?
    Mr. Bush. Yes. From my perspective there is already a 
provision for doing that, called the State Action Doctrine. So 
long as the states actively regulate and they have a clearly 
articulated state policy, from an antitrust perspective there 
is no attack.
    Now, if we go the route of advocating some sort of 
statutory immunity from the antitrust laws the question 
becomes, where does that lead us? And courts have demonstrated 
time and time again with respect to other express immunities 
that it leads us to someplace that Congress didn't intend.
    Ms. Jackson Lee. Mr. Ho, let me ask you--and I got my voice 
in to you before the light, if the Chairman would indulge--you 
were the victor of a decision out of the state of Texas, but 
tell us how you--and I guess it is somewhat challenging because 
your work role is to speak the voice of the state, so I will 
just hope that you can balance it, but how do you strike this 
Supreme Court decision of Granholm and its holding and what it 
did not hold, and how you can balance what is a reasonable 
request, which is that there be a free flow of commerce?
    For example, we have wine country in Texas. I am excited 
about it. I would be happy for their wine to be sold elsewhere.
    So let me yield to you, Mr. Ho, and welcome. It is a 
delight to see you.
    Mr. Ho. Thank you.
    Let me first hasten to add that the litigation we are 
talking about we have won so far, but it remains pending in 
higher courts, so that is still an ongoing matter----
    Ms. Jackson Lee. And forgive me--higher Federal courts, or 
you are in the--where are you in the jurisdiction?
    Mr. Ho. We won a three to zero opinion in the Fifth 
Circuit----
    Ms. Jackson Lee. Fifth Circuit. Thank you.
    Mr. Ho [continuing]. That is now going to the en banc 
court.
    Ms. Jackson Lee. Right.
    Mr. Ho. The plaintiffs have filed with an en banc. We will 
see what happens there.
    You have asked me how we might strike the balance between 
state authority and other values. If I may, I would defer to, 
frankly, the policymakers here and in Austin and in state 
capitals as to how we should strike that policy. But what I do 
want to say, though, is----
    Ms. Jackson Lee. I appreciate that.
    Mr. Ho [continuing]. It is as important to ask who should 
strike that balance as it is to ask how that balance should be 
struck. Should state legislatures and Congress strike that 
balance or should courts be in the business of striking that 
balance? Right now it is essentially a mix.
    I mean, state legislatures obviously are passing laws--have 
laws on the books--but Federal courts are--in different 
settings--I think Ms. Samona very well mentioned that different 
courts are coming to different conclusions, and it is really 
confusing and costly in terms of a litigation burden on states 
and on industry. If somebody else were to strike the balance 
and to take that issue out of the courts that might provide 
some clarity to the entire industry.
    Ms. Jackson Lee. Well, I will just finish by saying, you 
just--that is the hook that I am going to hold on to: clarity. 
And I think we need to be deliberative in how we assess that 
clarity, because in addition to the Congress acting we have 
juxtaposed against state legislatures acting. The one thing we 
don't want to do is to kill what, in a reasoned manner of use, 
is the right of the American people to consume, and we don't 
want to do that, we don't want to kill business.
    So I thank you and I thank the Chairman for his indulgence. 
And I thank you for giving us the real question, which is how 
do we strike a balance but how do we get clarity?
    And I yield back.
    Mr. Johnson. Thank you.
    Next, we will have questions from Congressman Bob 
Goodlatte.
    Mr. Goodlatte. Well, thank you, Mr. Chairman. I thank you 
for holding this hearing.
    And I would like to direct this first question to Professor 
Bush and Mr. Ho. If anybody else wants to join in that is fine. 
And it follows up on the comments of Mr. Smith.
    Lawsuits have been brought challenging state alcohol 
beverage regulation. How successful have these suits been and 
how big an impact are they having on the states' ability to 
regulate alcohol?
    Professor Bush?
    Mr. Bush. I will disclose that I am going to stay safely on 
the side as being an antitrust expert, so I will address the 
antitrust cases and let Mr. Ho discuss the rest. The antitrust 
cases that have been brought against the states have been quite 
limited in success.
    And as I described in my written testimony and my oral 
opening statement, it is quite limited to where the states have 
not actively supervised state regulation. For example, the post 
and hold system pretty much delegates the authority over 
pricing to private actors in the market with a rubber stamp at 
the--coming at the end from the state. In those instances, in 
any sort of price restraint that is delegated to private 
actors, the states have not fared well. But that is a very 
small, limited number of antitrust cases, and in most instances 
the blanket of the State Action Doctrine protects the bulk of 
state regulation.
    Mr. Goodlatte. Mr. Ho?
    Mr. Ho. Thank you for the question. I think the record of 
litigation has, frankly, been mixed. Different states are 
fighting different issues with litigants, and so different 
issues result in different results, even on the same issue.
    As my colleague just mentioned, on the very same issues 
different states are getting different results from different 
courts on precisely the same issue, and that is, frankly, a big 
part of the burden that we are seeing and the clarity that we 
were talking about earlier--the importance of that clarity.
    There is no question, to answer your question about burden 
on states, we would--I am not here to testify on particular 
legislation, but if you are asking me the effect of this area, 
we would love, obviously, to free up our resources elsewhere 
and not have to defend these suits.
    I had the honor of serving on Capitol Hill some time ago. I 
am familiar--just to use an example, I am familiar with the 
fact that each and every Member of Congress has a wide area of 
responsibility and jurisdiction, and you are only given certain 
limited resources, limited staff.
    Imagine if you were told, ``You have to designate one of 
your staff persons exclusively to doing nothing else other than 
to just defend your right to hold your seat.'' Would that be a 
burden on your office? I think it would be. And that is sort of 
analogous to the burden that we are dealing with. We are having 
to devote resources just to defend the right to enforce these 
laws.
    Mr. Goodlatte. Anyone else want to say anything?
    Ms. Samona. If I could?
    Mr. Goodlatte. Ms. Samona?
    Ms. Samona. Thank you very much.
    As a state regulator, the chair of the Michigan Liquor 
Control Commission, I think that the issue that you touched 
upon is the critical issue that we are dealing with here, 
Congressman, is that, for example, the lawsuit that Mr. Ho just 
spoke of, the same issue or the same lawsuit--in the state of 
Michigan that is the Siesta Village case that followed 
Granholm--the court ruled against us. In Texas, the court ruled 
in favor of Texas. In New York, the court ruled in favor of New 
York.
    The same arguments on all three cases and you have got a 
difference in mix. And now the New York ruling seems like it is 
going to be challenged, so who knows what is going to come up 
with that? The fact is that, you know, there are a lot of holes 
that need to be filled in, and I think Congress is the right 
person or group set to do that.
    You know, Professor Bush talks about this protectionism 
argument and that if you have--you know, if your protection--
you know, the State Action Doctrine says if you protect or you 
give the ability of, you know, independent businesses to 
operate then that is where you lose. Well, that is clearly not 
the case in the Heald--in the Siesta Village case, where it is 
the same argument in three different courts--three different 
states, three different courts, different rules.
    Mr. Goodlatte. I have to cut you off because I have got 
more questions----
    Ms. Samona. Thank you.
    Mr. Johnson. Mr. Goodlatte, may I ask you to yield the 
floor on that point?
    Mr. Goodlatte. Sure.
    Mr. Johnson. If one state regulates its alcohol 
distribution what does it care if it is not in a different--if 
it is in a different circuit from--a different circuit court 
ruling, what does that matter to the other state? What does 
that matter to you, being that the law does not apply to you as 
rendered by that other circuit?
    Ms. Samona. Well, because what the state--what the court 
told Michigan is that, ``What you are doing is inappropriate 
and you can't do it anymore.'' What the court in Texas told 
Texas is, ``What you are doing,'' which was the same thing as 
Michigan, ``you can do. Continue to do it.'' And so now you 
have got differences of how do you apply this? It is all the 
21st Amendment. It is all alcohol we are regulating. How----
    Mr. Johnson. Well, then it goes on up to the U.S. Supreme 
Court from there.
    Ms. Samona. It could, yes, if it continues in that 
direction. The problem is, we as a state suffer millions of 
dollars that we have to give away for these lawsuits to 
continue. And as a result, you know, we are burdened with that, 
and at a time when economy is hurting everybody you just don't 
have that person power to be able to defend those lawsuits and 
still continue to operate business and protect the health, 
safety, and welfare of your citizens.
    Mr. Johnson. Okay.
    I will yield back, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    To follow up on that--and I will ask this to Mr. Ho and Ms. 
Samona or Mr. Bush--Professor Bush, you want to--you indicated, 
Mr. Ho, in your testimony that the Congress can amend the 
dormant Commerce Clause. Can you give us any examples of the 
Congress having done this in recent times?
    Mr. Ho. Certainly. I think it was just a few years ago that 
Congress reacted to a Ninth Circuit decision--I think it was 
the Ninth Circuit--that dealt with striking down a state 
regulation of hunting and fishing. It was Congress' judgment at 
that time that that decision was incorrect, that states should 
have those regulatory powers, and I believe Congress passed 
legislation to authorize those state laws.
    Congress has done this in any number of other industries--
insurance, banking, various other industries where it wanted to 
preserve state authorities, state regulatory power, and the 
courts have consistently upheld and enforced those Federal 
statutes.
    Mr. Goodlatte. So if the Congress wanted to exempt the 
beer, wine, and spirits from the dormant Commerce Clause and 
Federal antitrust laws we could do that?
    Mr. Ho. Certainly.
    Mr. Goodlatte. What would be the disadvantages of doing 
that?
    Mr. Ho. I think there would be policy arguments back and 
forth that I would respectfully refer to the policymakers on, 
but there is no question that Congress has that power. Frankly, 
Congress exercised that power already when it ratified or 
proposed the 21st Amendment and passed other laws before and 
after that.
    The question is, what do those laws mean in specific areas? 
Courts have struggled to interpret those very few words that 
Congress has sent so far, and so I think the question before 
the body is, do you want to send some more instructions so that 
courts know what Congress wants and will simply follow that in 
a very clear way?
    Mr. Goodlatte. Professor Bush, you want to comment on that?
    Mr. Bush. Yes. First of all, I just want to point out, 
there is a great risk when you enact any sort of statutory 
immunity from the antitrust laws. I mean, keep in mind that the 
antitrust laws are magna carta free enterprise, as the Supreme 
Court has said.
    And the risk is, you have to weigh the benefits of the 
immunity with the potential costs. And in this instance an 
antitrust immunity carves out one particularly really small 
area of state regulation from what is already protected from 
the State Action Doctrine.
    In the history of statutory immunities rarely has the 
immunity actually just been limited to what Congress intended; 
there is usually some unintended consequences. When you are 
dealing with the--in the realm of state regulation and 
protecting state regulation through the statutory immunity 
there may be external effects outside the state from imposition 
of a statutory immunity which protects state regulation that 
has, potentially, effect on interstate commerce.
    Market conditions often change, and in the context of 
changing market conditions the statutory community may give 
way, may no longer be valid, and the statutory immunity may 
never actually go away because they rarely have any sort of 
limiting time restraint on them.
    I should also point out that when we are contemplating the 
risks of litigation here keep in mind that when you pass 
Federal legislation involving state regulation of alcohol that 
will also open doors for potential lawsuits. We all know of 
examples where legislation, either contemplated or enacted, has 
immediately been challenged in courts, and I would expect that 
the states would have to fact that kind of litigation challenge 
as well.
    Mr. Goodlatte. Yes, Mr. Hindy?
    Mr. Hindy. Congressman, also if----
    Mr. Goodlatte. You might want to hit your microphone. I 
don't----
    Mr. Hindy. Okay. If states were exempted from the Commerce 
Clause, I think it would open the door for every state having 
different rules for labeling, for formulation of beers, for 
licensing, for marketing of beer. It would be prohibitive for 
most brewers to ship anywhere but in their home state. It would 
be disastrously expensive for all brewers.
    And also, imagine----
    Mr. Goodlatte. Let me--I am not sure I quite understand 
that. Doesn't the 21st Amendment to the Constitution give the 
states that authority when it comes to alcohol anyway?
    Mr. Hindy. Yes, but right now they tend to observe the 
general guidelines of the TTB. In other words, labeling is 
approved by state governments, but the--most of what we have to 
put on a beer label is determined by the Federal Government, 
and it is uniform across the country: the warning--the 
government warning, you know, the place where the product is 
brewed, et cetera.
    New York State recently tried to require a specific label 
for the state because distributors were concerned about people 
shipping empties into the state from other states and getting a 
deposit. That would have been incredibly expensive for small 
brewers to do, and large brewers as well.
    I think the Federal oversight of our industry means there 
is a level of safety and a level of licensing that is uniform 
across the 50 states, and ceding that to every state I think 
would be chaotic.
    Mr. Goodlatte. I think the Chairman is indicating that my 
time is expired.
    Mr. Johnson. Well, you can reserve the balance if you would 
like.
    Next we will hear from Mr. Darrell Issa, a congressman from 
California.
    Mr. Issa. Thank you, Mr. Chairman. And since the wine 
industry isn't represented here I might mention that Temecula 
wine country is in my district, and so I come with 30 years of 
business experience and 10 years of representing wine producers 
who there, but for the ability to ship wine around the country, 
would probably--the small wineries would have no business.
    So I find myself in an odd situation of caring about this 
issue, wanted to ensure that underage drinking is not promoted 
nor any of the other unintended causes of repealing 
prohibition, or for that matter I don't want to get back to the 
unintended causes of prohibition. So I am going to sort of jump 
around here.
    But, Mr. Hindy, you are a beer equivalent of my wine 
constituents, and this is a Committee that looks at the 
Constitution in every aspect, every direction, not just the 
21st Amendment. Is it your belief that you have a reasonable 
right to sell anywhere in the world, as a manufacturer of 
product, unless otherwise restrained by Federal law?
    Mr. Hindy. Yes.
    Mr. Issa. And, Mr. Ho, would you say that if there was a 
Texas brewery that you would have an expectation that that 
brewery should be able to ship its products to the four corners 
of the earth as a promotion of commerce intended by the 
Constitution?
    Mr. Ho. I think as an employee of the Texas attorney 
general's office I would say that any business should have the 
right to engage in their business consistent with the laws of 
the jurisdiction they are selling to.
    Mr. Issa. That wasn't the question, Mr. Ho. Should Dell be 
able to sell their computers manufactured in Austin everywhere 
in the world and export them without any unreasonable restraint 
or prejudiced treatment because they simply come from Texas, 
and we don't like Texans in California? That is what I am 
asking.
    Mr. Ho. I understand and appreciate the spirit of the 
question very----
    Mr. Issa. That is why as an individual--you were here as an 
individual--I wanted your individual interpretation, on behalf 
of Dell. [Laughter.]
    Mr. Ho. As a constitutional matter--and I can speak 
personally as a constitutional lawyer--there is a huge 
difference between computers and, frankly, every other 
product--huge difference from that and alcohol, because alcohol 
does have this very unique----
    Mr. Issa. Yes, but that wasn't the question. The rest of 
the world does not regulate alcohol the way we do. The 
exporting of alcohol to many of the four corners of the earth 
is exactly the same as Dell computers. As a matter of fact, 
Dell computers may be more restricted in some countries, like 
China.
    So back to the same question: Do you see, on behalf of 
Dell, any problem with their having a reasonable right to enjoy 
the same opportunities anywhere they choose to sell their 
product in the four corners of the earth against domestic 
interests of that state or that Nation?
    Mr. Ho. I don't mean to frustrate you, sir. I speak 
primarily in a legal capacity; I am a lawyer. If the people of 
the United States, for that matter, want to repeal the 21st 
Amendment that is entirely, entirely within the right of this 
Congress and, obviously, through the state----
    Mr. Issa. Okay. I will take that as I am not going to get a 
square on behalf of Dell, and when you go home to Austin, good 
luck.
    Ms. Samona, maybe I can get a better answer from you. 
Automobiles are highly regulated around the world. Do you 
think, within reason, if I want to make a General Motors car 
and ship it to Great Britain, that as long as I comply equally 
in Great Britain with what Great Britain companies do I should 
have reasonable access, notwithstanding trade barriers that are 
artificially imposed, but generally, do you believe that 
Michigan companies should have that right?
    Ms. Samona. I think within reason yes, they should.
    Mr. Issa. Okay. So can we all ask one question and get a 
fairly quick yes or no? Ultimately, the 21st Amendment was a 
bargain to repeal prohibition but to grant to the states the 
right to protect individuals from harm from alcohol. Is that--
could I just get yeses from everyone and a no from someone that 
just disagrees with the intent of the 21st Amendment?
    Ms. Samona. That was one of its intents, yes.
    Mr. Issa. Well, they allowed states to stay dry if they 
wanted, but nowhere in the 21st Amendment was there any 
language that intended individuals--or individual states to be 
able to truly violate the Commerce Clause other than that which 
was for protection--uniform protection of their people. Maybe 
some of the more professorial folks could help me.
    Mr. Bush. Actually, one of the shipments of wine I get is 
from Mount Palomar in your district. Yes, it----
    Mr. Issa. And thank you.
    Mr. Bush. There is an issue here of--there is a tension in 
the Constitution between the 21st--the Commerce Clause, of 
course, and I agree with you that the purpose is for the 
health, safety, and welfare of the 21st, of citizens of the 
state.
    And I certainly do not take--ask states for regulating 
alcohol, per se. I have issues when they regulate alcohol in a 
way that is not consistent with--where they allow some degree 
of competition but in a discriminatory manner or where they 
totally delegate their authority to private actors.
    Mr. Issa. Right.
    We certainly could pass a law and let the men and women 
across the street decide whether we are within our authority of 
reconciling various constitutional clauses. But wouldn't it, 
Mr. Bush, be--Professor Bush--be reasonable to think that we 
here on the dais may want to make it clear that states can 
protect individuals--meaning the retail, distribution, and so 
on--while in fact interstate clauses should be just as 
supported? As long as they comply with whatever in-state people 
do, out-of-state people should have the same opportunity, and 
is there any reason to believe that we shouldn't consider 
defining that if the courts will not?
    And that means there will be no more questions, only 
answers to anyone that wants to answer that question.
    Ms. Samona. I would like to answer that. I think the 21st 
Amendment, with all due respect, Congressman, trumps the 
Commerce Clause. The Commerce Clause--21st Amendment gives the 
rights of those states to be able to regulate alcohol in a way 
that those states feel is safe and appropriate so they can 
bring it----
    Mr. Issa. That wasn't the question for Professor Bush. The 
question had to do with out-of-state entities being allowed, so 
long as they complied as in-state entities did.
    Ms. Samona. And that takes me to the next thing: Commerce 
Clause allows you to bring commerce, or goods, back from one 
state to the other as long as that doesn't harm that state's 
laws, rules, and/or existing health, safety and welfare issues. 
So those are two separate issues, yet they work together.
    However, the Commerce Clause does not trump the 21st 
Amendment, and unfortunately we are getting court rulings that 
say exactly that----
    Mr. Issa. Okay, Professor Bush, you get the last word 
because I truly am out of time, about whether or not 
protectionism among the states was justified in the 21st 
Amendment.
    Mr. Bush. Protectionism--I define----
    Mr. Issa. That is what you call it when you let people in 
state have an advantage over people out of state. We call it 
protectionism when it is us versus another country. It is 
protectionism if this 21st Amendment allows that as to a 
product that we are discussing here today.
    Mr. Bush. I think that that is not the purpose of the 21st 
Amendment. And I think the problem that the states are getting 
in trouble with is engaging in that kind of activity, which may 
or may not have a derivative benefit of temperance. But the 
fact of the matter is, we are an increasingly interstate 
economy, and these state regulations have an interstate effect. 
And therefore, we have to be careful about those kinds of 
interstate spillovers and the effect on other states' economies 
from those type of price restraints.
    Mr. Issa. Thank you so much, Mr. Chairman, for your 
indulgence. I yield back.
    Mr. Johnson. Thank you, sir.
    I appreciate the testimony from the witnesses today. 
Without objection Members will have 5 legislative days to 
submit any additional written questions, which we will forward 
to the witnesses and ask that you answer as promptly as you can 
to be made part of the record. Without objection the record 
will remain open for 5 legislative days for the submission of 
any other materials.
    Today's hearing raised a number of important issues. Moving 
forward we must ask ourselves whether state regulation of 
alcohol has been clarified or undermined through recent dormant 
Commerce Clause and antitrust litigation. Robust state 
regulation of alcohol is important for the public good, but so, 
too, are the antitrust laws in the United States Constitution.
    And with that, this hearing of the Subcommittee on Courts 
and Competition Policy is adjourned.
    [Whereupon, at 4 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record




                                 
