(The Center Square) – An Ohio policy groups wants state lawmakers to unlock competition in the brewing industry and let craft brewers compete on a level playing field.
The Buckeye Institute calls the state’s alcohol franchise law anti-competitive and favors distributors over small craft brewers.
“Ohio’s award-winning beer industry is suffering from the anti-competitive effects of the state’s 50-year-old alcohol franchise law,” said Greg R. Lawson, a research fellow at The Buckeye Institute and the author of Brewing Freedom. “While the Buckeye State’s craft brewers make some of the best beers in the world, Ohio lawmakers should brew some freedom and end the state’s onerous legal provisions that effectively create an ‘auto-renewal’ policy for contracts between brewers and distributors.”
The policy paper points to the state’s 1974 alcohol franchise law that was passed to help distributors who invested heavily in logistics but could have been undercut by larger brewers who could force cheaper contracts with local bars.
Lawson said the law’s “just cause” and “successorship” provisions make it difficult for alcohol manufacturers to end or turn down a renewal of a franchise agreement with a distributor.
The law allows for “just cause” events like bankruptcy and permit losses or suspensions.
“The state law all but ensures that any small brewer inclined to dispute a distributor’s contract terms would find itself in court and at a significant financial disadvantage,” the paper reads. “And, to highlight the law’s absurd consequences, any craft brewer contesting its distribution contract would still have to rely exclusively on the same distributor to move its beer during the entire course of their litigation.”
Lawson argues a better approach would be to allow craft brewers to find a new distribution contract when they want, and also give distributors the right to sue for breach of contract.
According to the Ohio Craft Brewers Association, 433 craft breweries operate in Ohio, which is the eighth-most in the nation. Forty-four new breweries opened in 2022, and Ohioans consume 4.6 gallons of craft beer per adult over the age of 21.
The association says the state ranked sixth in the country in craft beer production in 2022, down one spot from 2020. The brewers’ economic impact of the industry rose from $880.7 million in 2020 to $1.27 billion in 2022.
“The statute once intended to protect distributors from other market actors has, like protectionist laws often do, overcorrected,” the brief said. “Steps should be taken to revive and protect the freedom to contract in Ohio and regain the benefits of free markets and open competition.”
