It was standing room only in Room 172 of the Montana State Capital building today for the House of Representatives’ Business and Labor Committee hearing on three beer-related bills. After nearly four hours, only one thing remained clear: the tension and simmering anger that dominated the 2013 session has not dissipated, it has merely shifted form.
Rep. Pat Noonan, sponsor of HB 326, kicked off the discussion with a lesson on the definition of compromise, immediately firing a shot at the Montana Beer and Wine Distributors Association for pulling out of the alcohol industry coalition.
In reality, the shots started coming at the MBWDA during public testimony on the previous bill, HB 360, a bill designed to repeal a portion of Montana’s franchise laws. John Iverson, Government Affairs Director for the Montana Tavern Association, spoke in favor of the bill, noting the MTA’s support for “broad reform of franchise laws.” Franchise laws largely benefit the wholesale industry and the MTA’s sudden shift in support of reforms was not lost on anyone.
Tony Herbert, Executive Director of the Montana Brewers Association, correctly pointed out that “license stacking,” where brewers are allowed to also own retail licenses, is not breaking any new ground. A number of other states allow the practice. (Though no one pointed out that most of those states do not have license quotas.).
Iverson, calling himself the “mythbuster,” also dove into the dictionary for a definition of “entrenched,” labeling anyone who believed HB 326 further entrenches the state in its problematic quota system as “clearly confused.”
Proponents largely repeated a similar theme, arguing HB 326 provides the industry multiple avenues for industry growth by allowing breweries to purchase retail licenses and bars to purchase brewery licenses.
Absent Montana’s quota system, there would likely be near unanimous approval for the bill from Montana’s brewing industry. Yet, opponents to HB 326 pointed to the quota system as the root of why the bill creates winners and losers and results in an un-level playing field.
Matt Muth, owner and brewer of 406 Brewing Co. noted the high cost and scarce availability of retail licenses. Brad Simshaw, co-owner of Blackfoot River Brewing Co. argued the brewing industry is doing just fine without the complicated fix attempted by HB 326.
Dennis Himmelberger, owner of Himmelberger Brewing Co. and former House of Representatives member, explained how the 1999 Legislature’s House Bill 442, which authorized on-premise sales for breweries for the first time, had no opponents due to the hard work of that coalition.
Representatives from distributors from around Montana expressed concerns about the bill allowing the creation of a vertical monopoly where one entity can own all three tiers of the system. They also warned of unintended consequences, though the lack of specific examples did not appear to satisfy several members of the committee.
The discussion essentially continued into the hearing on HB 336, a bill which would raise the cap for on-premise sales at tap rooms from 10,000 bbls to 60,000 bbls.
HB 336 also includes a definition for how to calculate the 60,000 bbls by including all production from all related entities. The definition drew the ire of the MTA’s Iverson, who claimed it violates the commerce clause to the U.S. constitution and, therefore, is unconstitutional.* He was clearly listening when the MBA fired the same accusation at the MTA in 2013 in opposition to the MTA’s license stacking bill.
Jürgen Knöller, owner and brewmaster of Bayern Brewing, explained why HB 336 would benefit his brewery. Bayern has been operating just shy of the 10,000 bbl cap for several years. Knöller doesn’t want to operate a bar. He wants to keep his tap room which he deemed the most essential marketing tool for any brewery.
Bayern has the ability to expand 30% using the equipment it already has and Knöller needs a simple fix. Raising the cap would allow Bayern to expand without needing to purchase a retail license and without needing to change the character of his greatest marketing tool.
Thus, it was more than a bit awkward to see Tony Herbert, Executive Director of Bayern’s own trade organization, the Montana Brewers Association, walk to the podium and argue against the simple fix Knöller needs.
At that moment everyone in the room should have recognized we have a problem.
The reason for the opposition? It’s not the deal we made.
For the previous hour, the MTA, MBA and other proponents of HB 326 touted that bill’s options for growth. Now, that same coalition explained to the Committee that “growth” for Bayern, the longest operating brewery in Montana, means either buying a $200,000 to $700,000 retail license, or scaling back Knöller’s best marketing tool to a maximum of 500 bbl a year.
Apparently, that’s the definition of compromise.
The House Business and Labor Committee will take action on the bills at a later date, likely to be late next week.
*It doesn’t. The commerce clause is implicated when laws treat in-state business differently (usually more positively) than out-of-state businesses. The definition in HB 336 calculates the total production the same no matter where the beer is made, or how the ownership is structured.