By John Lyon
Arkansas News Bureau

LITTLE ROCK — The state Alcoholic Beverage Control Division is preparing for a rule change that proponents say will promote fairness in the beer industry and protect consumers.

Critics say it will do just the opposite.

Act 783 of 2009 requires the division to adopt rules prohibiting beer manufacturers from offering better prices to some Arkansas wholesalers than others. It authorizes the division to punish violators with penalties up to and including denial or suspension of their license to sell alcohol in the state.

If the law works, “whatever a case of beer costs a wholesaler in Fayetteville, Ark., ought to cost a wholesaler in Little Rock,” ABC Director Michael Langley said.

Under Arkansas’ three-tiered system, brewers are prohibited from selling directly to retailers and must instead sell to wholesalers, the middle men who then sell the product to retailers. Act 783 is the Legislature’s effort to resolve a long-running dispute between brewers and wholesalers over pricing.

“The discrepancy we were having is, the supplier or producer was not offering the same price for the same product to each one of its wholesalers, and the price varied by as much as $6 a case” Langley said.

The new rules are expected to be adopted in August or September, but Langley said ABC will have guidelines in place by the time Act 783 takes effect July 31.

The beer industry employs 8,538 people in Arkansas and contributes $912.5 million a year to the state’s economy, according to a study commissioned by the National Beer Wholesalers Association and the Beer Institute.

The average Arkansan drinks 27.6 gallons of beer each year, according to the Beer Institute.

The act’s title begins with the words, “An act to protect Arkansas consumers,” but brewers say it is more likely to hurt consumers by leading to higher retail prices.

“Though state lawmakers no doubt approved House Bill 1807 with the best of intentions, this law will not have the intended effect of creating more uniform pricing to retailers and consumers,” said Mark Bordas, regional director of governmental affairs for Anheuser-Busch.

“Nothing in this law speaks to pricing at the wholesale or retail level, only at the brewer level, and as a result, consumers most likely will continue to see varying prices — only on average those prices will be higher. The consequences are unfortunate, especially at a time when so many consumers are struggling to make ends meet,” Bordas said.

Rep. Keith Ingram, D-West Memphis, who sponsored the legislation, said consumers are now paying higher prices for beer in some parts of the state than others because of variations in brewers’ prices.

“Imagine you’re a distributor and you’re having to pay more for your product than the distributor next to you. Obviously, when you sell to a retailer you have to sell your product at a higher level,” he said. “This should level the playing field.”

Could that level playing field mean higher prices for consumers, as Bordas warned?

“They won’t do that” Ingram said. “Competitive pressures will bring them down.”

But Steve Higginbothom, executive director of the Wholesale Beer Distributors of Arkansas, acknowledged that retail prices may go up when the law takes effect, at least for a while.

“I think we will see a slight increase in beer prices temporarily, and then I think we’ll see a leveling-off average. I think the market will dictate what they’ll charge,” he said.

“Sure, somebody’s beer may go up slightly,” Higginbothom added. “Somebody else’s is going to come down slightly. It’s going to be a leveling effect.”

Currently, a brewer could choose to charge a higher price in an affluent area because that’s “what the traffic will bear,” Higginbothom said. The wholesaler he sells to, however, has no such flexibility because Arkansas law already requires wholesalers to sell to retailers at uniform prices.

“It seems only fair to say, ‘Mr. Brewer, you have to do the same,’” he said.

The law should make the three-tiered system run more smoothly, according to Langley. He said that in the past when a retailer complained about prices to a wholesaler, there wasn’t much the wholesaler could do.

“Previously, the wholesaler couldn’t adjust his price because the supplier may or may not have been willing to adjust their price. If they weren’t willing to adjust their price, that wholesaler was kind of stuck,” Langley said. “Now, everybody is going to get it at the same price.”

And if they don’t?

“Then we’ll have to hold a hearing and determine whether there’s a violation,” he said.