REPORT - Fighting Price Discrimination and the Beer Monopoly

Fighting Price Discrimination and the Beer Monopoly:

The Fight for Small Business Survival in an Age of Box Stores and Wholesaler Consolidation

Executive Summary

This report, done on behalf of the Empire State Beer Association and the Bodega

Association of the United States, examines how beer distribution and retailing has been

consolidated over the past thirty years with the result that competition has been restrained and

independent beer distributors, once the most vibrant and pro-competitive force in distribution,

decimated by a growing beer monopoly.

In addition, the report examines the extent to which the growing beer monopoly

threatens small retailers and the beer drinking public-with discriminatory pricing and higher

costs of a six pack of beer seen as a consequence of the elimination of real competition in the

sale of beer in NY State.

As the market has been consolidated, scores of independent beer distributors have been

forced out of business. This niche, once a diverse set of mom and pop wholesalers and minority

entrepreneurs, has been replaced by a racially monolithic handful of players whose profits have

soared as prices have risen while competitors have been eliminated.

The consolidation of the industry resulted from the efforts of the large brewers and their

franchise wholesaler handmaidens to gain market share, and they used their economic muscle

to garner political protection in the form of 55-C, an amendment to the NYS Alcohol and

Tobacco statute, that gives the territorial monopoly contracts of the brewer appointed

wholesalers political insulation.

This insulation has allowed further consolidation, with the state now having less than 30

franchise wholesalers where once over 140 such entities actively competed for retailers

business. As the report points out, this consolidation process continues unabated with

Corona/Coors distributor Manhattan Beer now looking to purchase Beehive Distributors, the

Miller and Heineken wholesaler in Brooklyn, New York. This merger will exacerbate that anti-

competitive trends that hurt the smaller players and NYCs beer drinkers.

Finally, the report details how the proposed Beer Price Posting and Sales Tax Reform Act

would level the playing field while at the same time give the state and NYC a better

methodology to collect beer sales tax from thousands of retail outlets. The legislation is an

attempt to introduce fairness and economic and racial justice into the beer distribution system

of New York. If adopted, the Act would promote competition and prevent the beer monopolists

from discriminating against the independent distributors.

Historical Background

The history of beer in New York is a long and colorful one-from the German migration in

the 1840s and the success of Jacob Ruppert and the NY Yankees at the turn of the last century,

to the rise of local beers like Schaefer and Rheingold in the post-Prohibition period. For many

years there were scores of local breweries and as consumption became more popular-

particularly in the home-methods of delivery were devised to meet the new needs.

(http://beernexus.com/beerinNYhistory.html) (http://tenement-

museum.blogspot.com/2009/10/awash-in-beer-history-tapping-into.html)

(http://www.beerhistory.com/library/holdings/schaefer_anderson.shtml)

(http://en.wikipedia.org/wiki/Rheingold_Beer)

The delivery system that was finally established was comprised of a colorful lot of home

deliverers whose families had started in the ice (Italian) and seltzer (Jewish) businesses-

delivering to the homes of their mostly immigrant customers. After Prohibition was ended it

was a natural spin off to get into the beer business-the same set of customers thirstily awaited

the formerly banned product. The distributors were appropriately called home distributors, and

for the next five decades were popularly known as Home Ds.

The Home Ds dominated the business picking up at the scores of local breweries and

delivering beer to homes and taverns across the city. It was an egalitarian business and no one

had an edge aside from ingenuity, intelligence and drive. The distribution system was extremely

competitive and this made for a pro-consumer environment.

This began to change in the 1970s as the national brewers like Miller and Anheuser-Busch

began to emerge and the role of the local breweries waned. At first, the out of town brewers

utilized the local distribution network and were happy to see their beer flying all over the map

in what was later pejoratively called transshipping.

As their market share increased however the nationals began to devise a territorial

franchise system in an effort to better control the distribution of their product. What this

meant was that each brewer anointed a local wholesaler who had the exclusive rights to

distribute its beer in a designated geographic area. This created a huge problem in New York.

http://beernexus.com/beerinNYhistory.htmlhttp://tenement-museum.blogspot.com/2009/10/awash-in-beer-history-tapping-into.htmlhttp://tenement-museum.blogspot.com/2009/10/awash-in-beer-history-tapping-into.htmlhttp://www.beerhistory.com/library/holdings/schaefer_anderson.shtmlhttp://en.wikipedia.org/wiki/Rheingold_Beer

Put simply, in the seventies and early eighties the beer market in the state was open and

truly competitive; with many brewers competing to sell their products, and using the

independent tier of distributors to get it out most efficiently to the public. During this period,

the independents (called C Licenses) sold between 85 and 90 percent of all the beer. These

independents, operating with a wholesale license and a retail privilege, would buy beer from

brewers and distributors; not only all over the state, but from all over the country as well. It

was precisely this ability to purchase the beer from all over (to transship) that redounded to the

benefit of New Yorks consumers.

A number of factors intervened to alter this environment, and to narrow the range of

competition. In the early eighties New York passed the bottle bill. Whatever the environmental

rationale for the bills passage, the economic impact was anti-competitive on a number of

levels.

In the first place, independent distributors could no longer purchase beer from out-of-

state because the bottles and cans lacked the NYS 5 Cents indicia. A huge marketplace for lower

priced beer was foreclosed. Secondly, the regulations promulgated pursuant to the bottle laws

passage had an additional anti-competitive impact. Under these regulations, the franchise

wholesaler was given the right to initiate the deposit. What this meant was that the franchise

distributor became a control point for the redemption of empty containers.

Practically this meant that, because of the brewery information on a bottle or can, the

franchisee could determine just where the beer in his territory was coming from. It also meant

that if the situation wasnt controlled the franchise wholesaler would be losing a lot of nickels

that werent originated in his market area. Loud wailing commenced, and these distributors

began to pressure their brewery suppliers to protect the territorial integrity of their market

area.

The situation was exacerbated by the fact that the extra nickel per bottle and can actually

precipitated an even greater incentive to transship the beer within New York State. If a

franchise could sell beer outside of his territory it would mean extra revenue from non-

redeemed containers. The chaos that ensued in the decade of the eighties for franchised

wholesalers was in reality a boon for consumers; as discounting dominated and consumer

prices dropped in a transshipping environment.

The chaos, however, couldnt last. In an effort to regain control over the market, brewers

and their franchised wholesalers promulgated what are known as equity agreements. These

agreements are contracts that protect the franchise wholesalers territory by contractually

prohibiting the sale of the brewers beer outside of the franchise area. The penalty for violating

the agreement is termination. The era of price competition was about to come to an end.

Of all the national brewers it was Anheuser-Busch, the largest of the bunch, which took

the lead in the development of the territorial franchise system-its new marketing plan set it on

a collision course with the spirited independent class of distributors. Anheuser, with Budweiser

as its flagship brand, had been happy to allow the Home Ds to transship the heck out of its

product all through the 70s-and in the process establish its predominance over the New York

market.

Once that predominance was firmly in place it was time to change course and end what

was now being characterized as chaos-and the Home Ds were seen as an anachronistic

chaotic element; an obvious impediment to the new system.

In order to gain control over all the chaos Anheuser promulgated what were known as

Equity Contracts. These agreements between the brewer and its anointed distributor created

an exclusive territorial marketing area and could be terminated by the brewer if its designee

sold beer outside of the territory-the end of the era of pro-competitive transshipping seemed at

hand.

There are approximately 300 independent beer distributors and beverage centers, known

as C Licenses, all over New York State. These outlets, employing over 20,000 New Yorkers, have

been in existence for over 70 years and historically have played an important role in the states

unique four tier distribution system. In NYC, close to 100 independents remain, as the

competitive nature of beer distribution has eroded through legal constraints and consolidation

at both the brewery as well as the franchise wholesalers levels.

This crucial role is now being threatened because of discriminatory market behavior by

some New York States franchised wholesalers.

In the past thirty years the beer distribution system in New York has become more

consolidated and, as a result, less competitive. The impact of this trend has meant higher beer

prices for the states consumers, and more pressure on independent beer distributors

struggling to survive in a controlled market where predatory pricing is common.

New York State has a unique four tier beer distribution system. With brewers, dwindling

in numbers through consolidation, on the top, franchised wholesalers who have been awarded

contracts from the brewers on the next tier, independent distributors below them, and finally

retailers who sell the beer directly to New Yorks consumers.

Discriminatory Impact of Equity Agreements

Once these equity agreements were put into place, brewers and their handpicked

franchise wholesalers began to move to restrict competition. Franchisees in less populated

areas that were transshipping beer through C license conduits were terminated. The result was

a drastic diminution of intrabrand competition and a gradual but inexorable rise in beer prices

for New Yorks consumers.

The closing off of competition also had a discriminatory impact on the states minority

independent wholesalers. Traditionally, predominately Hispanic distributors had gravitated to

the inner city neighborhoods; and by the late 1980s beer consumption in the state as a whole

became dominated by Black and Latino beer drinkers.

During this period, as much as 60% of all the beer consumed statewide was being

consumed in Black and Latino neighborhoods; and much of the distribution was being done by

independent Hispanic and other minority-owned distributors. Gradually, however, these

distributors were squeezed out, along with all the other independents, as the ability to freely

purchase beer in a truly open market was foreclosed by brewery/franchise wholesaler

collusion.

As the reality of the collusion began to sink in, the Hispanic distributors, and their small

business allies, launched a campaign against Anheuser Busch, the brewer with the largest

market share in the inner city. The slogan adopted was: If we cant sell it, dont drink it. It was

pointed out that, in spite of the fact that the great majority of New York beer drinkers were

Black and Latino, not a single franchise wholesaler in New York was from either group-a

regrettable situation that continues to this day for every single major brand sold in the state.

The legal and political clout of this beer cartel was simply too great to be successfully

challenged.

So protected by contract, and insulated from political accountability, franchise

wholesalers aggressively moved to regain control of their markets by devising discriminatory

pricing policies that made it increasing difficult for independents to purchase beer at legitimate

wholesale prices. Brewers and franchise wholesalers openly spoke about their desire to

transform the C licensee class: from New York State licensed wholesalers, into strictly retailers;

effectively dismantling the 4-tier system that New York State had established after the repeal of

prohibition.

Discriminatory Impact of Equity Agreements

Once these equity agreements were put into place, brewers and their handpicked

franchise wholesalers began to move to restrict competition. Franchisees in less populated

areas that were transshipping beer through C license conduits were terminated. The result was

a drastic diminution of intrabrand competition and a gradual but inexorable rise in beer prices

for New Yorks consumers.

The closing off of competition also had a discriminatory impact on the states minority

independent wholesalers. Traditionally, predominately Hispanic distributors had gravitated to

the inner city neighborhoods; and by the late 1980s beer consumption in the state as a whole

became dominated by Black and Latino beer drinkers.

During this period, as much as 60% of all the beer consumed statewide was being

consumed in Black and Latino neighborhoods; and much of the distribution was being done by

independent Hispanic distributors. Gradually, however, these distributors were squeezed out,

along with all the other independents, as the ability to freely purchase beer in a truly open

market was foreclosed by brewery/franchise wholesaler collusion.

Independents Fight Back: Anti-trust Action Filed

The threatened independents began to have discussions with NY State Attorney General

Robert Abrams about filing an anti-trust action against Anheuser Busch and their dreaded

equity contracts. In 1988 Abrams filed the suit naming the four major brewers as defendants;

Anheuser-Busch, Miller Brewing, G. Heileman Brewing and Stroh Brewery, along with

New York beer distributors, were accused of violating New York state and federal antitrust laws

by illegally dividing up exclusive territories for beer distributors. In a lawsuit filed in Brooklyn

federal court, New York Atty. Gen. Robert Abrams said the defendants began setting up

exclusive distribution systems in 1983, following a pattern allegedly already established by the

soft-drink industry. Abrams said that beer prices "have skyrocketed since this system was

instituted." (http://articles.latimes.com/1986-07-16/business/fi-19602_1_beer-prices)

(http://www.nytimes.com/1989/11/02/business/more-antitrust-challenges-are-expected-under-

bush.html?pagewanted=3&src=pm)

The filing of the lawsuit was a result of a five year campaign-and aside from looking to

protect endangered indigenous small businesses, the AG was concerned about the impact that

the growing territorial system would have on the consumer;

Beer prices have skyrocketed since this system was instituted in 1983," Abrams said. He

said the cost of a six-pack of beer has jumped 36.8 percent, from $2.82 to $3.79, while the cost

of six cans of soda has risen only 8.9 percent, from $2.10 to $2.32. "Brewers and distributors

frequently use as a claim or smokescreen that the escalating prices result from the New York's

bottle bill," Abrams said. "A simple comparison with soft-drink prices, affected equally by the

bill, show that the claim is absurd.http://articles.mcall.com/1986-07-16/business/2542520_1_beer-

prices-wholesale-empire-state-distributors-association

http://articles.latimes.com/1986-07-16/business/fi-19602_1_beer-priceshttp://www.nytimes.com/1989/11/02/business/more-antitrust-challenges-are-expected-under-bush.html?pagewanted=3&src=pmhttp://www.nytimes.com/1989/11/02/business/more-antitrust-challenges-are-expected-under-bush.html?pagewanted=3&src=pmhttp://articles.mcall.com/1986-07-16/business/2542520_1_beer-prices-wholesale-empire-state-distributors-associationhttp://articles.mcall.com/1986-07-16/business/2542520_1_beer-prices-wholesale-empire-state-distributors-association

The turmoil surrounding the monopolistic practices of the big brewers attracted the

attention of Mark Green, the NYC Commissioner of Consumer Affairs and public attention to

the anti-consumer aspects of the Budweiser marketing practices gained traction;

The independent distributors do what anyone trying to keep down the costs of a beer blast would

do: they comparison shop. Often, they buy beer from upstate wholesalers willing to undercut the

wholesalers closer to the city. Leslie Gersing, a spokeswoman for Robert Abrams, the state

Attorney General, said Mr. Abrams has long fought Anheuser-Busch's practices in court. "It's just

another example of their anti-competitive behavior," she said.

Mark Green, the city's Consumer Affairs Commissioner, said he would urge the Justice

Department to start an antitrust investigation of Anheuser-Busch. "It's a case of monopoly

muscle," he said.

Once the company drives independent distributors out of business, he said, it will gradually

raise prices $1 to $2 a case, with other brewers most likely to follow. Retail prices in the city,

ranging from about $11 to $16 a case, now tend to be 10 to 20 percent less than the national

average, he said. On sales of 100 million cases of beer a year, Mr. Green said, the added cost to

New Yorkers would be at least $100 million.

(http://www.nytimes.com/1992/01/31/nyregion/are-champagne-prices-in-store-for-

beer.html?src=pm)

In the end, the resources of Anheuser overwhelmed those of the NYS Attorney General,

and the brewers and wholesalers were able to successfully argue that there was enough inter-

brand competition to overcome concerns about price fixing and monopolies. In fact, however,

Mark Green was right and, having dodged the anti-trust bullet, the beer monopolists were just

getting started on the path of predatory pricing and higher prices for NYCs beer consumers.

With no effective counterweight the brewers and their franchise allies passed legislation

that effectively grants legal status to the franchised monopolies (Section 55-C of the Alcoholic

Beverage Control Law protects local franchised wholesalers against brewers from termination

against cause and legalizes their territorial rights).

The Passage of 55-C

Over ten years ago, the NY State legislature passed Section 55-C, an amendment to the

alcoholic beverage laws of the state that protects franchise beer wholesalers by giving their

equity contracts with brewers all of the authority of state law. In the words of the statute:

It is hereby declared to be the policy of this state, that the sale and delivery of beer by brewers

to beer wholesalers shall be pursuant to written agreement. That further, the regulation of

http://www.nytimes.com/1992/01/31/nyregion/are-champagne-prices-in-store-for-beer.html?src=pmhttp://www.nytimes.com/1992/01/31/nyregion/are-champagne-prices-in-store-for-beer.html?src=pm

business relations between brewers and beer wholesalers is necessary and appropriate to the

general economy and tax base of this state and in the public interest.

What 55-C does is to protect the local franchise beer wholesalers from unjust termination

due to consolidation or other factors. It also mandates a level of compensation for any such

wholesaler that the brewer wants to terminate because of a any company policy of

consolidation.

55-C goes into great detail on the level of protection afforded to these wholesalers-even

providing them with a civil right of action:

If a brewer fails to comply with the provisions of this section, a beer wholesaler may maintain

a civil action in a court of competent jurisdiction within this state for damages sustained in

accordance with the laws of this state which shall govern all disputes arising under an

agreement or by reason of its making and performance.

In essence, territorial monopolies were given legal status by the state-protecting the

monopolistic rights of beer wholesalers while damaging competitive opportunities for retailers

and independent distributors. Ultimately, however, it is the beer consumer who pays the

freight for this anti-competitive statute.

The contracts in question had been a bone of contention for years because they created

territorial monopolies that prevented retailers and independent beer distributors from

shopping around for the best price. In essence, the equity agreements forced these businesses

to buy exclusively from their designated local wholesaler.

The Unique Role of the Independent Distributors-Even Today

In spite of all of the economic and political muscle aimed at eliminating the

independents, they still remain-against all odds-a vibrant pro-competitive force in NYC today.

As we have pointed out, C Licenses have been around for over 70 years, and in that time have

performed a crucial role in New York State beer distribution. These also provide vital services to

smaller, often minority, retailers, and have acted to insure price fairness for the states

consumers.

Service is quite often the first casualty of monopolistic conditions and beer distribution in

New York underscores this tendency. The independent distributor affords retailers, particularly

the smaller ethnic inner city bodegas, important service options. These outlets, often cash poor,

use the independent distributors, at their convenience, to replenish inventories at those times

when the franchise wholesaler maybe unavailable.

As small businesses themselves, independents tend to be more sympathetic and attuned

to the needs of this retail sector, it is a productive symbiosis. In addition, because many of

these independents operate on a cash-and-carry basis, they are able to offer retailers price as

well as service advantages. The more price discrimination is tolerated, however, the less this

kind of mutually beneficial business practice can remain viable.

It is also in the economic interest of New York State to preserve the independent niche

because these distributors employ tens of thousands of New Yorkers in the local economies all

over the state. They also do so in some of the states most economically distressed inner city

localities, areas where unemployment is often twice or three times the state average. This job-

generating function will be lost if price discrimination is allowed to continue unabated.

In addition, many of the independent outlets, mirroring the retailers they serve, are

minority owned-of the 100 independents left in the city over 1/3 are minority or woman-

owned. In spite of much public outcry over the years, there is still not a single minority owned

franchise wholesaler.

This is in spite of the fact that a high percentage of the states beer drinkers come from

communities of color. Given this disparity, it is in the interest of equity and fairness for state

law to be enacted to prevent the kind of price discrimination we are witnessing today, from

putting minority businesses at serious risk of extinction.

The independent beer distributors have another important public function. This one

pertains to the environment and involves the key role that this niche plays in the redemption of

containers under the states deposit law. The independent C Licenses, even more so than many

of the large supermarkets, have become container sheds that redeem bottles and cans in

percentages that far exceed the beer and soda that is sold at these outlets.

This redemption function often places the independents in an adversarial position with

franchise wholesalers that are maximizing deposit retention by limiting redemption. The

disproportionately high redemption rates of C Licenses is an incentive to price discriminate, and

if the policy is allowed to continue and the independent niche is destroyed, huge volumes of

empty beverage containers will be unfairly forced through other already stressed redemption

points.

Consolidation and Monopoly Grows (In NY and around the world)

When the independent beer distributors, using the good offices of NYSAG Robert Abrams,

first challenged the brewer equity agreements in the late 80s-and were defeated in court-the

state of the beer industry in the state and the country was a lot different than it is today. Since

the settlement of the lawsuit in 1992, the industry has undergone further consolidation, with

Anheuser Busch being gobbled up by InBev and Miller being purchased by South African

Brewing before merging with Coors.

One of the successful arguments proffered by the brewer/franchise wholesaler

defendants in the Abrams antitrust lawsuit was the assertion that the equity agreements that

gave each franchise wholesaler a defined geographic territory were not anticompetitive

because there was sufficient inter-brand competition. Therefore, the fact that these

agreements forced retailers and independent distributors to buy from a single supplier did not

run afoul of the antitrust laws.

Attorney General Abrams debunked that assertion through his analysis of beer and soda

prices after the passage of the NYS bottle deposit law. The NY Times highlighted the price

implications of the budding Anhueser Busch monopoly over two decades ago:

"The local economy may be a mess, crime a constant threat and living costs still ruinous,

but one of New York City's consolations has been some of the nation's kinder prices for beer.

Now, the nation's largest beer producer is pitted against the city's independent beer distributors

in a battle whose outcome, the distributors and city officials say, could create a wholesaling

monopoly and raise prices by a dollar or more a case."

(http://www.nytimes.com/1992/01/31/nyregion/are-champagne-prices-in-store-for-beer.html)

What was understood by the opponents of the territorial monopolies back then was that

this was an ongoing process that would lead to further consolidation and anti-competitive

behavior. Events since have proved us prescient-as one shrewd observer has pointed out:

intense consolidation deforms the entrepreneurial landscape. Innovative newcomers

can find it hard to enter any market dominated by a few major playersextreme consolidation

among brewers tends to result in the classic problem of higher process and less real choice. This

is not just theory. Immediately after the Brazilian-Belgian company purchased Anhueser-Busch

in 2008, a years-long price war between A-B and Miller Coors came to a sudden end, and the

two giants began to raise their prices in concert.

(http://markets.newamerica.net/sites/newamerica.net/files/policydocs/A_King_of_Beers.pdf)

Given the world-wide consolidation at the brewery level, it is now widely recognized that

inter-brand competition if it was a reality 25 years ago, is now a mirage since a duopoly exists

with the two multi-national beer giants controlling over 80% of beer distribution in the United

States-and over 90% of all beer production, since the two majors also contract brew for

independent brands of beer.

At the time of the Abrams lawsuit against the equity agreements, Anheuser represented

slightly more than 50% of all the beer sold in this country-ranging slightly higher in some of the

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urban areas of the United States. The current beer market is significantly more consolidated

and anti-competitive-hurting consumers as well as smaller retailers and independent beer

distributors.

(http://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Mono

poly_0.pdf)

In addition, at the time of the Abrams suit, there were over 140 franchised wholesalers in

New York State. With little legal safeguards in place the franchise niche is also consolidating-

with only about thirty or so franchises left from the heyday in the 1980s. With consolidation

and market power goes decreased competition-and one wholesaler in particular, Simon

Bergson of Manhattan Beer now controls a territory for Coors and Corona that stretches from

Montauk on Long Island to somewhere passed Saratoga in upstate New York.

Manhattan Beer is a thirty million case business that nets around seven or eight dollars a

case, and without competition it is the consumer that pays for the continuing consolidation.

This one company is symbolic of what has happened to beer distribution in New York-an

outsized example of the unfettered trend towards a market with little or no competition.

Therefore whatever beer competition that existed in the 1980s and 1990s no longer

exists-and this has tremendous repercussions for both consumers and small businesses. When

competition doesnt exist, prices tend to rise even when demand is flat. For example, in the

middle of the Great Recession that began in 2008, beer prices actually rose while other

alcoholic beverages were cutting their prices in the face of the economic downturn.

While the beer consumer is paying the wages of monopoly, the independent beer

distributors are being hammered out of existence. With the onset of equity agreements, and

the defeat of the Abrams lawsuit, franchise wholesalers and their brewery partners were given

the weapons to force out these entrepreneurs. These weapons were given added power when,

in the late 1990s, NY State passed ABC. LAW 55-c, a law that gave state sanction to the

territorial monopolies embedded in the brewer equity agreements.

(http://codes.lp.findlaw.com/nycode/ABC/4/55-c)

ABC LAW 55-c protected the franchisees against the arbitrary actions of their brewer

suppliers, but even more, gave official sanction to their business practices. Unrestrained by

state law prohibiting price discrimination, franchise wholesalers began a process of predatory

pricing that slowly forced the independent distributors out of business. In NYC over the past 20

years, 143 independents have been priced out of business because they have been unfairly

targeted by franchises that dont want them competing in the market place for the citys

considerable retail business.

http://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Monopoly_0.pdfhttp://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Monopoly_0.pdfhttp://codes.lp.findlaw.com/nycode/ABC/4/55-c

Anti-Competitive Trigger Pricing

As the NY Times reported just last year, the growing beer monopoly, protected by

contract and law, has almost eliminated any price competition in any and all US beer markets.

The Abrams effort to restore competition to New York State was the last opportunity to protect

consumers against monopolistic practices:

Anheuser-Busch has been employing what game theorists call a trigger strategy,

something like the beer equivalent of the Mutually Assured Destruction Doctrine. Anheuser-

Busch signals to its competitors that if they lower their prices, it will start a vicious retail war. In

1988, Miller and Coors lowered prices on their flagship beers, which led Anheuser-Busch to slash

the price of Bud and its other brands in key markets. At the time, August Busch III told Fortune,

We dont want to start a blood bath, but whatever the competition wants to do, well do.

Miller and Coors promptly abandoned their price cutting.

(http://www.nytimes.com/2013/03/03/magazine/beer-mergers.html?pagewanted=all&_r=1&)

All of this anti-competitive behavior grew as a consequence of the defeat of the Abrams

lawsuit and, in New York, as a result of the enshrinement of the equity agreements in state law.

The Times highlights these consequences for the consumer:

Since that dust-up in the late 80s, the huge American beer makers have moved in

tandem to keep prices well above what classical economics would predict. (According to the

logic of supply and demand, competing beer makers should pursue market share by lowering

prices to just above the cost of production, or a few cents per bottle.)

Beer Prices and Monopoly: Report from the American Anti-Trust Institute

Beer pricing has been extensively studied by the American Anti-Trust Institute. Whhat

their 136 page report has found is that continued consolidation of the beer in dustry-at both

the manufacturing as well as the wholesaling levels, leads to higher prices for the beer

consumer;

A high level of industry concentration arouses concerns about market power of giant

companies and their potential for reducing competition and raising prices. Indeed, the prospects

for monopolistic or anticompetitive behavior are magnified by consolidation of the industry into

a smaller number of large manufacturers. Beer prices, therefore, need to be regularly

monitored.

As measured by the Consumer Price Index (CPI), beer prices have risen steadily since 1980,

but generally not more than about 3 percent per year. A big exception was 1991 when the

http://www.nytimes.com/2013/03/03/magazine/beer-mergers.html?pagewanted=all&_r=1&

federal excise tax was increased by 100 percent to $18 per barrel and the CPI for beer jumped

nearly five points.

More recently, however, beer prices show signs of rising faster than the CPI and higher

than prices for wine and other alcoholic beverages (see table). In three of the last four years for

which data are available (2007, 2009, and 2010), price increases for beer at home and away

exceeded increases of the CPI. CPI actually fell in 2009, while beer prices increased. Beer price

increases in 2007-8-9 exceeded 3 percent, but remained below 4 percent. In 2010, the increase

for beer at home was only 1.8 percent, but it exceeded the increases for the total CPI, for

alcoholic beverages as a whole, and for wine.

The period 2007-2010 is particularly interesting in two respects. First, it was a period of

economic decline in the United States with relatively high unemployment. Second, the purchase

of the leading supplier, Anheuser-Busch, by InBev occurred in 2008. Stories appeared in the

media around this time, reporting that Anheuser-Busch was raising prices in the face of a

recession and relating it to the high level of concentration in the industry.63 It is difficult to draw

hard and fast conclusions at this point, however, because costs of ingredients (barley and malt

in particular) and transportation increased for beer manufacturers and distributors during this

period. Also, the rate of price increase in 2010 for beer at home was less than 2 percent,

although it still was greater than the increase for the CPI and for alcoholic beverages and for

wine in general.

(http://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Mono

poly_0.pdf )

What has also been pointed out by industry observers is something we have seen steadily

occurring in NY State: is the concomitant consolidation of beer wholesalers:

"Over the past decade, there had already been significant consolidation among beer distributors. While this reflects the competitive push to achieve economies of scale, it has also been driven by the major brewers for more alignment in their distribution networks having one distributor in each territory for all of their brands. As a result, the distribution market has also become an effective duopoly, with one ABI and one Miller distributor in each territory, together accounting for well over 90 percent of sales in many markets." (http://www.washingtonpost.com/business/beer-merger-would-worsen-existing-duopoly-by-ab-inbev-sabmiller/2013/02/01/efa78ce8-6b1c-11e2-af53-7b2b2a7510a8_story.html

This means that retailers and consumers-and of course New Yorks independent beer distributors, are having their choices and purchasing options further restricted. The tightening of the market is good for the monopolists but not so good for those who are at the mercy of a less competitive market.

http://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Monopoly_0.pdfhttp://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Monopoly_0.pdfhttp://www.washingtonpost.com/business/beer-merger-would-worsen-existing-duopoly-by-ab-inbev-sabmiller/2013/02/01/efa78ce8-6b1c-11e2-af53-7b2b2a7510a8_story.htmlhttp://www.washingtonpost.com/business/beer-merger-would-worsen-existing-duopoly-by-ab-inbev-sabmiller/2013/02/01/efa78ce8-6b1c-11e2-af53-7b2b2a7510a8_story.html

The Price of Consolidation on the Local NYC Economy

As we have pointed out, one of the most significant results of consolidation in the beer

industry has been the gradual elimination of independent beer distributors. The independent

niche is threatened by the activities and unregulated practices of New Yorks franchised

wholesalers-a dwindling number of firms as more and more of these businesses are

consolidated and/or are bought outright by international brewers.

Increasingly, unencumbered by any state law, these franchises are purposefully pricing

their products in such a way that it is becoming impossible for the independents to exist. In NYC

there are really only four major franchise beer wholesalers for over 8 million people. These

four dictate to the entire class of independents and monopolize the distribution system.

Under state law there are no restrictions on the pricing practices of the new

monopolists. In order to reduce and/or eliminate any role for the independents they have

instituted a predatory pricing discrimination campaign. If these independent distributors are

offered prices at rates comparable to most retailers they cant possible maintain their

wholesale business. And they havent which is why so many have gone by the wayside in the

past two decades.

Racial Justice, Price Discrimination, and the Assault on Small Business

Even though Blacks and Latinos account for the largest percentage of beer drinkers in

New York City, there is not a single beer franchised wholesaler that is owned by an African-

American or Hispanic business person. In contrast, as we have pointed out, over 30% of the

over 100 independent distributors in NYC are owned by Blacks, Hispanics, Asians and women-a

remarkable example of diversity and economic empowerment. These independents employ

close to 10,000 minority workers and are located mostly in the low income neighborhoods of

the city where unemployment is at a record high level.

In addition, because of the power of the growing beer monopoly, there are no legal or

economic constraints on the behavior of brewers and their handpicked wholesalers. As a result,

they are free to price discriminate against the independents as well as the small grocery stores.

In regards to the independents, their demise over the past two edcades is directly the result of

blatant price discrimination.

In spite of the fact that the independent distributors, unlike any other customers, buy in

trailer load quantities and pay COD, they are not afforded a discount price commensurate with

their wholesale functions. Deprived of any functional discounts, they struggle to remain

competitive, or simply to survive

There are approximately 120 million cases of beer sold in New York State and around 65%

of this beer is sold in NYC. In NYC, unlike in most of the rest of the state or the entire country

for that matter, the largest percentage of these sales is made in small neighborhood grocery

stores. In spite of this fact, the wholesale price of beer sold to the mom and pop food retailers

is actually higher than the price that is offered to chain supermarkets, drug stores and retail gas

station outlets.

The reason for this unfairness can be attributed to the practice known as channel pricing.

As one expert describes the practice; Distribution channels are consolidating to take

advantage of economies of scale and to leverage volume purchasing power. This consolidation

enables them to extract ever-increasing concessions from their suppliers.

(http://channelpricing.com/lead-or-follow-channel-pricing-strategies-for-todays-economy/)

So, under normal conditions, the consolidating power of a large chain store is used to

pressure a supplier to offer a volume discount. But in New York as we have pointed out, it is the

mom and pop store that is selling a greater volume of the beer to consumers. As a result, this

channel pricing is actively discriminating against smaller retailers:

Secondary line price discrimination occurs when a supplier (such as a manufacturer or

large wholesaler) sells a similar product to competing purchasers, usually retailers, distributors

and resellers (referred to collectively as "purchasers"), at two different prices. Those purchasers

compete with one another in distributing the supplier's product (intra-brand competition).

(https://portal.idc.ac.il/He/ILEA/Home/Documents/hagit-bulmash-paper-english-jcle.pdf)

What is important to underscore in this regard is that there is no such thing as a chain

license for beer in NY State. If a chain has 100 stores or more, each store has a separate beer

license. There is no justification either under the law, or under the laws of economics (NYC

especially) to allow for this discrimination to continue.

Combating the Illegal Practices of Big Box Stores

As we have pointed out, bodegas sell a huge majority of all the beer sold in NYC. Yet, in

spite of their aggregate volume sales, the citys box stores are given a price advantage over the

smaller, yet more voluminous sales at the smaller stores. Nowhere is the level of discriminatory

practices of the beer monopolists more evident than at the box stores.

As we have discovered through a comprehensive undercover investigation, box stores

such as BJs and Costco in NYC are inappropriately labeling themselves as wholesalers-a practice

that we believe is illegal; in violation of the State Liquor Authority rules and a deceptive

consumer practice at the same time. These national chains are being given favored nation

status and because of price favoritism are able to sell to the discriminated against bodegas that,

http://channelpricing.com/lead-or-follow-channel-pricing-strategies-for-todays-economy/https://portal.idc.ac.il/He/ILEA/Home/Documents/hagit-bulmash-paper-english-jcle.pdf

on a percentage basis, are outselling the box stores by a wide margin. This is one of the most

egregious consequences of monopoly.

By engaging in illegal wholesaling of beer, these food retailers are not only putting

supermarkets with union employees at a disadvantage, while also siphoning business from

mom and pop grocery stores and independent immigrant run supermarkets, they are directly

competing and hurting independent beer distributors at the same time.

As importantly, the bolstering of the club stores retail business by the use of an illegal

marketing tactic erodes the profitability of existing local store owners-many who are single

entrepreneur bodegas who are more vulnerable to the subsequent loss of sales. Independent

beer distributors, already hurt by predatory pricing from beer franchise wholesalers, are also

losing business A large percentage of these store owners and independent beer distributors in

NYC are Hispanic, Asian and Caribbean-owned operators so that the illegal practice has an

additional discriminatory impact.

The non-union box stores also erode the sales of local supermarkets at a time when

supermarkets are disappearing from NYC and the city has instituted a policy to try to prevent

the further erosion of the local food stores in our neighborhoods. This trend has led to the loss

of good family supporting union jobs. In addition, it also has a discriminatory impact because so

many of our local markets are also minority owned.

(http://www.nyc.gov/html/misc/html/2009/fresh.shtml)

In addition, the deceptive and arguably illegal representation that they are wholesalers

also puts local independent distributors at a competitive disadvantage-siphoning business from

these heavily minority owned beer wholesalers. In doing this, the box stores are engaging in

illegal wholesale beer sales to bodegas, selling the alcoholic beverage to store owners even

though they are actually a retailer and not a true wholesale outlet.

The favored nation status of the box stores underscores the extent to which the big guys

take care f each other and how, at the same time, those with less prestige and fewer

resources are victimized. Absent the monopolistic contracts of the beer wholesalers, these

kinds of sweetheart-and discriminatory-deals would not be possible.

Manhattan Beer to Merge with Beehive

The trend toward brewer and wholesaler consolidation continues unabated. On the

multi-national level the worlds two largest brewers are looking to merge. As Money has

reported:

http://www.nyc.gov/html/misc/html/2009/fresh.shtml

One of the largest brewers in the world Anheuser-Busch InBev NV is preparing a bid to

buy its rival SABMiller, according to news reports. If true, the union would create a massive

beer conglomerate featuring some of the most recognizable brands in the world, including

Budweiser, Coors Light, Corona and Miller. AB InBev (AHBIF) is talking to banks about financing

a $122 billion bid for its rival SABMiller (SBMRF), according to the Wall Street Journal and other

news reports. (http://money.cnn.com/2014/09/16/news/companies/beer-sabmiller-ab-

inbev/)

As one observer notes, this would be bad for beer consumers, but hopefully the move

will be blocked by anti-trust regulators: AB InBev owns Budweiser, while SABMiller produces

Miller (as well as Milwaukees Best, Keystone Ice, Leinenkugel, and more). It would be bad for

American consumers if the two companies were allowed to combine their stateside operations,

but chances are that wont happen thanks to antitrust concerns. When AB InBev

purchased Corona-maker Grupo Modelo last year, the Justice Department forced it to spin off a

new brewer that would produce all of the Mexican beer titans brands in the U.S., thus

preserving domestic competition. Something similar might happen in the event that AB InBev

gobbles up SABMiller.

(http://www.slate.com/blogs/moneybox/2014/09/15/anheuser_busch_inbev_sabmiller_merge

r_the_maker_of_bud_wants_to_buy_the.html)

This ominous trend is, as we have already noted, also characteristic of wholesale

consolidation as well. Now it appears likely that consolidation will be exacerbated by the

proposed merger of two of New Yorks largest beer wholesalers:

The stage is set for a mega-merger between two of New York Citys largest beer

distributors. A tentative agreement between Bronx-based Manhattan Beer Distributors which

will sell and deliver more than 35 million cases of beer in 2014 and Brooklyn-based Windmill

Distributing (d/b/a Phoenix\Beehive Beverage Distributors) is expected to close in the first

quarter of 2015, according to Mike Mazzoni, an advisor on the transaction Combining the two

operations means that Manhattan Beer will control approximately half of the New York City

beer market, in which annual sales are estimated at roughly 100 million cases.

(http://www.brewbound.com/news/nyc-beer-distributors-reach-tentative-merger-agreement)

In our view, if this is allowed to happen, all of the ominous trends we have been reporting

will only get that much worse. In NYC, where once over 140 distributors actively competed for a

brisk beer market, barely 100 distributors remain-and those that do are severely constrained by

both the unfair pricing strategies of the wholesalers, and the inability to shop for a better price

elsewhere. Where the wholesalers are insulated by law from termination by the brewer,

independent distributors are offered no such protection, and the resulting decimation of the

independent niche speaks for itself.

http://money.cnn.com/quote/quote.html?symb=AHBIF&source=story_quote_linkhttp://money.cnn.com/quote/quote.html?symb=SBMRF&source=story_quote_linkhttp://money.cnn.com/2014/09/16/news/companies/beer-sabmiller-ab-inbev/http://money.cnn.com/2014/09/16/news/companies/beer-sabmiller-ab-inbev/http://www.bloomberg.com/news/2013-04-19/ab-inbev-u-s-file-agreement-in-court-on-modelo-acquisition.htmlhttp://www.bloomberg.com/news/2013-04-19/ab-inbev-u-s-file-agreement-in-court-on-modelo-acquisition.htmlhttp://www.slate.com/blogs/moneybox/2014/09/15/anheuser_busch_inbev_sabmiller_merger_the_maker_of_bud_wants_to_buy_the.htmlhttp://www.slate.com/blogs/moneybox/2014/09/15/anheuser_busch_inbev_sabmiller_merger_the_maker_of_bud_wants_to_buy_the.htmlhttp://www.brewbound.com/news/nyc-beer-distributors-reach-tentative-merger-agreement

In the course of the continuing consolidation of the beer market, another trend has

become obvious: the continual increase in the cost of beer for NYCs beer consumers. Insulated

from real competition, and benefitting from consolidation, beer wholesalers have been able to

aggressive price their products way beyond what would be expected in an open market. This

trend is aided and abetted by the consolidation of the multi-national brewers into an anti-

competitive duopoly.

The proposed merger of Manhattan Beer and Beehive furthers this anti-competitive trend,

and increases the likelihood of greater harm being done to independent beer distributors,

bodegas that rely on these middlemen, and New Yorks beer drinkers. Because the anti-

competitive beer market is unfairly protected by state law, it is just and proper for the US

Department of Justice to intervene to prevent this anti-competitive merger.

Tax Breaks for Manhattan Beer Exacerbate Merger Implications

It is quite clear that the Manhattan Beer merger will be another nail in the coffin for

small and minority-owned businesses. Making the situation worse, is the fact that under NYCs

former mayor, Mike Bloomberg, the tax payers gifted the hugely successful wholesaler with tax

subsidies to build a warehouse in the Bronx. Heres what the NYC Economic development

agency said about the prospective deal in 2009:

"The Company services over 24,000 accounts in fifteen counties in New York State and

employ more than 1,400 people during the peak summer months. Manhattan Beer operates out

of approximately 1.2 million square feet of warehousing space, with locations strategically

located throughout its distribution area. The Company has increased its volume growth by 88%

over the past 10 years and is continuing its expansion. Manhattan Beer is seeking a new

distribution center to target its ever expanding clientele in Manhattan and the Bronx."

Left unsaid, however, is the fact that the incentives were not needs for a business that has

increased its volume by 88% over the past ten years-and the company certainly wasnt leaving

the city to distribute its beer here. In addition, unmentioned is jsut how the company was able

to increase its volume-and at whose expense. In essence, the city, in a corporate welfare deal,

was rewarding the monopolist so it could continue-using the publics money-to put the

independent distributors out of business.

So how much was the public in for? Here's the damage: New York City taxes to be

exempted:

(1) Mortgage Recording Tax: $ 316,388

(2) Sales Tax Exemption 109,000

(3) Building Tax Exemption (NPV, 25 years) 8,125,352

(4) Land Tax Abatement (NPV, 25 years): 831,425

Maximum Total: $ 9,382,165"

But don't go expecting that the price of a six pack of your Corona will be reduced-or even

that it will stay at current price levels. That's because these IDA benefits come with virtually no

give backs to the tax payers that are forced to pony up; and there's little apparent due

diligence investigating whether, absent the public money, a company like Manhattan Beer

would refuse to build. This is corporate welfare in its most egregious form.

Without any irony, EDCs then head Seth Pinsky lauded the deal:

Helping our vital industrial companies to remain and expand in the City is one of IDAs

primary goals and creating jobs today is a foundation of the Five Borough Economic

Opportunity Plan, said IDA Chairman Seth W. Pinsky. The benefits approved today will help to

ensure that this growing New York City-based company continues to contribute to our

important industrial sector by investing in an additional location and improved equipment and

creating new, quality jobs for New York City residents. I am pleased that, despite obvious

advantages offered by neighboring municipalities, Manhattan Beer chooses to stay in the City

and that IDA can help to make that choice viable.

Three years later, the deal got even sweeter-as a different parcel opened up in Hunts

Point. As the NY daily News reported:

Manhattan Beer Distributors will receive tax breaks worth nearly $24 million from the

Industrial Development Agency to buy and renovate four parcels of land in Hunts Point. The

company expects to add at least 25 jobs at the site within three years of opening its new

headquarters, in 2013 In 2009, the IDA awarded Manhattan Beer a tax incentive package worth $9

million over 25 years to buy and renovate a site on Leggett Ave. in Port Morris. But the company shifted

gears when the four Hunts Point parcels became available.

The 2009 deal will be terminated but the city wont require Manhattan Beer to repay any

benefits received to date as long as the company fulfills the obligations of the new agreement,

said EDC spokesman Kyle Sklerov. (http://www.nydailynews.com/new-york/bronx/manhattan-

beer-tax-breaks-worth-24m-ignore-lure-new-jersey-expand-bronx-article-1.1025397)

Not a bad deal for 25 jobs-and no one who knows the company believes for a second that

it was going over to New Jersey. This is what is known as a ruse:

http://www.nydailynews.com/topics/Kyle+Sklerovhttp://www.nydailynews.com/new-york/bronx/manhattan-beer-tax-breaks-worth-24m-ignore-lure-new-jersey-expand-bronx-article-1.1025397http://www.nydailynews.com/new-york/bronx/manhattan-beer-tax-breaks-worth-24m-ignore-lure-new-jersey-expand-bronx-article-1.1025397

CEO Simon Bergson said the project will allow the firm to grow without leaving the Bronx, where

it set up shop in 1979. Manhattan Beer is currently based on Walnut Ave. in Port Morris. It means a

commitment to staying in the Bronx forever, said Bergson, who founded the company in lower

Manhattan but moved north after just one year.

What is left out in this discussion of Bergsons windfall, is that for the 25 jobs he created,

he also destroyed scores more by putting more independents out of business. In essence, the

tax payers have been funding the pillaging of these smaller distributors, and the creation of an

impregnable monopoly that discriminates against small stores and overcharges the consumers-

the majority of whom are Black and Latino. This is precisely why there is a need for anti-trust

intervention by the DOJ, and for political intervention and support for the independents and

the bodegas that depend on them.

Beer Price Posting and Sales Tax Reform Legislation

The ideal solution to this growing anti-competitive monopoly would be for the

Department of Justice to legally challenge the brewer/franchise wholesaler equity Agreement

as a restraint of trade; and/or for New York State to make these agreements illegal by statute

for the same reason. Opponents of these agreements, however, dont believe that there is a

strong enough political will do accomplish this worthy task-there is too much political and

economic strength on the side of the monopolists.

There is, though, another method for addressing the problem, one that will preserve the

independent niche of independent wholesalers, and at the same time reduce the price

discrimination against beleaguered bodegas and other small retailers. This approach is

encompassed in legislation called, The Beer Price Posting and Sales Tax Reform Act.

The proposed Beer Price Posting and Sales Tax Reform Act (A.7857/S.5758 seeks to

amend the Alcohol Beverage Control Law in relation to the manner of price posting and

changing beer prices to wholesalers and retail licensees. Essentially, this legislation would

create price fairness for beer to be sold to independent beer wholesalers and, by doing so,

create a level playing field for all retailers, big and small. A single posted price for beer for each

category of license would eliminate the current channel price discrimination and bring

economic justice to the distribution system.

Put simply, A.7857/S.5758 would create a mandated price differential for New York Citys

100+ independent C-licensed beer wholesalers who supply the smaller neighborhood stores

and who are threatened with extinction because of a pattern of discriminatory pricing

practiced by larger franchise distributors and their multi-national brewer-suppliers. The

discrimination against these wholesalers is the foundation for the wider price discrimination

practiced against the citys 13,000 bodegas.

http://www.nydailynews.com/topics/Simon+Bergson

Opponents of this legislation argue that it creates a government mandated price structure

that amounts to nothing more than price fixing. The response to this point of view makes the

case that the current system is itself a wider price fixing scheme, with brewers and franchise

wholesalers, insulated from competition, deciding unilaterally what prices they should charge

to a distribution system with no means to find alternative sources of beer to purchase.

The independents and small retailers would prefer a truly open market, but absent that

possibility, this legislation does afford these endangered competitors and their customers with

a modicum of protection. In addition, it could also be argued that the franchise wholesalers

already have, under 55-C, the full legal protection of the state, so it is simple economic justice

to give the most vulnerable players in the distribution system similar legal protection. The

history of the past thirty years, demonstrates that they badly need it.\

Sales Tax Reform

New York States current method of collecting taxes on the sale of beer creates a hardship

on thousands of small stores in NYC. The existing law mandates that sales tax be instituted and

collected at the retail level. In reality, a great deal of this tax revenue goes uncollected for a

number of reasons.

There are over 20,000 small food retailers in NYC-bodegas, delis, salad bars, candy stores,

and tobacco outlets. A great majority of these retailers are immigrant entrepreneurs that are

not only unfamiliar with state tax laws, but also lacking in the needed accounting skills that are

necessary to insure compliance with the tax collection procedures.

As a result, these small retailers often fail to properly charge the tax to their customers. In

its desire to remedy this serious tax collection avoidance situation, the NY State Department of

Taxation and Finance has initiated a crackdown on the citys small retailers.

Unfortunately, many of these tax department audits are conducted two or three years

after the alleged failures to report taxes that were supposed to be collected. When the retailers

are confronted with the accusation of failure to report sales tax collection, however, they are

unable, because of the reasons cited above, to provide the Department with the proper records

and documentation.

The audits themselves encompass a three year period and the amount of uncollected tax

revenues often run into the hundreds of thousands of dollars-money that the majority of these

retailers are unable to come up with to satisfy the amount owed. Faced with the need to satisfy

the tax collectors, yet lacking the funds to do so, most of these store owners are forced to go

out of business. Since there is no personal liability involved in the failure to collect the sales tax,

the state has little or no recourse, and is consequently forced to absorb the loss.

The Beer Price Posting and Sales Tax Reform Act is being introduced in order to remedy

this situation. What the bill does is to change where the sales tax is initiated from the retail

level to the wholesaler that sells the beer. In this way the tax is built into the wholesale price of

the beer and is collected at this point and turned over to the state.

Not only does the sales tax get collected in the most efficient manner, it is collected right

at the point of sale by a small number of beer wholesalers licensed in New York. The state not

only gets paid in full, but it does so at the earliest stage of distribution-with no need for labor

intensive audits that are often a waste of tax payer money becomes of the difficulty of

collecting from thousands of small stores.

Price posting of beer, then, is needed to insure the accurate and fair pricing of the product,

and the subsequent collection of the appropriate sales tax. The goal of the legislation is to

simultaneously protect these stores, and their suppliers in the independent niche, from being

forced out of business, while insuring that at the same time the state and city tax revenues are

properly collected.

The Great Recession of 2008, has had a disproportionate impact on the small businesses of

NYC. Bodegas and other small retailers are closing in record numbers, beset by slow sales, high

taxes and burdensome regulations. Beer sales are a crucial component of the viability of these

small retailers and we need to develop tax collection methods that help these stores survive.

The Beer Price Posting and Sales Tax Reform Act does just that.