The latest legislative plan to create a government office to better enforce Wisconsin's liquor laws is dead, but it has again highlighted a policy quandary affecting hundreds of businesses: How should the state's complicated alcohol laws be interpreted and enforced?
The debate surrounding that question has divided Republican lawmakers and pitted businesses who produce alcoholic beverages against those who distribute and sell them to the public. Both sides speak of clarifying the law, but what that looks like varies widely.
That divide was on display this week during a public hearing for a Senate bill introduced in the waning days of the legislative session that would have created an Office of Alcohol Beverage Enforcement housed within the state Department of Revenue. The office would have had the power to develop administrative rules and allocate staff to more effectively enforce Wisconsin's three-tier system, which governs the alcohol industry.
The three-tier system, outlined in Chapter 125 of the state statutes, divides the alcohol industry into three parts: manufacturers, distributors and retailers. Businesses in each part of the industry work together but must follow distinct, specific rules on how to operate. The origins of the system date back to Prohibition and was created to prevent monopolies.
The bill Senate lawmakers reviewed this week would have also carved out a separate operating permit in the three-tier system to uniquely suit Kohler Co., which wants to both manufacturer and sell its spirits.
Though the plan failed, the enforcement and interpretation problems in Wisconsin's alcohol laws persist. Since Republicans differ on how to solve those problems, they agree that the laws should be clarified because few people actually understand them.
"I think everybody recognizes that the law as written is confusing and there are a lot of holes in it," said Jeff Glazer, an attorney who has tracked changes to Wisconsin's alcohol laws for a decade and represents dozens of craft beverage producers."People on one side of the fence — for example the Tavern League, the wholesalers and the restaurant association — have a very particular way they would like to see those laws interpreted or written. The people on the other side of that fence are the manufacturers, by and large. They have a different way they would like to see it written."
As craft beers, spirits and wine have become more popular with the public, the producers are trying to adapt to meet demand, Glazer said.
"Consumer taste has kind of muddied the waters as to what (the public's) expectations are of what a manufacturer is or a retailer is," he said.
Mike Wittenwyler, an attorney who represents the Wine and Spirits Institute, a wholesale organization which supports more concentrated enforcement of the three-tier system, agreed.
"Chapter 125 has been amended and added to in a manner that is not a model of clarity or consistency and so going through and cleaning it up I think definitely would be an appropriate action," he said. "The question I would have is whether or not some of the things people believe are clarifications and consistencies are substantive changes and so that kind of dialogue and discussion would have to occur."
Minutes after cancelling a vote in his committee on the enforcement bill Friday, Sen. Dan Feyen, R-Fond du Lac, called for the Legislature to study how to fix the alcohol laws.
"It is clear that there are larger issues with how we regulate and enforce alcoholic beverages here in Wisconsin that need to be addressed," he wrote. "I am calling on leadership to support a legislative study committee to review our alcohol beverage laws. A broad look at updating these laws, many of which date back to prohibition and are no longer in sync with modern times, is long overdue. I am asking for all those involved in the industry to come to the table and work together to find a solution.”
Eric Bott, president of Americans for Prosperity in Wisconsin, which has railed against plans to create what they call an "alcohol czar" said he supports Feyen's proposal.
"There were a lot of rumors flying around and they didn’t officially pull the vote until the last possible second," he said in an email. "I think that getting all impacted parties around one table to discuss fixing Chapter 125 is a much better approach than rushing a flawed bill."
Dozens of alcohol producers statewide — craft breweries, wineries, distillers — say they support the integrity of the three-tier system but uniformly oppose plans to create the type of enforcement entity promoted by Senate Majority Leader Scott Fitzgerald, R-Juneau, and the state's beer and liquor wholesalers and taverns.
Those representing alcohol wholesalers and retailers say a lack of education is also a part of the problem.
The craft beverage industry has "never had a consistent position that shows a thorough understanding of what Chapter 125 allows or doesn’t allow," Wittenwyler said. "They don't know what it is they're complaining about. They don't have an understanding of Chapter 125."
"It's about understanding that you have a three-tier system and what we need to do is preserve that three-tier system. If what they're looking at is somehow undercutting that or making changes to it, that is the problem. But they haven't identified specifics. We don't know what it is they want, but typically the proposals they're putting forward are things that would put holes in the three-tier system rather than firming it up."
The alcohol manufacturers say they don't understand or know how to follow the law because it is vague and inconsistent.
"We don’t have enforcement problems from a producer's perspective. We have a clarity-of-Chapter 125 problem. That (lack of) clarity makes it very very difficult," said Ryan Prellwitz, president of the Wisconsin Winery Association. "The changing rule structure in Wisconsin is one of the greatest fears I have (for) my business."
A discrepancy in how Stevens Point Brewery and Sprecher Brewing Company are regulated because of a 2011 law change highlights the problem with Wisconsin's alcohol laws.
"Enforcement problems are rooted in inconsistencies that have been written into Chapter 125," he said.
Both breweries want to make cider, which is regulated as a type of wine in Wisconsin so both companies hold winery permits. In order to make beer, the companies hold a separate state-issued permit.
A 2011 law prohibited breweries from holding licenses that allowed them to sell the cider they made, but made an exception for breweries that were already selling cider under that permit. Sprecher was already selling cider and Point was not.
"When Point began producing cider, they were prohibited from selling the cider they produced while Sprecher retained their ability to sell cider at retail," Garthwaite said. "So both breweries have the exact same winery permit, the exact same brewer permit, but one can sell cider under their brewer permit while the other cannot. Even more confusing is that it’s the 'brewer' permit that authorizes the sale of cider and wine for some breweries while a winery cannot sell cider or wine under their winery permit. Clear as mud, right?"
It’s an example of how enforcement cannot possibly be uniformly applied if licenses and permits are not themselves uniform, Garthwaite said. And that needs to change.
Garthwaite said his group is not against enforcement, but does not want it at the hands of a separate government entity that his group had no hand in developing.
"What is most important to us is that this rules are uniformly implied," he said.