Three-tier system (alcohol distribution)

The three-tier system of alcohol distribution is the system for distributing alcoholic beverages set up in the United States after the repeal of Prohibition.[1] The three tiers are importers or producers; distributors; and retailers. The basic structure of the system is that producers can sell their products only to wholesale distributors who then sell to retailers, and only retailers may sell to consumers. Producers include brewers, wine makers, distillers and importers. The three-tier system is intended to prohibit tied houses and prevent "disorderly marketing conditions."[2]

Some states chose to become alcoholic beverage control jurisdictions after Prohibition. In these states, part or all of the distribution tier, and sometimes also the retailing tier, are operated by the state government itself (or by contractors operating under its authority) rather than by independent private entities.

The only state with a privately operated retailing and distribution system that does not require any form of three-tier system is the State of Washington. In Washington, retailers may purchase alcoholic beverages directly from producers, may negotiate volume discounts, and may warehouse their inventory themselves. However, the three-tier system largely remains in fact a reality in Washington despite the lack of a law requiring it.[3]

  1. ^ Mayfield, Kendra, Web Wine Sales Still Bottled Up, Wired, 31 March 2004.
  2. ^ California Beer Wholesalers Ass'n v. Alcoholic Beverage Control App. Bd., 5 Cal. 3d 402, 407–408 (1971). The real party in interest in this case was retailer Smart & Final, which at that time operated both retail and wholesale stores. The court upheld the application of the triple-tiered system to Smart & Final, meaning that the company could not simultaneously hold retail and wholesale licenses to sell alcoholic beverages.
  3. ^ Nakamura, Motoya, Privatizing liquor sales in Washington hasn't brought price down, Oregon Live, December 31, 2012, accessed 25 April 2015.