When the 21st Amendment was ratified in 1933, ending America's "noble experiment" with nationwide alcohol Prohibition, it supposedly meant the federal government was getting out of the business of regulating booze. But few governments willingly give up power, and even fewer give it up absolutely.
In 1935, Congress passed the Federal Alcohol Administration Act (FAA Act), allowing the feds to collect alcohol excise taxes, prevent unfair trade practices, and protect consumers. Determining which agency should administer the FAA Act has been quite a journey—the Internal Revenue Service; the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); and, for the last 21 years, the Alcohol and Tobacco Tax and Trade Bureau (TTB) have all taken turns. But one thing hasn't changed: The FAA Act still remains the main authorizing legislation empowering the federal government to regulate alcohol markets.
One of the TTB's main responsibilities is enforcing the FAA Act's unfair trade practice rules, which are intended to protect alcohol retailers from being controlled by large alcohol producers that might exercise monopolistic powers. This authority is derived from Section 205 of the FAA Act, which is a mere 907 words—meaning the TTB is currently policing the commercial trade practices of a $300 billion industry based on statutory language that is nearly a century old (with a few minor updates over years) and around the length of a newspaper op-ed.
The Biden administration recently drew upon these provisions to instruct the TTB to undertake a roving review of the industry under the guise that there could be antitrust concerns and too much concentration in the alcohol marketplace. Not only is this problematic in that the TTB is aggressively using an outdated and sparsely worded statute to contemplate aggressively beefing up its regulatory posture toward the industry, but on the merits, the alcohol sector is less concentrated than ever at the producer level, as the beer aisle at any grocery store will attest. Regardless, the Federal Trade Commission and Department of Justice are already tasked with competition and antitrust enforcement under federal law—are three federal agencies really necessary to prevent potential monopoly concentration?
As a matter of course, one could argue that any agency whose primary authorizing legislation is close to 100 years old—and with little in the way of substantive updates along the way—should automatically sunset unless Congress acts to revive it.
Another task for the TTB is its notorious alcohol labeling regulations. The bureau uses a preapproval system for the labels that go on alcohol cans and bottles, which requires the government to sign off on labels before products can go to market. Most food labeling systems, by contrast, look for violations after a product is being sold.
The TTB's labeling rules prohibit "health-related statements" to be put on alcohol labels. The agency has taken the enforcement of these provisions to the land of farce, having rejected labels for beers like King of Hearts (the label depicted a playing card with a heart, which the agency argued implied a health benefit) and St. Paula's Liquid Wisdom (the word "wisdom" was seen as making a medical claim).
The agency also prohibits booze labels from including any statement or design deemed "obscene or indecent." It doesn't take a constitutional law professor to notice that the agency's labeling rules raise a host of First Amendment concerns in that they curtail what many would view as legitimate commercial speech.
Perhaps the most powerful argument for phasing out the TTB is that alcohol is already intensely regulated at the state and local level. States have their own unfair trade practice rules as part of their three-tier system for alcohol regulation, which functions on top of the TTB's federal rules. Most states also have their own draconian labeling laws that producers must seek to satisfy alongside the TTB's standards.
Any plan to eliminate the agency would need to be careful not to amount to a bureaucratic shuffling of the deck chairs. At various points, suggestions have been put forth to give the TTB's excise tax collection authority to the Internal Revenue Service and its other authority to the Food and Drug Administration—ideas that the alcohol industry vehemently opposes under the (entirely plausible) theory that those agencies would make the TTB look downright libertarian in comparison.
The post Abolish the Federal Alcohol Tax and Regulation System appeared first on Reason.com.
