Ohio Brewery News
Repeal Day 2023
Today is the 90th anniversary of Repeal Day: the 21st Amendment was ratified on Dec. 5, 1933, ending nearly 14 years of Prohibition. Our government has historically shown the wisdom to modernize laws when they have become antiquated or conflicted with the original purpose.
The Ohio Alcoholic Beverages Franchise Act of 1974 is an excellent example of a law that made sense when it was written, but now has very negative consequences for small and independent breweries that didn’t exist when the law was enacted.
Franchise law was instated nearly 50 years ago to curb the undue influence of massive breweries over small wholesale distributors: the companies that deliver beer to retailers. Locking big breweries into lifetime distribution contracts gave wholesalers the legal protection they needed to not only survive, but grow into large, powerful and influential actors in the beer market themselves.
As small and independent breweries have grown in popularity, it has become apparent that franchise law now protects big businesses to the detriment of small business. The law shackles small breweries into evergreen contracts with the distributor that delivers their beer to market, even if the distributor doesn’t hold up their end of the agreement.
The law gives small breweries limited options to get out of the contract:
- The distributor may agree to release them or sell their rights to another distributor.
- The brewery can sue at exorbitant cost against a deep-pocketed opponent that still controls their products in the market during the suit.
- The contract is dissolved when the brewery business fails.
In every case, the big business enjoys the protection of law while the small business suffers.
Think about that. As large as their businesses are, distributors are still essentially delivery service providers for breweries. How would this look if other services had the same state interference protecting them? Should a brewery have to sue its way out of a plumbing contract when a toilet continues to leak? Should a brewery have to sue its way out of a contract with an HVAC contractor if its air conditioning continually fails? No. In virtually every other service contract, a brewery can switch providers if their needs aren’t met. However, under the antiquated franchise law, the brewery’s delivery service provider is protected from accountability regardless of their performance.
In the past decade, hundreds of small and independent breweries have opened in all corners of Ohio. These small business owners poured their hearts – and often their life savings – into their American dream: being their own bosses, building sustainable businesses and serving their communities. Ohio breweries are renowned not just for making great beer, but also for their positive impact on the economic growth and revitalization of their towns and neighborhoods.
However, as independent breweries have carved out their small space in the beer market, they’ve been constrained by an antiquated law that was never meant to apply to them. The brewing industry of 2023 is not the same as the industry of 1974: applying franchise law to small breweries flies in the face of its original purpose of protecting small business from abuses of power by their larger partners.
It is time for the Ohio General Assembly to repeal this outdated restriction on our small and independent breweries. Franchise law gives a delivery service more control over the destiny and success of beer in the market than the people who manufactured it or the consumers who purchase it.
The proposed Ohio Craft Brewer Freedom Act (H.B. 306/S.B. 138) is not just a piece of legislation that cures a problem in our industry: it’s an opportunity for Ohio to support small businesses, promote innovation and empower consumers. It’s a chance to let Ohio’s craft brewers continue on this incredible journey toward the American dream.