has always been a strong policy in favor of interpreting the Constitution to prohibit such barriers." (Emphasis ours) Congress has the right to legislate in this field although the Supreme Court has rendered interpretative decisions on a section which certainly does not lend itself to the interpretation given by the Supreme Court. It is respectfully submitted that the decisions of the Supreme Court are not interpretative of the section based upon the intention of the Congress as indicated in its debates but are rather judicial legislation. Further, the Supreme Court of recent times has reversed itself on some very important subjects, vis, Civil Rights and the Miranda Decision. For those who contend that the Congress does not have the right to act, it should be pointed out that the Supreme Court has never decided the issue as to whether discriminatory taxes may be levied. There is appended hereto a legal memorandum which supports this position. It should be further emphasized that in construing the Twenty-first Amendment the Supreme Court has never been confronted by legislation enacted by the Congress in the exercise of its power under the Commerce Clause. Thus, in the very recent case of Heublein, Inc. v. South Carolina Tax Commission, 409, U.S. 275-282 (1972), Note 9, the Court stated in part and directly : “... Though the relation between the Twenty-first Amendment and the force of the Commerce Clause in the absence of Congressional action has occasionally been explored by this Court, we have never squarely determined how that Amendment affects Congress' power under the Commerce Clause." (Emphasis supplied) It would seem that the Court has actually requested the Congress to act. This bill does not in any way impinge upon the police powers of the State and its rights to do any and everything that it presently does, except the right to discriminate. There is annexed hereto a copy of a letter addressed to the National Alcohol Beverage Control Association in which their statements were challenged by us. They have to this writing never in any way answered the challenge nor denied the correctness of the communication. LAW OFFICES OF JEFFERSON E. PEYSER, NATIONAL ALCOHOLIC BEVERAGE CONTROL ASSOCIATION, (Attention Ms. Dorothy Kelly, Executive Vice President) GENTLEMEN: I would earnestly request that this letter be read to the Members in Convention Assembled. This communication is made necessary by the many misconceptions which appear to be present with regard to the purpose and effect of the H.R. 2096 (Moss) Bill on control states. As I have many times stated to representatives of the NABCA, the Bill is not intended to nor does it in any way affect the powers or operations of any control state, or any other state. H.R. 2096 does not interfere in any way with the right of a control state to list or delist any or all brands of wines. H.R. 2096 does not interfere with the exercise of full discretion which the Commissioners have regarding the number of brands or the kinds of brands of wine a state wishes to purchase or sell. (The statement made by the representative of the NABCA to the effect that the Bill would require a control state to purchase all brands of wine or any given number of brands is not true.) H.R. 2096 does not affect the adoption by any state of Local Option Laws. H.R. 2096 does not affect the right of any state to prohibit the sale of all or any alcoholic beverages. H.R. 2096 does not interfere in any way with the right of a state to fix license fees, markups, hours of sale, or the excrcise of any other police powers it now has. What the bill does : The only purpose of H.R. 2096, and all it does, is to prevent one state from passing any discriminatory tax, discriminatory regulation, discriminatory markup, or discriminatory requirement against wines produced outside of the particular state. 28-456 0-74 The undersigned challenges the NABCA to indicate any provision of the Bill which contradicts any of the above stated facts, and the undersigned respectfully requests that in the absence of successful contradiction that the NABCA withdraw its opposition to said H.R. 2096 and advise the member states accordingly. Respectfully, JEFFERSON E. PEYSER, General Counsel, Wine Institute. Senator MONDALE. Our next witness is Mr. William G. Clark, counsel to National Alcoholic Beverage Control Association. Mr. Clark, welcome to the committee. STATEMENT OF WILLIAM G. CLARK, GENERAL COUNSEL, NATIONAL ALCOHOLIC BEVERAGE CONTROL ASSOCIATION, INC. Mr. CLARK. Mr. Chairman, thank you very much for the opportunity to address you this morning and the committee on the question of H.R. 2096, which is before you. Senator MONDALE. What is the Alcoholic Beverage Control Association? Mr. CLARK. The National Alcoholic Beverage Control Association, Mr. Chairman, is an association of the 18 States which have elected, under the provisions of the 21st amendment, to engage in the alcoholic beverage business within their own respective borders. Senator MONDALE. I see. You are basically representing States here. Mr. CLARK. Yes, sir. Senator MONDALE. Governmental bodies. All right. Mr. CLARK. The 18 States have been listed in my statement to you. I will not bother to take up the committee's time in going through the list of these States. I think they are probably well known to the chairman. Those States cover or represent approximately 62 million people in this country, and they do account for one-fourth of the alcoholic beverage sales in this country. Needless to mention, the alcoholic beverage business in those 18 States is a very vital factor in their own State operations. Mr. Chairman, you put your finger on a very good question about the question of whether the approach to the solution of this alleged problem should be through the courts or through asking Congress for relief, and I would like to defer a response to that for a few minutes and then comment on it, if I may. That has been one of our contentions all along. We followed this bill since it started, and previous bills which have not survived other sessions of the Congress. We have been opposed to it in every instance. Our view is that in looking at the bill and trying to analyze why a bill with such possible repercussions for State operations, seemingly so innocuous, would be propounded and carried through Congress, eludes us. Our only conclusion is that it is a special interest bill for the California wine producers, those giants of the grape business out there, that by the admission of previous witnesses produce over 70 percent of all of the wine produced in this country, including imports. The State of California alone produces over 85 percent of the wine produced in this country. In our view, Mr. Chairman, if this legislation is enacted into law the following things will undoubtedly occur. Those control States which are engaged in the wine business will get out of the wine business altogether. Most, if not all, of the small independent wineries in this country will fall by the wayside. The alcoholic beverage tax excise laws of the 50 States will have to be modified in one manner or another. Senator MONDALE. Now, this bill just applies to wine, does it not? Mr. CLARK. Yes, sir. Senator MONDALE. Now, give me a typical control State and how such a State would deal with wine and how this bill would affect how it deals with it now. Mr. CLARK. That is a very good question, Mr. Chairman. It is a matter that we have been trying to get across as the basis for our concern. The 18 control States, or monopoly States, if you will, operate their own business. In most instances their inventory, the amount of their inventory, is dictated by capital restraints placed on them by the legislatures. Therefore, they are unable to supply and offer to the consumers every single alcoholic beverage product that is offered. Senator MONDALE. Do they usually operate through State-owned retail Mr. CLARK. In most cases they operate through State stores. Senator MONDALE. All right. Let's take that example where the State wholesale and retail distribution organization Mr. CLARK. Let's take the State of Pennsylvania, incidentally, while we are talking about it, since we had a witness from Pennsylvania. Senator MONDALE. All right. Fine. Now, I assume the State buys liquor and wine and beer on the market, and then distributes these items to their outlets. That would be the way you do it? Mr. CLARK. Yes, sir. Yes. Senator MONDALE. Now, would you not be interested, then, in getting wine at the cheapest cost? Mr. CLARK. Absolutely. The way it works is this Senator MONDALE. So then if your State-let me ask the questions, because I am ignorant of all this, and then you can explain. If the State had a higher tax on wine produced, say, in California, than on wine produced in Pennsylvania, you would have to sell California wine either at a higher price or not handle it; would you not? Mr. CLARK. If in the net price to the consumer was included an excise tax which was somewhat higher than the tax imposed on a locally produced wine, that would be the case. But the way the system works is this. The State of Pennsylvania has in excess of 700 State stores. Potential vendors are invited into the State to submit their products for listing with the State. They have to show what their market projections are, what their prices are. The States do not set prices of the goods sold to them. They have to convince the State that the product which is offered to them would be competitive, that there would be a market for it, and if bought, it would be sold. If the State is convinced that a given product meets all of these tests, then that product is listed. Senator MONDALE. Does the Pennsylvania Alcohol Commission, or whatever the organization is called, turn revenues over to the State from its operation? Mr. CLARK. Yes, sir, they do. I think in Pennsylvania they contribute in excess of $150 million a year to the general funds of the State. Senator MONDALE. Are they more interested in reducing the price to the consumer or increasing revenues to the State? Mr. CLARK. The control State operation, Mr. Chairman, has as its charter moderation. The State is not in the business of selling whiskey simply to enhance profits and enhance revenue. They have a combined purpose. One is to not encourage consumption but, recognizing the modern day concept that people do drink, they do want to consume alcoholic beverages, the State sells them. The State has a uniform markup in many cases which applies to every single product that is imported into the State. [The following additional material was submitted for the record. Oral testimony continues on p. 66.] Re H.R. 2096. NATIONAL ALCOHOLIC BEVERAGE CONTROL ASSOCIATION, INC., Hon. WALTER F. MONDALE, DEAR CHAIRMAN MONDALE: During the recent public hearing on H.R. 2096, you asked whether the principal aim of the Control State system was to raise revenue. My response was that those 18 States which have elected to operate the alcoholic beverage business within their respective borders stress moderation over revenue. I am taking the liberty of enclosing a recent publication of the National Alcoholic Beverage Control Association which bears directly on the question you raised. Should the Committee desire, we will be pleased to furnish more information on this point. Yours truly, WILLIAM G. CLARK, |