LIMA — An Ohio House bill either encourages competition in the state’s beer business or squashes it, depending on who’s doing the explaining.
And a Lima beer distributorship is in the middle of all of it.
State Rep. Jim Buchy, R-Greenville, has introduced legislation that places an emergency clause on already passed legislation prohibiting large breweries from acquiring wholesale distributorships. Gov. John Kasich signed the bill April 30, but it does not become effective until July 30.
Buchy said the Legislature heard rumors that Anheuser-Busch was attempting to buy more distributorships before the bill became effective, so he introduced the “bridge” legislation that would make it effective immediately after passage and the governor’s signature. The emergency legislation had a hearing on Wednesday and will have another this Wednesday.
Since 1994, Anheuser-Busch has owned a distributorship in Canton, in Northeast Ohio, and has a pending purchase of C&G Distributing Co. Inc. in Lima. The two companies announced the sale May 17. The Cecala and Guagenti families have owned and operated C&G for more than 60 years. Since 1967, the family-owned distributor has been selling Anheuser-Busch products throughout a nine-county area in west-central Ohio. The business includes a 30,000-square-foot warehouse and office facility in Versailles. In 2000, the company sold its wine and spirit business and has for a number of years been selling Anheuser-Busch products exclusively. The business has a customer business of about 900 licensed retail accounts, according to C&G’s website.
Buchy said Friday he is drafting an amendment to his legislation that would allow the C&G sale to proceed.
“It’s not the intent of the legislation to harm a contractual obligation they have arrived at, and we want to make clear we’re not interested in stopping that sale,” Buchy said.
In Ohio, as many states, a three-tiered system — manufacturer, wholesale distributor and retailer — regulates the sale of alcohol. The system dates back to Prohibition, Buchy said, and his original bill was passed to strengthen the system and protect consumers. Buchy, a fiscal conservative, is known as a free market supporter; he said his legislation ensures competition.
“It maintains the integrity of the distribution so no one manufacturer is in a position to dominate the market and eliminate competition,” Buchy said. “We wanted to make sure no one manufacturer could buy up so many distributors that it would create a noncompetitive situation.”
In a statement about the bill, Buchy used the word “monopoly.” Regional economist Bill LaFayette has been supporting Anheuser-Busch and may testify on its behalf Wednesday. He said Buchy’s bill is addressing a problem that doesn’t exist.
“The proponents are trying to prevent a monopoly from occurring, but there is no way this situation could turn into a monopoly,” LaFayette said. “Why we worry about monopolies is that when someone becomes the only producer of a good, they can restrict the supply of that good and drive up the price. If Anheuser-Busch tried to do that, consumers would react to higher prices by switching to any of the other of dozens and dozens of beers on the market. It’s an easily substitutable good. Anheuser-Busch would lose business.”
LaFayette owns Regionomics, a Columbus-based economic and workforce strategy firm. He said that there are 62 distributorships in the state and about a quarter of them deal with Anheuser-Busch.
Buchy gave a different number; he said there are fewer than 50 distributorships in the state, and 15 to 20 of them handle the bulk of beer distribution for the state.
Buchy’s new legislation comes after Anheuser-Busch sent a scalding letter to House and Senate leaders complaining about the speed with which the original bill was passed. The General Assembly passed the legislation April 17; the ban on breweries buying distributorships was an amendment to the legislation, which was added the same day the House voted on the bill and the Senate concurred.
The brewery was hoping to move the Legislature in another direction, to get new legislation lessening the prohibition against manufacturers buying wholesale operations.
Before Wednesday’s proponent hearing, Anheuser-Busch distributed a statement opposing the bill, saying it disrupts the free market and and sends a message that Ohio isn’t business friendly.
“This is a system that has existed for many years, with no problem for the beer industry. In fact, there’s more choice and competition than ever, with hundreds of different beers available in Ohio, including in Canton,” the statement said. “We’re alarmed by attempts to alter the system by legislating private business transactions. This not only impacts competition in the beer marketplace — it sends the wrong message to anyone who owns a business in Ohio or is thinking of starting one.”