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Kentucky General Assembly OKs Ban on Out-of-State Brewers Owning Distributorships

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A bill banning out-of-state brewers from owning distributors in Kentucky has won approval in the General Assembly and awaits final word from Gov. Steve Beshear, who has indicated his support.

The bill was approved Wednesday in the state Senate following earlier approval from the state House.

The bill closes what craft brewing interests call a loophole in Kentucky law that allows out-of-state brewers to own distributors in the state.

Two brewers—Missouri’s Anheuser-Busch and Ohio’s Rhinegeist—currently own distributors in Kentucky and won’t be able to renew their distribution licenses next year.

One of Anheuser-Busch’s distributors is located in Louisville and several senators from that area voted against the bill.

“I wholeheartedly support the craft beer industry in Louisville, they are doing great,” Sen. Denise Harper Angel, a Democrat from Louisville. “But Mr. President, I can’t vote against property rights and I won’t vote against workers rights, so I encourage the body to vote no.”

Earlier on Wednesday, Sen. Julie Raque-Adams, a Republican from Louisville, had proposed amending the bill so that distributors owned by Anheuser-Busch and Rhinegeist could be grandfathered in under the ban. But the amendment was withdrawn early during the floor debate.

The vote made for some unusual bedfellows—Sen. Damon Thayer, a Republican from Georgetown, noted that it was odd he was voting in favor of a regulatory issue with Sen. Julian Carroll, a Democrat from Frankfort and former governor.

“I feel like I’m living in some sort of strange parallel universe today when I look around the room at who agrees with me on this issue and who disagrees with me on this issue,” Thayer said.

Sen. Dan Seum, a Republican from Fairdale, accused Anheuser-Busch of putting the squeeze on small businesses.

“I understand a bully when I see one and I understand what it is when you’re a small businessman out there trying to make it, trying to get someone to distribute your product and they say, ‘No we don’t want you, we just want to do ours,’” Seum said.

Anheuser-Busch representative Damon Williams said the company was put at a competitive disadvantage in finding a buyer for the distributor because of the Jan. 1 deadline to divest.

“I would call it more an auction than I would a sale,” Williams said.

In a statement after the bill passed, Williams said that the company "will continue to fight for the business we’ve successfully built with our employees over the last 40 years." Questions have been raised over whether Anheuser-Busch take the bill to court if it becomes law.

Beshear released a statement on Wednesday evening:
I will be pleased to sign House Bill 168, which protects the integrity of the three-tier system for alcohol sales in Kentucky. This system was designed to protect consumers as well as small producers like new breweries. This aligns the rules for beer with rules for other alcoholic beverages, so everyone is on a level playing field.

Ryland Barton is the Managing Editor for Collaboratives. Email Ryland at rbarton@lpm.org.