On February 9, 2022, the US Treasury Department (Treasury) released a report with recommendations for how the Tobacco Tax and Trade Bureau (TTB), Federal Trade Commission (FTC) and Department of Justice (DOJ) can help drive competition in the beer, wine and spirits markets by stepping up conduct enforcement, adopting creative and nuanced theories of harm in merger reviews and implementing new regulations to decrease the burden on smaller industry participants.

TREASURY REPORT SUMMARY

• Treasury released a report entitled “Competition in the Markets for Beer, Wine, and Spirits” in response to President Biden’s July 2021 Executive Order 14036 that assesses the current market structure and conditions of competition, including an assessment of threats to competition and barriers to entry.
• Treasury’s report is based, in part, on hundreds of comments received from industry participants and paints a detailed picture of the current landscape for alcohol beverage distribution and sale across the United States.
• The report focuses on how changes could benefit smaller participants in the beer, wine and spirits industry. Given that the stated goal of Executive Order 14036 was, in part, “to reduce the trend of corporate consolidation, increase competition, and deliver concrete benefits to America’s consumers, workers, and small businesses,” it is not surprising that the report is focused on analyzing how a shift in enforcement priorities may be able to help eliminate impediments that make it difficult for smaller producers, distributors and retailers to compete with the larger players in the industry. Treasury specifically recommends that TTB cease bringing cases against “smaller industry members whose conduct does not have obvious effects on competition” (i.e., the investigation several years ago against small wineries for ‘consignment sales’).
• Treasury makes recommendation on enforcement priorities for FTC, DOJ and TTB. To address the market concentration concerns that the report describes, Treasury makes recommendations regarding how the TTB, FTC and DOJ should focus investigations and enforcement of mergers and conduct in each of the three tiers of the beer, wine and spirits markets: producers, distributors and retailers.
• Many of the recommendations are likely to be pursued given that the Attorney General and FTC Chair were consulted. The report and its recommendations should be considered carefully as a clear indication of the kinds of issues that FTC and DOJ are likely to focus their investigations on in beer, wine and spirits because the report was developed “in consultation with the Attorney General [DOJ] and the Chair of the FTC.”

TREASURY’S KEY RECOMMENDATIONS

• While there are myriad competition-focused suggestions in the report, we think the areas that are most likely to receive increased focus from FTC, DOJ and TTB are the following:
  • Anticompetitive Conduct: Treasury noted that FTC, DOJ and TTB have generally not brought any conduct cases on many theories of harm for which myriad complaints were received. Treasury suggests that TTB should act on [...]
    
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