Executive Order on Competition: NABI Seeks More Information from Treasury Department


Submitted by regulations.gov for Docket # TTB-2021-0007; Notice No. 204

Timothy E. Skud Deputy Assistant Secretary (Tax, Trade and Tariff Policy) United States Department of the Treasury Washington, DC 20005

Re: Request for Information on Executive Order “Promoting Competition in the Beer, Wine, and Spirits Markets” (86 Federal Register 40678 (July 28, 2021)); Notice No. 204

Dear DAS Skud:

The National Association of Beverage Importers (NABI) appreciates the opportunity to offer some reflections on the above-referenced request for information on “Promoting Competition in the American Economy” pursuant to Executive Order 14036 (EO), dated July 9, 2021, on the two provisions relating to the beverage alcohol industry. Since 1935, NABI has represented the interests of importers of beverage alcohol products in the United States. NABI is the only nationwide association representing solely importers of distilled spirits, wine, and beer/malt beverages.

Action items under the EO are reports on (1) consolidation within the beverage alcohol industry “assessing the current market structure and conditions of competition, including an assessment of any threats to competition and barriers to new entrants and (2) consider updating the Alcohol and Tobacco Tax and Trade Bureau (TTB) trade practice regulations by revising or rescinding any regulations that “unnecessary inhibit competition” and “reducing any barriers that impede market access for smaller and independent brewers, winemakers, and distilleries.

The “social evils” that led to Prohibition and the reality of its failures that led to the repeal of Prohibition are the core reasons that the beverage alcohol industry is so highly regulated at the Federal association representing solely importers of distilled spirits, wine, and beer/malt beverages. importers of beverage alcohol products into the United States. NABI is the only nationwide

Given the highly regulated character of the beverage alcohol industry, NABI understands why the two report topics are included within the 72 action items in the EO. At the same time, NABI respectfully submits that more details from the Treasury Department and TTB in coordination with the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) is appropriate and necessary – which is why we urge the Treasury Department to provide for an additional public comment period after issuing the two reports in question.

The President’s Remarks at the EO signing ceremony tell us that the EO is looking at the U.S. economy over the past forty years. During the past forty years there has been consolidation in all tiers of the distribution system and in all of the three commodity types. In some instances, the mergers and acquisitions were approved by the Federal Government, in others they were stopped, and in some the business entities decided to end the proposed transaction. Much like the EO was developed in-house, NABI believes it would be a valuable pre-requisite to public comments for the Treasury Department, along with the FTC and DOJ, to prepare the required report as an empirical synopsis of these past consolidations and the ultimate impact on the industry, especially new entrants. Certain assumptions were made about the long-term impact of these mergers and acquisitions and empirical evidence, rather than the anecdotal comments sought by the Request for Information, about the correctness of these assumptions would be invaluable to generate a focused and productive public comment period.


The second report focuses on whether the TTB trade practice regulations on exclusive outlet, tied- house, commercial bribery, and consignment sales under the Federal Alcohol Administration Act (FAA Act) (1935) impede or function as barriers to entry by small and medium sized and independent businesses and whether specific regulations be should revised or repealed, or new regulations issued. As you know, for the past five years or more, the investigation and enforcement of the unfair trade practice rules has been a top priority goal of TTB and the subject of several $5 million multi-year appropriations. As a result today, TTB holds the most detailed information about unfair trade practices in the U.S. marketplace and their impact on other players or entrants, as a result of establishing the exclusion of a competitor’s product element under the FAA Act. Rather than receiving general anecdotal comments, again it would be invaluable to have an in-house report presenting the Treasury Department and TTB conclusions about the compliance level within the industry before seeking comments on whether the existing rules act to impede or bar entry. This is more than data- analytics on the number of offers-in compromise (OIC), the dollars collected via the OICs, and the number of voluntary suspensions. In other words, if there is a high level of compliance, then it is easier to assess whether the current regulations impede or bar entry. Alternatively, if there is low compliance, then the question is whether the impediments and bars to entry are the result of poor compliance but not the current rules on unfair trade practices? Public comments following this type of report would be far more productive of useful information.

Finally, NABI members have suffered significant financial harm from the recent uptick in demurrage and detention charges, so we would be remiss and derelict if NABI did not endorse the action in Section 5(o) of the EO for the Chairman of the Federal Maritime Commission to take concrete steps to address this abuse.

Again, NABI appreciates the opportunity to share these views with you. Please do not hesitate to contact me should you require additional information or have any questions.

Sincerely,

Robert M. Tobiassen


Find a copy of the letter here:

NABI Comment Letter on EO Competition
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