NCPA - National Center for Policy Analysis

Beer Mercantilism in Indiana

August 15, 2002

In the 16th and 17th centuries, European governments sold monopolies over goods like soap and clothing to companies. They did this to gather extra money and influence over the companies in their nations. The state of Indiana has a similar, heavily regulated, system with beer.

  • The Indiana Code contains more than 100 pages devoted to the granting of permits for the making, distribution and sale of beer.
  • The Indiana Alcohol and Tobacco Commission (ATC) controls these permits with a budget of more than $5.6 million.
  • In addition to the 100 pages of statutes, there are 56 pages of regulation governing the operations of the ATC.

The important thing to note, observers say, is that very few of these regulations are designed to prevent underage drinking. Most of the regulations are simply exercises of bureaucratic power over beer brewers. Politicians exercise this power to extract political campaign contributions from the beer lobby and to use the ATC as a resource for political patronage. A logical question then becomes: how much money would beer wholesalers be spending in political contributions if these laws did not exist?

Perhaps most abusive, is that Indiana law allows for private monopolies. Wholesalers enter into exclusive regional territories that prevent breweries from choosing their wholesaler. Even worse, Indiana law makes it "unlawful" to "cancel or terminate an agreement or contract between a beer wholesaler and a brewer...unfairly and without due regard for the equities of the other parties." Once brewers are locked into a wholesaler, it is next to impossible to leave. This creates government mandated private monopolies, critics say, hurting consumers for the benefit of political patronage.

Source: Charles M. Freeland, "The Economics of a Tall, Cool One," Indiana Policy Review, Summer 2002.


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