NCSLA Louisville 2019, Part III: Legal Update: Why Regulation Matters, Richard Blau

A great solo panel by Richard Blau. I don’t know how he does it by himself, lots of stamina and lots of work, but he always pulls it off!

Summary/Takeaways

A great presentation by Richard Blau who always raises great points.

I think the takeaways are about relevance and how relevance must be an important part of the regulators tool box. If you don’t act with relevance and think in relevant terms, then regulation will not be effective.

Richard started out his presentation by talking about how important regulation was for consumer safety. If the regulator fails this relevant test, then regulatory credibility is sacrificed and its importance is sacrificed!

Finally, Richard gave a run-down of cases, but not what they are about, but why they are important.

He succinctly put the cases into categories and tells us how a decision one way or another can change and shape the system going forward.

A Richard Blau presentation is never one not be missed and this one was no different!

 

The big question

Richard opened by posing this question, does regulation matter?

Regulation, the safety valve against danger

As we look at the problems of alcohol killing people in the Dominican Republic, we are glad to know that because of government regulation in the U.S. these problems have been eliminated. Even consumers in the E.U. don’t have the same level of confidence in their product that the U.S. consumers have.

Even though regulation keeps things in line, don’t underestimate human beings trying to push the outer boundaries of safety.

There is the example of alcohol by aerosol spray which works on the system faster. Regulation will keep this from coming widespread and becoming a safety issue.

Although alcohol is enjoyed by many, for others it is disastrous. There are the large number of DUI deaths and death from liver disease. Although all of these can’t be contributed 100% to alcohol, (some of these are owed to opioids and other hard drugs), alcohol still significantly contributes.

Regulator being relevant

Clearly regulation is important to deal with these serious matters, however, for the regulator to be effective, they must be relevant.

And they must serve their two constituencies effectively; 1. Elected officials and the public at large and 2. Industry members who they regulate.

Creed for being a good regulator

To be a good regulator you must have laws that are relevant and people that are going to obey. If you pass laws that people won’t obey, what good are you as a regulator.

If you are not present in the same place where your audience operates, they are not going to hear you. Think of how regulators sometimes have a hard time regulating ecommerce.

If your audience does not derive value from your education and enforcement, they are not going to learn from you.

If you want to stay relevant, your actions have to fall in line with your audience’s values.

An example of regulators staying relevant is the TTB change where there will be a new status for COLAs called conditionally approved. This will streamline the process and not slow it down when it is not 100% complete. The process is done online.

This change shows the agency is listening to its constituents and using technology to help the process.

Technology developments

Technology has brought about developments that the drafters of the 21st Amendment could never foresee, such as the rise of ecommerce and ordering alcohol from your couch.

So how does that play in your role as a regulator? For regulators it is utilizing the tools in your regulator toolbox, for industry members it is about educating regulators about the process.

Even with ecommerce it doesn’t change the fact that everyone wants to see a safe and responsible alcohol system.

Role of the regulator

The role of regulator has changed, now there is a distinct possibility that if a regulator wants to defend its position it will need evidence to back it up. Without evidence it stands a good chance of losing. For a couple of generations, after prohibition the regulators theory was enough, because people remembered the ills of prohibition, that has changed.

Cases

Many cases present the question whether regulation remains relevant today, and these cases challenge the concept of relevance.

There is a line of cases that challenge important legal concepts such as: is residency relevant to alcohol laws; are state lines relevant; is alcohol pricing relevant; is morality relevant; are advertising restrictions relevant; and is the three-tier system relevant?

What makes it difficult for regulators is different courts around the country come to different conclusions on the same set of facts. In some courts the 21st Amendment reigns supreme and in other courts the Commerce Clause overrules 21st Amendment.

Is pricing relevant?

Connecticut Fine Wine and Spirts, LLC v. Seagull Total Wines, Total Wine and more challenged Connecticut’s price posting law and claimed it violated the Sherman Anti-Trust Act, the Court didn’t agree with Total.

It states that Connecticut’s alcohol laws requiring minimum pricing, mandating nondiscrimination sales of products to all retailers at the same price, and imposing Post & Hold compliance were not preempted by the Sherman Act.

Is morality relevant?

Is morality relevant, the Supreme Court decided an intellectual property case dealing with whether a fashion designer’s logo was indecent or obscene. Iancu v. Brunetti. If it was deemed indecent or obscene, then the fashion designer would not be allowed trademark protection. The Supreme Court deemed that the logo was not indecent or obscene. The decision’s impact is it could open the way for looser meaning of what is deemed indecent or obscene.

This has an impact on alcohol because if the standards of indecent or obscene are lowered, then what happens to the TTB’s regulatory authority over labels? Can the TTB refuse to issue a label if it deems it indecent or obscene, or has this case decreased their power? If this standard is lowered or obsolete, could we have a label such as “shit faced beer” being approved?

Are too many exceptions killing the liquor code?

In discussing the Missouri Broadcasters Association v. Taylor, Richard made a great observation about this case and tying it to a state regulatory principle that has existed for a long time, the numerous exceptions to the state liquor codes. Every state’s alcohol beverage code is riddled with exceptions; this is the reality of the situation. In this decision the Judge stated that Missouri had so many exceptions to the tied-house rule that it is hard to justify a regulation based on tied-house principles.

Same case different decision

Finally, Richard looked at the Sarasota Wine Market, LLC v Parson case and showcased how rulings from different courts exist. In this case, the Court ruled that Missouri’s wine shipping law that allowed in-state wine shipping but prohibited out-of-state wine shipping was constitutional. This same issue was looked at by federal courts in Michigan and Illinois and both courts reached decisions that were opposite the Missouri decision.

An interesting question

So, it begs the question is regulation relevant when we can’t even come to a clear answer about it!

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