Tired of Losing, North Carolina Breweries Sue State

Austin Ray

THE GIST
Having failed to bring about change legislatively, two North Carolina breweries have filed a lawsuit against the state, in which they contend the annual production cap imposed on brewers as it relates to self-distribution is unconstitutional. The Charlotte Observer reports that Olde Mecklenburg and NoDa, both of Charlotte, allege the law suppresses the free market, “thereby harming consumers by artificially inflating prices and reducing consumer choice.” As GBH has previously reported, when a North Carolina brewery produces in excess of 25,000 barrels in a year, it forfeits its legal right to self-distribute and must partner with a wholesaler. A recent effort to quadruple the cap failed in the General Assembly.

WHY IT MATTERS
We knew this was a possibility. Last month, Olde Mecklenburg owner John Marrino told the Observer, “I’m not sure the General Assembly is the best avenue to ensure success of the micro-brewery industry in North Carolina,” suggesting he was exploring his legal options. This, of course, was in response to lawmakers acquiescing to pressure from wholesalers and scrubbing key language from a bill that sought to lift the cap.

But still, a lawsuit seemed like a last resort, especially considering, in light of the legislative loss, the two breweries partnered with State Rep. John Ray Bradford to call for civil negotiations. “I don’t have closed fists,” said Bradford during a press conference, calling wholesalers to the table in hopes of avoiding this very situation. “I have open arms right now.”

Apparently it's time for those closed fists. And this case could be a big one. As the Observer notes, a former state Supreme Court Justice who helped write the complaint calls the matter “one of the most significant economic liberty cases we’ve seen in the state in a long time.”

The issue's of obvious import to the state’s breweries, though it’s not by chance that Olde Mecklenburg and NoDa are leading the charge. For its part, Old Mecklenburg is hoping to spearhead a multi-million dollar expansion project, which the company seems willing to scrap or otherwise alter in scope should the laws not change. NoDa, meanwhile, has capped its own growth at 24,999 barrels to purposefully avoid going over the limit (which is a practical move, but also a clever political statement: “We’re not growing because you won’t allow it and that’s it.”).

This has, it’s worth noting, given wholesalers a counter argument to suggest that changing the rules is an unnecessary step that would, in essence, only benefit a couple companies (as most breweries in the state produce significantly less than the 25,000-BBLs limit). But the initiative has the support of the North Carolina Craft Brewers Guild, which sees the issue as an industry-wide problem. And given similar fights taking place elsewhere in the country like Texas and Nebraska, there’s bound to be considerable interest in this case not only in North Carolina, but everywhere brewers are fighting outdated laws that no longer serve the industry.

—Dave Eisenberg

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Charlotte craft brewers take their fight to court [Charlotte Observer]