Beer Law Mashing

What’s All the Fuss about North Carolina’s Beer Distribution Laws? Part II—The Three-Tier System

Introduction

North Carolina regulates beer distribution under a so-called “three-tier system.” If you’re familiar with the craft beer industry, then you’ve probably heard the three-tier system is a carryover of old, Prohibition-era laws designed to promote temperance and eliminate abusive industry practices prevalent in the years leading up to Prohibition. That’s the story I knew anyway. And while it may be that simple in some places, the history of the three-tier system in North Carolina is more elusive.

This Part II of my series on North Carolina’s beer distribution laws focuses on the history of North Carolina’s three-tier system, with an emphasis on understanding its purpose. For context, I’m also including some historical facts about North Carolina’s brewing industry. As the debate continues over North Carolina’s three-tier system, including its 25,000-barrel small brewery exception,[1] it makes sense to consider the arguments with a clearer understanding of the system’s place in North Carolina history.

The Controversy

If you’re not familiar with the three-tier system, it’s a regulatory scheme that requires industry participants to distribute beer through three separate and distinct tiers—breweries, wholesalers, and retailers. That is, breweries may sell only to wholesalers, wholesalers may sell only to retailers, and retailers may sell only to consumers. North Carolina’s three-tier system is “modified” because it includes exceptions for smaller breweries that sell fewer than 25,000 barrels of beer per year.

The three-tier system is a fairly rigid regulatory scheme because it mandates an industry’s structure, which arguably limits the freedom of its participants to innovate and adapt to changing market conditions. For example, if a craft brewery believes self-distribution is a key element of its success (e.g., for delivering a unique product that requires special attention, adapting to the size or particularities of its market, or other strategic concerns), the three-tier system forces it to choose between (1) giving up that important element of its business model (i.e., self-distribution) or (2) artificially suppressing its annual production and future growth to fewer than 25,000 barrels of beer per year.[2] Whenever a regulatory scheme restricts free market activity in this way, it should be narrowly designed to serve an important public purpose.[3] It should also be monitored and revised appropriately as our society and markets inevitably change over time.

Whenever a regulatory scheme restricts free market activity in this way, it should be narrowly designed to serve an important public purpose. It should also be monitored and revised appropriately as our society and markets inevitably change over time.

Some argue that inserting wholesalers as a barrier between breweries and retailers, which is what the three-tier system does, is important because it promotes temperance, consumer choice, brewer access to retailers, product safety, quality control, and timely tax collection.[4] They contend the three-tier system has been serving North Carolina well for many years, evidenced by the recent success of craft breweries. Others argue the three-tier system is a carryover of old, outdated laws from the Prohibition era that have outlived their intended purposes and are holding back craft breweries.[5] For them, the three-tier system is “economic protectionism” for wholesalers through an undue restraint of free trade.[6]

Irrespective of the arguments, I believe the debate should focus on whether North Carolina’s three-tier system serves an important public purpose that (1) justifies the free market restrictions it imposes and (2) cannot be achieved sufficiently through less restrictive alternatives. In other words, “We don’t need a sledgehammer to crack a nut.” With this framework in mind, this post considers the history and purpose of the three-tier system with the hope of adding context to the debate.[7]

Overview of North Carolina’s Three-Tier System

North Carolina’s modified three-tier system is codified in Chapter 18B of the North Carolina General Statutes and related administrative regulations.[8]

As modified, the three-tier system permits breweries to sell beer only to licensed wholesalers, subject to limited exceptions for small breweries.[9] Wholesalers may then sell beer only to licensed retailers and other licensed wholesalers.[10] This establishes the three separate tiers of distribution—breweries, wholesalers, and retailers.

Under the small brewery exceptions, a brewery may generally (1) sell its beer as a retailer on its premises (the “brewpub exception”) or (2) obtain a wholesaler’s permit to sell, deliver, and ship its beer as a wholesaler (the “self-distribution exception”), provided it sells “fewer than 25,000 barrels” of beer “produced by it per year.”[11] Once a brewery reaches the 25,000-barrel limit, however, it must discontinue any self-distribution and hire a third-party wholesaler to distribute all of its future beer production.[12]

Any distribution relationship between a brewery and a wholesaler is governed by North Carolina’s “beer franchise laws,”[13] which mandate certain contractual relationships between the brewery and wholesaler.

A brewery is generally prohibited from:

  • requiring a retailer to purchase the brewery’s beer at the exclusion of any other alcoholic beverages.
  • having a direct or indirect financial interest in the business or premises of a retailer; or
  • lending or giving to a retailer money, services, equipment, furniture, fixtures, or anything of value.[14]

I refer to these as “tied house” laws. If a brewery qualifies for the small brewery exceptions, the “tied house” laws precluding a brewery from having a financial interest in, or lending or giving things of value to, a retailer do not apply to a retail establishment on the brewery’s premises (e.g., a taproom or brewpub).[15] A brewery is also prohibited from, among other things, imposing sales quotas on retailers.[16]

History of North Carolina’s Three-Tier System

As noted above, the generally accepted history of the three-tier system suggests it’s a carryover of Prohibition-era laws designed to promote temperance and eliminate abusive industry practices prevalent in the years leading up to Prohibition. Based on my research, however, the actual history of the three-tier system in North Carolina is a little more complicated, particularly in regard to beer regulation.

For years following Prohibition, the manufacture, distribution, and sale of beer were only lightly regulated in North Carolina, with most of those regulations focused on taxation. The more rigid three-tier system was not contemplated or enacted in North Carolina until decades after Prohibition, around the same time as North Carolina’s “beer franchise laws.” In fact, North Carolina did not even adopt a mandatory “two-tier” beer distribution system until 1953, when it first prohibited breweries and wholesalers from having financial interests in retailers.

For years following Prohibition, the manufacture, distribution, and sale of beer were only lightly regulated in North Carolina, with most of those regulations focused on taxation.

To be clear, the three tiers of beer distribution have existed in North Carolina since the repeal of Prohibition, presumably because that structure made good business sense for large out-of-state breweries and others wanting to focus solely on brewing. But the system was voluntary, not mandatory. I have not found any evidence suggesting the three-tier system was mandated in North Carolina before sometime around the 1980’s. The exact timing is unclear.

In any event, let’s start at the beginning with Prohibition.

The Prohibition Era

North Carolina enacted statewide prohibition in 1908, well in advance of national Prohibition. It was the first state in the nation to impose prohibition by referendum.[17]

Nationwide Prohibition was approved by the states in 1919 with the ratification of the 18th Amendment to the U.S. Constitution.[18] The 18th Amendment prohibited the “manufacture, sale, or transportation of intoxicating liquors within . . . the United States . . . for beverage purposes.” The Volstead Act, adopted in 1919 to enforce the 18th Amendment, defined “liquor” as any beverage containing 0.5% or more of alcohol.[19] National Prohibition became effective in January 1920.[20] And in 1923, the General Assembly of North Carolina passed the Turlington Act to conform North Carolina’s existing prohibition laws to the 18th Amendment and Volstead Act.[21]

As most of us know, Prohibition was a complete failure in the United States. It resulted in bootleggers, moonshine, illegal speakeasies, corruption, organized crime, and lawlessness among otherwise law-abiding citizens.[22] The federal government didn’t have the manpower to enforce Prohibition, and some state officials lacked the motivation to enforce it.[23] This lead to frustration, noncompliance, and some highly questionable enforcement techniques[24] Amazingly, federal officials eventually resorted to a program of poisoning the U.S. alcohol supply, which resulted in thousands of deaths around the country.[25]

Toward Liquor Control

By 1933, even the most ardent supporters of Prohibition knew it wouldn’t last.[26] In anticipation of repeal, John D. Rockefeller, Jr., a lifelong teetotaler, commissioned a study of the alcohol policies and experiences of other countries and the various states prior to Prohibition.[27] The objective of the study was to recommend best practices for the regulation of alcohol by the individual states.[28] The final report, Toward Liquor Control, by Raymond B. Fosdick and Albert L. Scott, was published in 1933 and was highly influential in the formation of alcohol policy in the United States.[29] According to some, “Fosdick and Scott’s Toward Liquor Control has done more to shape modern alcohol policy than any other book except the Bible.”[30]

Some commentators suggest Toward Liquor Control advocated for today’s mandatory three-tier system, but that is a stretch at best. At its core, Toward Liquor Control recommended a sliding scale of regulation with increasingly tighter restrictions for beverages with higher alcohol contents.[31] It recommended (1) limited or no restrictions for lower alcohol beers and wines and (2) strict regulation, in the form of governmental monopolies, for distilled liquors.[32] The authors contended that “the experience of every country supports the idea that light wines and beers do not constitute a serious social problem.”[33]

Beer and wine regulation

Toward Liquor Control supported the unrestricted sale of beer of less than 3.2 percent alcohol by weight (4 percent by volume).[34] Fosdick and Scott noted that:

[s]uch beer should be obtainable by the bottle for off-premises consumption, practically without limitation. Its sale should be allowed by grocery stores, drug stores, delicatessens and general stores, and indeed by any merchant who desires. A vendor’s permit should be required, but the cost should be low and there should be no restriction on the number of permits.[35]

They recommended similar permits for off-premises consumption of higher alcohol beers and wines of not more than 10 to 12 percent alcohol by weight.[36] And for on-premises consumption, they recommended similar permits for service of higher alcohol beers and wines with meals.[37]

Liquor regulation; State-owned monopolies

Toward Liquor Control was primarily concerned with the regulation of high alcohol beverages, including fortified wines and liquor.[38] For these beverages, it recommended tight regulation by governmental (i.e., state-owned) liquor monopolies.[39] This approach, while seemingly “radical” to free-market purists, was consistent with the regulatory environment of the Great Depression and New Deal in the 1930s. The New Deal lead to tighter government control over many businesses (e.g., banking, stock markets, utilities, public works, etc.) and the implementation of welfare programs, like social security.[40] The name of Fosdick and Scott’s book, “Toward Liquor Control,” emphasized their focus on a system of government control over liquor and high alcohol beverages.

For Fosdick and Scott, the primary objective of alcohol regulation was to promote both lawfulness and temperance by satisfying an “unstimulated” demand for liquor and high alcohol beverages.[41] They believed the most effective way to achieve this objective was to eliminate private profit motives, including incentives to stimulate sales, from the retail sale of liquor.[42] The creation of state-owned monopolies over retails sales of liquor was the best method to eliminate private profits, advertising that drove demand, and political corruption.[43] It would also provide a means to control retail pricing, store environments, and temperance education.[44]

Notably, Fosdick and Scott did not think it was necessary to adopt tight controls for manufacturing and distribution. For them, it was not necessary for the government to assume control of distribution because “virtually all of the individual social evils of the liquor traffic [arose] from an inadequately regulated and over stimulated retail sale.”[45] Moreover, Toward Liquor Control did not specifically recommend or contemplate a mandatory three-tier system for regulating the distribution of any alcoholic beverages.

Liquor regulation: Alternative licensed-based systems

Understanding that some states might be reluctant to adopt a government monopoly system, Fosdick and Scott also outlined an alternative, licensed-based system of control for liquor and high alcohol beverages.[46] Although they believed a license-based system to be inherently defective, they highlighted certain features that might promote temperance and mitigate problems that arose under the licensed-based systems prevalent before Prohibition.[47]

Many of these problems were attributed to saloons under the so-called “tied house” system.[48] Leading up to Prohibition, distilleries and breweries often took financial interests in saloons through equity investments, loans, credit arrangements, and building and equipment leases.[49] They also gained influence over saloons by furnishing fixtures, bars, signs, and other equipment.[50] They would use this ownership or leverage to ensure a healthy market for their products.[51] For example, they would require their saloons to sell only their liquors, meet strict sales quotas, and implement aggressive promotions. Consequently, many believed that “tied house” saloons, controlled by “absentee owners” who weren’t around to suffer the negative consequences in a community, encouraged problematic drinking, prostitution, gambling, and other problematic activities leading to poverty and hardship in communities.[52]

Accordingly, Fosdick and Scott recommended that any licensed-based system should be designed to eliminate “tied houses.” They contended “the ‘tied house’ and every device calculated to place the retail establishment under obligation of a particular distiller or brewer, should be prevented by all available means.[53] As noted previously, Fosdick and Scott did not contemplate a three-tier system, but their discussion of “tied houses” is often cited as the basis or inspiration for today’s mandatory three-tier system.

In addition to the elimination of tied houses, Fosdick and Scott suggested that a licensed-based regulatory system for liquor and high alcoholic beverages should establish:

  • A state licensing board insulated from politics;
  • Advertising restrictions;
  • Restrictions on the number of licenses;
  • Rules for the appearance of stores;
  • Controls over pricing and profits;
  • Different licenses for beer, wine, and spirits; and
  • Restricted hours of operation;[54]

They also recommended a “local option” enabling municipalities and counties to elect for themselves whether to permit sales of liquor and high alcoholic beverages.[55]

Ultimately, Fosdick and Scott preferred a state monopoly system for liquor and recommended against licensed-based systems.[56] They believed that any licensed-based system would be inherently defective because it could not eliminate private profit motives, politics, incentives to stimulate demand, and the entrenchment of proprietary interests.[57] The following quotes from Toward Liquor Control are telling about today’s debate in North Carolina:

Any licensing system tends to project the whole question into politics and to keep it there. Indeed, it compels the traffic be in politics for self-protection. The licensing body becomes a powerful political engine. Every licensee, as well as every manufacturer who sells to a licensee or has any interest in the business, begins to marshal his own political strength to serve his own ends. A multitude of private traders means a multitude of opportunities for political favoritism.[58]

[T]he establishment of a licensed liquor trade means the deep intrenchment [sic] of a far-flung proprietary interest. This interest would have a large capital investment to be protected at all costs. Buildings, leases, fixtures, inventories, stocks and bonds – representing millions of dollars – would require defense against those who in the public interest might threaten or curb reduction. The question of property rights would at once be involved, and the states adopting license systems would be faced . . . with a widespread disinclination seriously to disturb a business into which so much money had been put.[59]

With the passing of the Eighteenth Amendment, the American states are free to make a fresh start. Only the public welfare needs to be considered. There are no property interests that have to be defended, no interests demanding protection, no organized retail trade associations to fight. For a state, confronted with this opportunity, deliberately to tie its own hands by establishing an intrenched [sic] business that will seek in its own protection to thwart every limitation and block every change, would seem to be the height of folly.[60]

Despite the warnings of Fosdick and Scott, most states eventually implemented licensed-based, mandatory three-tier systems, including North Carolina. Consistent with Toward Liquor Control’s recommendations, however, North Carolina initially adopted (1) minimal regulation over beer and wine and (2) a state retail monopoly over liquors and high alcohol beverages. North Carolina required licenses for the manufacture, distribution, and sale of beer, but those licenses were primarily concerned with taxation.

Legalization of Beer During Prohibition

Federal legalization of beer

On March 13, 1933, within a week of his inauguration, Franklin D. Roosevelt called for the immediate legalization of beer and other lighter alcoholic beverages.[61] This was prior to the repeal of Prohibition. The nation was in the height of the Great Depression, repeal was inevitable, and the government needed revenue. In a short message to Congress, President Roosevelt said,

I recommend the passage of legislation for the immediate modification of the Volstead Act, in order to legalize the manufacture and sale of beer and other beverages of such alcoholic content as is permissible under the Constitution; and to provide through such manufacture and sale, by substantial taxes, a proper and much needed revenue for the government. I deem action at this time to be of the highest importance.[62]

Nine days later, President Roosevelt signed the Cullen-Harrison Act, legalizing the manufacture and sale of alcoholic beverages containing no more than 3.2 percent alcohol by weight (about 4 percent by volume). From a legal perspective, the Cullen-Harrison Act (1) effectively removed 3.2 percent beer from the definition of prohibited “liquor” under 18th Amendment and Volstead Act; (2) imposed federal barrel and bottle taxes and license fees on brewers; and (3) eliminated federal advertising restrictions on beer. Each state was given the option to allow 3.2 percent beer and wine. Regarding the Cullen-Harrison Act, Franklin D. Roosevelt famously, said “I think this would be a good time for a beer.”[63] The Cullen-Harrison Act became effective on April 7, 1933, and April 7 is now celebrated as “National Beer Day.”[64]

State-wide legalization of beer in North Carolina

Effective May 1, 1933, North Carolina’s General Assembly followed President Roosevelt’s lead and legalized the sale of 3.2 percent beer and wine throughout the entire state of North Carolina.[65] Again, this was before the repeal of Prohibition. The legislation was codified as the “Beverage Control Act of 1933,” tasking the Department of Revenue with regulating the manufacture, transportation, and sale of 3.2 percent beer and wine.[66]

Effective May 1, 1933, North Carolina’s General Assembly followed President Roosevelt’s lead and legalized the sale of 3.2 percent beer and wine throughout the entire state of North Carolina. Again, this was before the repeal of Prohibition.

The governing boards of each county and municipality were required to issue a retail beer license to anyone who could satisfy minimal requirements (e.g., North Carolina citizenship, twenty-one years of age, good moral character, etc.) and pay a small license tax.[67] Each retailer was then required to furnish a surety bond with the Department of Revenue for the payment of state barrel and bottle taxes, unless the retailer agreed with the Department of Revenue to purchase and sell beverages only from licensed “wholesaler distributors” or bottlers.[68] Retailers were not required, however, to purchase solely from wholesale distributors.[69]

Breweries and wholesalers were required to obtain state licenses from the Department of Revenue.[70] A manufacturer’s license permitted the brewing and sale of 3.2 percent beer and wine within the State.[71] Licensed breweries were permitted to sell 3.2 percent beer “only to persons licensed . . . for resale.[72] Licensed wholesalers were permitted to sell 3.2 percent beer and wine to “persons licensed . . . for resale only.”[73] Thus, both breweries and wholesalers were permitted to sell beer directly to retailers. And nothing in the statute prevented a brewery from (1) obtaining a wholesaler’s permit or (2) having an ownership or investment interest in a wholesaler.

Additionally, under the Beverage Control Act, “the owner or operator of every distributing warehouse selling, distributing, or supplying” 3.2 percent beer or wine “to retail stores” was automatically deemed a “wholesale distributor.”[74] Each “wholesale distributor” was liable for state barrel and bottle sales taxes and required to furnish a sufficient bond to the Department of Revenue.[75] Thus, under the plain language of the Act, any brewery that self-distributed its beer was automatically deemed a “wholesaler distributor,” whether formally licensed as a wholesaler or not.

This regulatory scheme was consistent with the recommendations of Toward Liquor Control. It provided only minimal regulation for the manufacture, distribution, and sale of beer and wine. And it was primarily concerned with taxation, rather than temperance or structural control of the distribution system. North Carolina’s original Beverage Control Act did not contemplate “tied-house” laws, advertising restrictions, profit and pricing controls, or any type of mandatory three-tier, or even a two-tier, beer distribution system.

North Carolina’s original Beverage Control Act did not contemplate “tied-house” laws, advertising restrictions, profit and pricing controls, or any type of mandatory three-tier, or even a two-tier, beer distribution system.

Repeal and Post-Prohibition Era

On December 5, 1933, national Prohibition was repealed with the ratification of the 21st Amendment.[76] North Carolina and South Carolina were the only two states to vote against repeal.[77] With repeal, the question of whether to legalize liquor and high alcohol beverages was left to the individual states. The manufacture, transportation, and sale of 3.2 percent beer and wine was already legal in North Carolina,[78] but the prohibition of liquor and high alcohol beverages remained in effect under the Turlington Act of 1923.[79]

After repeal, the maximum alcohol content for beer in North Carolina was increased from 3.2 percent to 5 percent by weight (approx. 6 percent by volume) in 1935,[80] but no other regulatory changes were made at that time regarding the manufacture, distribution, or sale of legal beer.

In May 1935, the General Assembly ratified an Act to “promote temperance and prosperity,” “encourage the growing of grapes, fruits and berries,” and legalize higher alcohol wines in North Carolina.[81] The Act legalized the State-wide production of wines “having such alcoholic content as natural fermentation may produce” from grapes, fruits, and berries grown within the State.[82] Licensed wineries were permitted to sell their naturally fermented (i.e., higher alcohol) wines to any person “engaged either as a wholesaler or retailer of food products,” subject to the right of each county to specifically prohibit such sales within its boundaries.[83] Consistent with Toward Liquor Control, any food retailer could sell such wines for off-premises consumption, and on-premises sales were permitted by hotels and restaurants that sold food.[84] There were no mandatory three-tier distribution requirements for these naturally fermented, higher alcohol wines.[85]

In 1937, four years after Prohibition ended, the General Assembly turned its attention to liquor and high alcohol beverages, which had remained illegal throughout most of North Carolina.[86] The General Assembly established a State-owned monopoly system for retail sales of liquor and high alcohol beverages.[87] The system was generally consistent with the core recommendations of Toward Liquor Control, applying only to “alcoholic beverages” containing more than 21 percent alcohol by weight.[88] A “State Board of Alcoholic Control” was established, and each county was given the option to legalize liquor sales within its boundaries.[89] If a county voted in favor of legalization, the county was authorized to operate “liquor control stores” governed by a County Board of Alcoholic Control.[90] The liquor control legislation of 1937 is outside the scope of this article because it applied to only liquor and high alcohol beverages.

Brewing in North Carolina

Before and during Prohibition, the Atlantic Ice and Coal Company provided ice, cold storage, and coal service throughout the Southeast.[91] Shortly after Prohibition ended, the company realized that, while Northeastern and Midwestern breweries were shipping surplus beer to the South, there weren’t many Southern breweries.[92] Consequently, they opened strategically placed breweries in five Southeastern states, including one in Charlotte, North Carolina.[93] This positioned Atlantic to brew and distribute beer throughout the Southeast.[94] The company eventually changed its name to Atlantic Company, and by 1941, it claimed to be selling more beer than any other brand in the Southeast.[95]

Throughout the 1930s and 1940s, breweries and wholesalers worked together to self-regulate the beer industry.[96] The Brewers and North Carolina Beer Distributors Committee was formed in 1939.[97] It was sponsored by a national brewery organization—United Brewery Industry Foundation—and comprised primarily of out-of-state breweries and North Carolina distributors.[98] The Committee’s “Clean Up or Close Up” campaign worked with law enforcement officers to police retailers engaged in unlawful activities, such as bootlegging and selling to minors.[99] In 1941, the effort resulted in the closing of 155 retailers, with warnings issued to another 234.[100]

In 1942, North Carolina’s brewing industry consisted of 5,148 retail establishments, 120 wholesalers, 4 bottling plants, and 1 brewery, which was presumably the Atlantic Company in Charlotte.[101] Due to World War II shortages, sales of canned beer in North Carolina dropped from 3.1 million cans in 1941 to only a “few thousand” per month in 1942.[102]

The Atlantic Company stopped production in 1943 due to wartime conditions, including shortages of tires, gas, trucks, and containers.[103] In a newspaper advertisement, it said, “our investment in time, effort, distribution, merchandising, and advertising is lost to us for the present . . . .”[104] Atlantic eventually reopened and was reported as North Carolina’s only brewery in 1949.[105] The Atlantic Company closed all of its breweries by 1956, including the Charlotte brewery, due to competition from bigger national breweries.[106]

Tightening of Beer Regulations

In Toward Liquor Control, Fosdick and Scott were concerned with eliminating “tied houses” by regulating the relationship between suppliers of liquor and high alcohol beverages and retailers, but they did not recommend “tied house” or “licensed-based” regulations for beer and wine.[107] Notwithstanding Fosdick and Scott’s advice, North Carolina enacted soft, licensed-based “tied house” restrictions in 1945. Under those amendments, breweries and wholesalers were prohibited from requiring or inducing retailers to sell their beer at the exclusion of another firm’s beer.[108] The amendments did not, however, prevent a brewery or wholesaler from having an ownership or financial interest in a retailer or wholesaler. And other amendments in 1947 continued to contemplate firms participating in multiple tiers of the beer industry, with a focus on tax collection for each tier.[109]

Also in 1947, some North Carolina counties and municipalities were presumably not happy with the Statewide legalization of beer. As such, they were given the “local option” to go completely “dry” by voting to prohibit the sale of beer and wine within their borders.[110] As an incentive for counties to keep legal beer, however, the General Assembly doubled the State’s barrel and bottle taxes and allocated one-half of those revenues to counties and municipalities that retained 5 percent legal beer.[111] Counties that voted against legal beer lost their beer revenue.

In further legislative tightening, the responsibility for regulating the manufacture, distribution, and sale of beer in North Carolina was shifted from the Department of Revenue to the State Board of Alcoholic Control in 1949.[112] Among other things, the Board was tasked with approving and issuing State permits for breweries, wholesalers, and retailers.[113] And additional qualifications and fitness requirements were imposed on breweries and wholesalers.[114]

In 1951, the General Assembly ratified an “Act Relating to the Wholesale Distribution of Beer.” The Act provided that “[n]othing in this Article shall prevent bottlers, manufacturers, or wholesalers of beer . . . from bottling, manufacturing, possessing, transporting or selling beer as a wholesaler” to any person licensed under the Act.[115] Similar language remained in effect in North Carolina until 1981.[116]

Toward a “Two-Tier” System

North Carolina implemented a mandatory two-tier beer distribution system in 1953 by tightening its “tied house” laws.[117] The amendments prohibited a brewery or wholesaler from:

  • requiring the purchase of any of its beer by a retailer to the exclusion of any beer or wine offered by another party.
  • having a direct or indirect financial interest in the business or premises of any retailer; or
  • lending or giving to any retailer any money, services, equipment, furniture, fixtures, or anything of value.[118]

Thus, beginning in 1953, a brewery was explicitly prohibited from having a financial or ownership interest in a licensed retailer, but it was not precluded from having a financial or ownership interest in a wholesaler. This effectively mandated two tiers of distribution, one comprised of breweries and/or wholesalers and another comprised of retailers. Undoubtedly, the large nonresident breweries serving the North Carolina market continued to utilize resident wholesalers voluntarily as a matter of good business.

North Carolina implemented a mandatory two-tier beer distribution system in 1953 by tightening its “tied house” laws.

Other than applying to beer (rather than liquor), this mandatory two-tier system was consistent with Toward Liquor Control’s recommendations. It was designed to prevent a brewery (or a wholesaler) from obtaining undue influence over a retailer to artificially drive demand for its products (e.g., through ownership, exclusivity agreements, quota systems, etc.). And since virtually all (if not all) of the breweries selling beer in North Carolina were shipping it from out of State, this two-tier system was also consistent with Fosdick and Scott’s concerns regarding “absentee ownership” of retail establishments.

Interestingly, the core language of North Carolina’s “tied house” laws has not changed substantively since 1953.[119] That is, the laws were never expanded to explicitly prohibit a brewery from having a financial or ownership interest in a wholesaler. This is discussed further under “North Carolina’s Elusive Three-Tier System.”

Big Beer and Franchise Laws

During World War II, beer consumption in the United States grew from 53 million barrels in 1940 to 80 million barrels in 1945.[120] Despite this booming growth, shortages of malt, supplies, equipment, and labor made things difficult for local breweries, and many couldn’t compete with the national brands.[121] The national breweries withstood the shortages, capitalized by shipping beer overseas, and built brand loyalty with the nation’s GIs.[122] The number of breweries in the United States decreased from a high of 857 in 1941 to only 163 in 1965.[123] By 1978, the number of U.S. breweries had bottomed out at 89.[124] The market share of the top five breweries grew from 19 percent in 1947 to 87 percent in 2001.[125] Interestingly, there were over 4,000 breweries in the U.S. in 1873, and there are more than 5,000 today.[126]

After the closing of Atlantic Company’s Charlotte brewery in 1956, it appears there weren’t (or at least I haven’t found evidence of) any other resident breweries in North Carolina until 1967. In that year, Schlitz Brewing Co. announced plans to build a $40 million plant near Winston-Salem.[127] A 1968 newspaper photo caption said the plant would be the “biggest single brewery facility ever built in the nation” with a production capacity of 100 million gallons of beer per year.[128] Shortly after opening, the brewery was sued for $2 million for overloading Winton-Salem’s sewage treatment plant and polluting the Yadkin River. It eventually settled the suit.[129]

In 1975, Miller Brewing Co. gave up on its plans to open a $100 million brewing facility in Raleigh, North Carolina due to a “cool reception” from the Raleigh Chamber of Commerce.[130] Apparently, the Raleigh Chamber was not in favor of Miller’s unionized labor.[131] Shortly thereafter, in 1976, Miller announced the groundbreaking of its new plant in Eden, North Carolina.[132] The plant would be “one of the largest industrial capital investments in North Carolina history” and “one of the largest breweries in the world.”[133] The plant was built in Eden despite protests from the local Christian Action League.[134] The League said the brewery would have a “negative impact on the life of our community, both morally and environmentally.”[135] The group wanted to know how a “manufacturer of beer, a product that has caused so much headache and suffering to our fellow man, could truly be a good neighbor?”[136] The final cost of the Miller plant and an associated wastewater facility was $265 million.[137] It employed 1,000 employees[138] and brewed 8.8 million barrels of beer in 1977.[139]

As breweries consolidated into large national corporations, states began to adopt “beer franchise laws” in the 1960’s.[140] These franchise laws, which I’ll discuss in Part III of this series, were designed to promote competition in the beer industry and fairness between smaller local wholesalers and the national breweries with superior bargaining power.[141] North Carolina’s first “beer franchise law” was enacted in 1965.[142] It was a simplified version of today’s beer franchise laws. It made it illegal for a brewery to (1) coerce a licensed wholesaler to agree to something that would “tend to violate” North Carolina’s alcohol laws, or (2) “unfairly” or “without just cause” terminate a distribution agreement with a wholesaler.[143]

A newspaper article from 1965 titled, “Rep. Uzzell Goes to Bat for Wholesalers,” noted that the franchise laws would give wholesalers the “whip hand in dealing with brewers.” Representative George Uzzell of Rowan County, one of the sponsors of the bill, was quoted as saying, “[the wholesalers] are at the mercy of brewers . . . . The distributors have no franchise or guarantee they will be allowed to continue as a distributor on a shipment to shipment basis.”[144] The beer franchise laws continued to evolve and tighten throughout the 1970s and 1980s.

North Carolina’s Elusive Three-Tier System

The General Assembly commissioned a study of North Carolina’s alcohol statutes in 1969.[145] A stated purpose of the study was making North Carolina’s alcohol laws more “cohesive, better understandable, and less ambiguous.”[146] Based on that study, North Carolina’s alcohol statutes were rewritten in 1971.[147] They were studied and rewritten again in 1981.[148]

Many of the amendments in the 1970s and 1980’s focused on the beer franchise laws, but various changes were also made to the brewery permit provisions. From 1933 through the 1960’s, a licensed brewery was permitted to sell beer “to persons licensed . . . for resale,[149] which would have authorized sales directly to both retailers and wholesalers. By 1981, however, the permitting laws had been tweaked. As rewritten, the holder of a brewery permit was authorized to sell beer to licensed “wholesalers,” but the authorization no longer included the broader language covering sales “to persons licensed . . . for resale.”[150] This language remains substantively the same today.[151]

After these amendments, it was clear that a brewery permit no longer authorized direct sales to retailers. It is not clear, however, whether these amendments were intended to preclude a brewery from either (1) obtaining a wholesaler’s permit that permitted sales to retailers or (2) having a financial or ownership interest in a wholesaler. For example, nothing in the statute explicitly prohibited a brewery owner from forming a separate legal entity to be licensed as a wholesaler and then distributing beer through that wholesaler.

If the intent was to mandate a three-tier system in the 1970’s or early 1980’s, it seems particularly curious (and is curious even today) why North Carolina did not amend its existing “tied house” laws to explicitly prohibit a brewery from obtaining a wholesaler’s license or having a financial or ownership interest in a wholesaler. In this regard, states generally adopt explicit “three-tier” language, but North Carolina has not. For example, Georgia’s three-tier statute provides that “no licensed registered brewer . . . nor any of his employees or members of such brewer’s . . . immediate family shall own, enjoy ownership interest in or a partnership arrangement with the business of any wholesaler or retail licensee[152]

At least one modern North Carolina Attorney General Opinion contemplates a brewery obtaining a separate wholesaler’s license.[153] And based on North Carolina’s ABC Commission website, at least three licensed North Carolina breweries were issued wholesaler permits during the 1980’s—Weeping Radish Restaurant and Brewery was issued a malt beverage wholesaler’s permit on January 1, 1988, Greenshields Brewery and Pub was issued a malt beverage wholesaler’s permit on June 7, 1989, and Red Oak Brewpub was issued a malt beverage wholesaler’s permit on April 30, 1992.[154] Each of these wholesaler’s permits was issued prior to the adoption of North Carolina’s small brewery self-distribution exception on July 23, 1993.[155]

All of this suggests that North Carolina did not have a mandatory three-tier system in place until as late as 1981, and perhaps not until 1993.[156] The exact date is difficult to pin down, but it seems right to conclude that North Carolina implicitly adopted its three-tier system sometime around the 1980’s alongside its beer franchise laws. In 1989, North Carolina overhauled its beer franchise laws, and specifically provided in the preamble that one of the purposes of the laws was to “promote and maintain a sound, stable and viable three-tier system of distribution of malt beverages to the public.”[157] This was the first time a “three-tier system” was referenced in the statutory history. Also in 1989, North Carolina adopted a peculiar provision that permits a brewery to “financially assist a proposed purchaser in acquiring ownership of a wholesaler’s business” under certain circumstances.[158] That provision seems odd, however, given the lack of an explicit provision precluding a brewery from acquiring a wholesaler’s permit or financial interest in a wholesaler. Also, any conclusion that the three-tier system was in place prior to 1993 seems inconsistent with the issuance of wholesaler’s permits to Weeping Radish in 1988, Greenshields in 1989, and Red Oak in 1992.

What seems clear, however, is the three-tier system was not adopted by North Carolina until decades after the repeal of Prohibition and became effective during the same general period as its beer franchise laws.

In any event, the three-tier system has arguably been accepted as the law in North Carolina, and the exact date of adoption is not important. What seems clear, however, is the three-tier system was not adopted by North Carolina until decades after the repeal of Prohibition and became effective during the same general period as its beer franchise laws. It is also notable that there were only a handful, if any, resident North Carolina breweries around during that period to question or challenge the three-tier system.

Small Brewery Exceptions—Brewpubs and Self-Distribution

In the 1980’s, Uli Bennewitz wanted to open a brewpub in North Carolina,[159] but that was illegal under North Carolina’s “tied house” laws prohibiting a brewery from having a financial interest or exclusivity arrangement with a retailer. After lobbying by Mr. Bennewitz, the North Carolina General Assembly ratified an “Act to Allow On-Premise Sales of Beer at Mini-Breweries” in 1985.[160] The Act permitted the holder of a brewery permit to sell its beer at its brewery upon receipt of an on-premise retail permit, so long as the brewery produced “fewer than 62,000 gallons” of beer per year.[161]

This brewpub (or taproom) exception was increased in 1992 to permit on-premise retail sales, so long as the brewery’s sales to “consumers at the brewery, to wholesalers, and to exporters” were “fewer than 310,000 gallons of beer produced by it per year.”[162]

A year later, the Act was revised again to provide the small brewery self-distribution exception. The 1993 amendment permitted a brewery permit holder to “obtain a malt beverage wholesaler permit to sell, deliver, and ship at wholesale only malt beverages manufactured by the brewery.”[163] This authorization applied to a brewery that sold, “to consumers at the brewery, to wholesalers, to retailers, and to exporters, fewer than 310,000 gallons of malt beverages produced by it per year.”[164] The self-distribution limit was increased to 25,000 barrels in 2003.[165]

Since 2003, breweries have lobbied unsuccessfully to increase the 25,000-barrel self-distribution limit. And a suit was recently filed against The State of North Carolina claiming the three-tier distribution system and its related franchise laws are illegal under the State’s constitution.[166] These events have been covered widely in the news and social media, but I may discuss them in a future post.

Conclusions

It’s frustrating that I can’t pinpoint the exact time when North Carolina became a mandatory three-tier system state, but I don’t think it matters.[167] We can still make the following conclusions about the history of North Carolina’s three-tier system:

  • The three-tier system was not a carryover from the Prohibition era in North Carolina.
  • The seminal 1933 study that shaped alcohol policy in the United States, Toward Liquor Control, did not contemplate or recommend a three-tier system. It supported a two-tier system for controlling retail sales of liquor and high alcohol beverages.
  • Toward Liquor Control was not concerned with tightly regulating beer and wine or the manufacture and distribution of alcohol.
  • Consistent with Toward Liquor Control, North Carolina initially imposed minimal regulations on the manufacture, distribution, and sale of beer, which were primarily concerned with tax collection.
  • North Carolina gradually tightened its beer regulations over many decades. It eventually adopted a “two-tier” system for beer and wine in 1953 to separate (1) retailers from (2) breweries and wholesalers. These “tied house” laws prohibited breweries and wholesalers from having ownership, financial, and other influential relationships with retailers.
  • North Carolina hasn’t amended its “tied house” laws to explicitly prohibit a brewery from having an ownership or financial interests in a wholesaler.
  • The mandatory three-tier system developed only recently in North Carolina around the same time as its beer franchise laws.
  • There were only a handful, if any, resident North Carolina breweries in existence when the three-tier system developed.

Thus, if nothing else, we’ve cleared up a few facts. It remains questionable, however, whether these facts mean anything with regard to the current debate over North Carolina’s three-tier system.

In my view, the debate should focus on whether the system serves an important public purpose that (1) justifies the free market restrictions it imposes and (2) cannot be achieved sufficiently through less restrictive alternatives. And in answering these questions, we should consider them with a clear understanding of the three-tier system’s history and purpose in North Carolina.

In my view, the debate should focus on whether the system serves an important public purpose that (1) justifies the free market restrictions it imposes and (2) cannot be achieved sufficiently through less restrictive alternatives. And in answering these questions, we should consider them with a clear understanding of the three-tier system’s history and purpose in North Carolina.

For example, what is today’s important public purpose for the three-tier system? After Prohibition, there seemed to be a genuine consensus that “tied house” saloons presented a significant societal problem that needed to be eliminated (i.e., absentee owners of saloons promoting alcoholism, prostitution, gambling, poverty, and other illegal and disruptive behaviors in local communities). And based on Toward Liquor Control, many states (including North Carolina) agreed that this problem justified a “radical” approach to alcohol regulation—a state-owned monopoly system over retail sales of liquor and high alcohol beverages. They did not, however, see an equally compelling public purpose for tightly regulating the manufacture, distribution, or sale of beer and wine.

Those were judgment calls made at that particular time in history, but times and circumstances change. Accordingly, we should be focused on the same questions today, but in light of today’s different social and economic environments. For example, assuming for the sake of argument that promoting temperance for beer drinking has become more important today than it was in 1933, then we should consider whether that problem (1) justifies rigid free-market restraints and (2) cannot be solved through less restrictive means. We should also be asking questions like the following:

  • If promoting temperance with regard to beer drinking is an important concern, why are there so many beer advertisements these days (as well as liquor advertisements for that matter)?
  • How does prohibiting a brewery from selling its beer directly to bars, restaurants, and grocery stores that it does not own, control, or influence promote temperance or discourage tied houses?
  • What do brewery-owned brewpubs or taprooms have to do with absentee ownership problems?

These are just a few examples, but it seems most potential problems could be addressed sufficiently through less restrictive regulatory alternatives, such as simple “tied house” laws and expanded brewpub and self-distribution exceptions.

As for other reasons commonly given for maintaining the three-tier system (e.g., promoting competition in the beer industry, brewer access to retailers, customer choice, quality control, timely tax collection, etc.), the same analysis should apply. Are these compelling public welfare concerns or are they private business matters that free markets are uniquely designed to address? And why do these concerns require tight “three-tier” regulation in the beer industry, but not in similar industries like non-alcoholic beverages or snack foods? For example, is there something about a brewery that makes it less likely to pay its taxes than a soda manufacturer?

A clearer understanding of the history of North Carolina’s three-tier system also has implications for brewers. As we’ve seen, the standard argument that the three-tier system should be dismissed as a carryover of outdated Prohibition-era laws doesn’t seem quite right from a factual perspective. Moreover, the national breweries thrived (squeezing out their smaller, local competitors) during the decades before the three-tier system was in place in North Carolina. While not necessarily a causal connection, this suggests the development of the three-tier system may have contributed in some way to the recent resurgence of craft breweries in the State. By limiting the market power of the national breweries, it is at least conceivable that the mandatory three-tier system resulted in better retailer access for craft breweries. Additionally, artificially limiting the growth of small breweries through the self-distribution cap may be encouraging more craft breweries to enter the market, with the understanding that they will have time to “catch up” with more established craft breweries. Granted, these are not really public welfare concerns, and, for better or worse, free market forces are better suited for dealing with these types of issues. But craft breweries shouldn’t ignore them and should be careful what they ask for when it comes to changing the three-tier system.

In any event, I understand this post is mostly academic. In Toward Liquor Control, Fosdick and Scott warned about the inherently political nature of a licensed-based alcohol regulatory system, and it seems their concerns have come to fruition. The wholesaler tier has already invested significant time, capital, and resources in reliance on the three-tier system, and they aren’t going to give it up easily. And the national breweries, which no longer need self-distribution (if they ever did), have a vested interest in anything that makes it harder for craft breweries to gain market share. Accordingly, it boils down to a political and economic problem (i.e., “it’s the economy stupid”). And the ability of craft breweries to change North Carolina’s beer distribution laws, including the three-tier system, will likely depend on their continued success in driving North Carolina’s economy and building political influence.[168]

If you made it this far, thanks. Writing this post has been fun. Cheers!


[1] See generally Michael J. Denny, What’s All the Fuss About North Carolina’s Beer Distribution Laws? Part I—The Controversy, Beer Law Mashing (September 19, 2017), https://beerlawmashing.com/2017/09/19/fuss-about-beer-laws/.

[2] See Complaint at 9, Craft Freedom, LLC v. The State of North Carolina (N.C., Wake County 2017) (No. 17CV005976)

[3] This is not a precise legal or constitutional requirement, but I believe it makes sense from a policy perspective in a predominantly “free market” society. This article discusses a proposed framework for evaluating the debate over the three-tier system. It is not intended to provide a legal analysis or opinion regarding the enforceability or constitutionality of North Carolina’s three-tier system.

[4] See supra note 1 (citing North Carolina Beer & Wine Wholesalers Association, http://ncbeerwine.com/).

[5] See generally Craft Freedom, http://craftfreedom.org/about/ (last visited Sept. 19, 2017).

[6] See supra note 2, 15.

[7] The research for this post has been interesting and a little surprising. It has also been challenging, which is often the case with statutory history. Statutory history requires piecemeal interpretation of old statutes that aren’t always clear. In any event, I have tried to pull together a relatively detailed history of North Carolina’s three-tier system based on my interpretation of legislative records, books, newspaper articles, and other readily available online resources.

[8] N.C. Gen. Stat. § 18B (2016); 14B N.C. Admin. Code 15C (2016).

[9] N.C. Gen. Stat. §§ 18B-102(a); 18B-1006(h); and 18B-1104(8).

[10] N.C. Gen. Stat. §§ 18B-102(a); 18B-1006(h); and 18B-1109(2).

[11] N.C. Gen. Stat. § 18B-1004(8).

[12] N.C. Gen. Stat. § 18B-1305(a1).

[13] N.C. Gen. Stat. § 18B-1300. North Carolina’s franchise laws, while mentioned in this post, will be covered later in this series.

[14] N.C. Gen. Stat. § 18B-1116.

[15] Id.

[16] 14B N.C. Admin. Code. 15C .0706(7).

[17]  Act to Prohibit the Manufacture and Sale of Intoxicating Liquors in North Carolina (“NC Prohibition Act”), 1908 N.C. Pub. Laws Ch. 71. See, e.g., Ben Steelman, North Carolina Has a Complex History with Liquor, Wilmington Star News (Mar. 6, 2010), http://www.starnewsonline.com/news/20100306/north-carolina-has-complex-history-with-liquor (“North Carolina became the first state in the South to ban the sale and manufacture of alcoholic beverages, and the first state in the nation to do so by popular vote.); Harry Mckown, May 1908 – Statewide Prohibition, This Month in North Carolina History (May 2006), http://www.learnnc.org/lp/editions/nchist-newcentury/5010.

[18] Robert P. George & David A.J. Richards, The Eighteenth Amendment, Interactive Constitution, https://constitutioncenter.org/interactive-constitution/amendments/amendment-xviii (last visited Oct. 18, 2017)

[19] Id.

[20] Id.

[21] Act to Make the State Law Conform to the National Law in Relation to Intoxicating Liquors (the “Turlington Act”), 1923 N.C. Pub. Laws Ch. 1.

[22] See generally S. Mintz & S. McNeil, Prohibition, Digital History,
http://www.digitalhistory.uh.edu/disp_textbook.cfm?smtID=2&psid=3383 (last visited Oct. 18, 2017).

[23] Id.; Deborah Blum, The Chemist’s War: The little-told story of how the U.S. government poisoned alcohol during Prohibition with deadly consequences, Slate (Feb. 19, 2010), http://www.slate.com/articles/health_and_science/medical_examiner/2010/02/the_chemists_war.html.

[24] Id.

[25] Id.

[26] Raymond B. Fosdick & Albert L. Scott, Toward Liquor Control 10 (1933), with forward by John D. Rockefeller, Jr.

[27] Id. at 11.

[28] Id. at 11.

[29] Id. at 6-8.

[30] Id. at 6.

[31] Id. at 30.

[32] Id. at 29-31.

[33] Id. at 23.

[34] Id. at 30-31.

[35] Id. at 30-31, 37-38.

[36] Id.

[37] Id.

[38] Id. at 33.

[39] Id. at 46.

[40] Id. at 57-58.

[41] Id. at 52, 56.

[42] Id. at 57-58.

[43] Id. at 46-47, 52.

[44] Id. at 57-58.

[45] Id. at 46-47 (emphasis added).

[46] Id. at 34-35.

[47] Id.

[48] Id. at 35-37.

[49] Id. at 26, 35-36

[50] See id.

[51] See id.

[52] Id. at 26, 33-36.

[53] Id. at 35-36. This quote is often cited as support for the conclusion that Fosdick and Scott recommended a three-tier system, but I don’t think that conclusion follows from the quote.

[54] Id. at 36-39.

[55] Id. at 39-40.

[56] Id. at 34-35.

[57] Id. at 34-35, 40, 44.

[58] Id. at 41-42.

[59] Id. at 42-43.

[60] Id. at 43-44.

[61] Franklin D. Roosevelt, President of the United States, Message to Congress (March 13, 1993), http://www.fdrlibrary.marist.edu/daybyday/resource/march-1933-6/.

[62] Id.

[63] See Jean Edward Smith, FDR 305 (2008); Kelly Phillips Erb, 15 Fun Facts About Beer & Tax on National Beer Day, Forbes (April 7, 2017), https://www.forbes.com/sites/kellyphillipserb/2017/04/07/15-fun-facts-about-beer-tax-on-national-beer-day/#639b296e3a6a; David J. Hanson, Cullen-Harrison Act: Early Start on National Appeal, Alcohol Problems and Solutions, https://www.alcoholproblemsandsolutions.org/cullen-harrison-act-early-start-national-repeal/ (last visited Oct. 18, 2017).

[64] Id.

[65] Act to Legalize the Sale of Beer, Lager Beer, Ale, Porter, and Fruit Juices Containing Not More than 3.2% Alcohol by Weight (“Legal Beer Act I”), 1933 N.C. Pub. Laws Ch. 216.

[66] Act to Provide for and Regulate the Manufacture, Transportation and Sale of Certain Beverages (“Legal Beer Act II”), 1933 N.C. Pub. Laws Ch. 319.

[67] Id.

[68] Id. (emphasis added)

[69] See id.

[70] Id.

[71] Id.

[72] Id. (emphasis added)

[73] Id. (emphasis added)

[74] Id.

[75] Id.

[76] Prohibition, Encyclopedia Britannica, https://www.britannica.com/event/Prohibition-United-States-history-1920-1933 (last visited Oct. 18, 2017); NCC Staff, Five Interesting Facts about Prohibition’s End in 1933, Constitution Daily-Smart Conversation from the National Constitution Center, https://constitutioncenter.org/blog/five-interesting-facts-about-prohibitione28099s-end-in-1933 (last visited Oct. 18, 2017).

[77] Id.

[78] 1933 N.C. Pub. Laws Ch. 216.

[79] Turlington Act, supra note 21.

[80] 1935 N.C. Pub. Laws Ch. 134, 315.

[81] Act to Promote Temperance and Prosperity, and to Encourage the Growing of Grapes, Fruits and Berries in North Carolina; To Legalize the Making and Selling of Light Domestic Wines (“Legal Wine Act”), 1935 N.C. Pub. Laws Ch. 393.

[82] Id.

[83] Id.

[84] Id.

[85] Id.

[86] Act to Provide for the Manufacture, Sale, and Control of Alcoholic Beverages in North Carolina (“NC Repeal Act”), 1937 N.C. Pub. Laws Ch. 49. Liquor was legalized in 1935, presumably on a test basis, in a few counties bordering South Carolina and Virginia, but those regulations were repealed and replaced by the 1937 state-wide legislation. Id.; see 1935 Pub. Laws Ch. 418, 493.

[87] NC Repeal Act supra note 86.

[88] Id.; Fosdick supra note 26.

[89] NC Repeal Act supra note 86.

[90] Id.

[91] Original Atlantic Idea Proves Worth in War (“Atlantic Company”), The Beaufort News, Oct. 1, 1941, at 10.

[92] Id.

[93] Id.

[94] Danial Anthony Hartis, History of Brewing in the Queen City 33 (2013).

[95] Atlantic Company supra note 91; Hartis supra note 94, 33.

[96] See generally Counties Help in Weeding Out Beer Offenders, Asheville Citizen-Times, Apr. 30, 1941, at 1; Beer Laws Upheld in North Carolina, Asheville Citizen-Times, Apr. 30, 1941, at 1. Clean Up or Close Up (Advertisement), The Waynesville Mountaineer, June 29, 1939, at 6.

[97] Id.

[98] Id.

[99] Id.

[100] Id.

[101] North Carolina Beer Industry Provided Several Thousand Jobs, The Cherokee Scout, Sept. 24, 1942, at 1.

[102] Id.

[103] Goodbye Friends (Advertisement), The Cherokee Scout, Dec. 2, 1943, at 3.

[104] Id.

[105] Hartis supra note 94, 33; “Shweitzer-izing” Beer Is Interesting Process, Statesville Daily Record, Apr. 28, 1949, at 22.

[106] Hartis supra note 94, at 35.

[107] See generally, Fosdick supra note 26.

[108] Id.

[109] See id. § 525(a) (“When any person, firm or corporation is engaged in more than one business or trade which is made under the provisions of this Article subject to State license taxes, such person, firm, or corporation shall pay the license taxes prescribed in this article for each separate business or trade.”). Substantially similar language remained in North Carolina’s alcohol statutes until they were rewritten in 1981. See 1971 N.C. Sess. Laws Ch. 872, N.C. Gen. Stat. 105.113.100 (1971) and 1981 N.C. Sess. Laws Ch. 412.

[110] 1947 N.C. Sess. Laws Ch. 1084

[111] Id.

[112] 1949 N.C. Sess. Laws Ch. 974.

[113] Id.

[114] Id.

[115] 1951 N.C. Sess. Laws Ch. 998.

[116] See 1971 N.C. Sess. Laws Ch. 872, N.C. Gen. Stat. 18A-38(b)(1971) and 1981 N.C. Sess. Laws Ch. 412.

[117] 1953 N.C. Sess. Laws Ch. 1207.

[118] Id.

[119] See supra note 14 and accompanying text.

[120] Timothy Harper and Garrett Oliver, The Good Beer Book 16 (1997).

[121] Id.; see also, Goodbye Friends supra note 103.

[122] Harper supra note 120, 16.

[123] Brewers Association, Historical Brewery Count, https://www.brewersassociation.org/statistics/number-of-breweries/ (last visited Oct. 17, 2017).

[124] Id.

[125] Andrew Tamayo, What’s Brewing in the Old North State: An Analysis of the Beer Distribution Laws Regulating North Carolina’s Craft Breweries, 88 N.C. L. Rev 2198, 2212 (2010).

[126] Supra note 123.

[127] Schlitz Brewery to Build Plant Near Winston, The Asheville Citizen-Times, June 30, 1967, at 5.

[128] Photo and caption, Statesville Record and Landmark, July 29, 1968, at 1.

[129] Here’s the reason David Spring Decided to Sue Brewing Firm, The Evening Telegram, Aug. 3, 1971, at 14.

[130] Cool Reception, The High Point Enterprise, Nov. 13, 1975, at 4.

[131] Id.

[132] Miller Brewery Started at Eden, The High Point Enterprise, June 30, 1976, at 9.

[133] Id.

[134] Brewery Opposed, Statesville Record and Landmark, Jan. 28, 1976, at 16B.

[135] Id.

[136] Id.

[137] Miller Brewing Co. is Building $15 million Waste Treatment Plant, The Evening Telegram, Aug. 25, 1977.

[138] Pact Signed, Asheville Citizen-Times, Dec. 13, 1978.

[139] Economy Fairs well in 1977, The Daily Times News, May 31, 1978.

[140] Tamayo supra note 125, 2213.

[141] Id.

[142] N.C. 1965 Sess. Laws Ch 1191.

[143] Id.

[144] Rep. Uzzell Goes to Bat for Wholesalers, The Daily Independent, May 12, 1965.

[145] N.C. 1969 Sess. Laws Resolution 115.

[146] Id.

[147] N.C. 1971 Sess. Laws Ch. 872.

[148] N.C. 1981 Sess. Laws Ch. 412.

[149] Legal Beer Act II supra note 66, as amended by 1969 Sess. Laws Ch. 732.

[150] N.C. 1981 Sess. Laws Ch. 479, G.S. 18B-1104.

[151] See supra note 9 and accompanying text.

[152] Ga. Code Ann. § 3-5-32 (2016) (emphasis added). See also, e.g., Ala. Code § 28-3A-6 (2016); Fla. Stat. § 563.022 (2016); Ky. Rev. Stat. Ann. § 243.157 (2016); La. Rev. Stat. Ann. § 26:273 (2016); Neb. Rev. Stat. § 53-169 (2016); Nev. Rev. Stat. § 369.382 (2016); S.C. Code Ann. § 61-4-940 (2016).

[153] N.C. Attorney General Opinion, August 7, 1969 (“It is likely that it would have been necessary for such brewery to first obtain a wholesaler’s license . . . .”).

[154] See North Carolina Alcoholic Beverage Control Commissions permit search function at http://abc.nc.gov/Permit/SubmitBusinessSearch. I was informed by the ABC Commission that their permit records are required to be maintained for only 10 years after cancellation of a permit, so older permits records dating back to 1933 are not always available.

[155] N.C. 1993 Sess. Laws Ch. 415, Gen. Stat. § 18B-1004(7).

[156] See infra note 163 and accompanying text.

[157] N.C. 1989 Gen. Stat. § 18B-1300.

[158] See N.C. Gen. Stat. § 18B-1119.

[159] See generally Tamayo supra note 125, 2199, 2215 (citing Elizabeth Leland, Something’s Brewing in Manteo: N.C. Gets a Taste of Germany, Charlotte Observer, Aug. 4, 1988, at 1B.

[160] N.C. 1985 Sess. Laws Ch. 596, 766.

[161] Id.

[162] N.C. 1992 Sess. Laws Ch. 920, Gen. Stat. § 18B-1104(7)

[163] N.C. 1993 Vol 1. Sess. Laws 415, Gen. Stat. § 18B-1104(7).

[164] Id.

[165] N.C. 2003 Sess. Laws Ch. 430, Gen. Stat. § 18B-1104(8).

[166] See supra note 2.

[167] Honestly, it makes me wonder if I’ve missed something, perhaps a case or some other authoritative guidance. I have relied primarily on readily available public documents for this post. I may convert this post to a formal legal article in future, so I welcome any constructive thoughts or feedback.

[168] Or, perhaps, a successful constitutional challenge.

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