What's a business supposed to do when customers don't pay their bills on time?
You can make nasty phone calls, send computerized dunning letters and recruit large, unpleasant men who enjoy playing baseball with creditors' kneecaps. Or, like Washington beer distributors, you can turn to the D.C. City Council for help.
For years, beer distributors have been complaining about the District regulations over credit for wholesale beer sales. The post-Prohibition era rules permit wholesalers to give their customers no more than 45 days to pay their bills.
As regulations have a way of doing, this one works backwards. Instead of acting as a ceiling on beer credit, the 45-day limit is more of a floor--no one pays their beer bills until they have to.
So in the midst of one of the worst economic downturns since booze became legal, the distributors faced a cash flow crisis: they had to pay their bills to the brewers in 10 days, but their customers were taking 45 days to pay up.
No kneecapping necessary, the beer dealers decided. Their answer was to ask the council to change the rules, to cut the maximum credit limit from 45 days to 20 days. On an 8 to 5 vote June 8, the council agreed to give the beer distributors what they wanted.
Then the bar and liquor store owners started to scream. Faster than you can say "set 'em up" the bartenders bellied over to the District Building and showed the council some of their arithmetic.
There are 1,600 liquor stores, bars and other retail beer distributors in the District, they pointed out, and there are four wholesalers.
That's 400 to one, and even Charlene Drew Jarvis, the council member who introduced the measure, knew she couldn't win against those odds. Goodbye beer bill.
The whole incident is another lesson in practical politics. Democracy in action: the side with the most clout, the loudest voice or the deepest pockets wins.
But the real issue is not whether liquor stores should have three weeks or six to pay their bills, it's what the City Council is doing getting involved in the whole mess. Nobody tells refrigerator makers or wholesale haberdashers how to run their credit departments; why does the District of Columbia have to regulate credit for beer distributors?
Like a lot of regulations written in "the public interest," the District's liquor laws have come to protect special interests rather than the public at large. The city regulates beer credit, so the distributors don't have to worry about their rivals offering better terms. The city regulates liquor store hours, so store owners don't have to compete by staying open later. The city bans price signs from liquor store windows, so discounters don't drive higher priced stores out of business.
Rather than promoting the general welfare, regulation can become instead a tool of competing special interests, who prefer political solutions to economic confrontation. When that happens, the political decision makers get caught in the middle, as the council did on the beer credit issue.
The council's vulnerability on such issues is increased because the District government seems to have no clear philosophy on regulatory questions. The council members and the Barry administration certainly are not Reagan-style born-again deregulators. Nor is the District government dominated by anti-business crazies, as evidenced by the strong business community support for the mayor and influential council members.
Though cynicism and skepticism about the effectiveness of detailed regulation are growing, the District government is still full of true believers. The council, for example, recently decided that the solution to the city's drug epidemic is to outlaw the sale of drug paraphernalia--an approach that can be expected to be about as effective as banning sales of wine glasses during prohibition.
The council has also imposed new regulations on the architecture of sidewalk cafes and soon will find itself in the midst of a bitter argument from competing special interests on closely related regulatory issues: How much to charge sidewalk cafe owners for using city property and what to do about street vendors.
Last week's comments about vending regulations in this column upset a lot of business people. Many readers disgreed with the charge that vending rules backed by the Greater Washington Board of Trade and the city's vending task force will regulate vendors out of business. More than a few people adamantly believe all vendors ought to be run off the streets.
Other readers were disturbed because the "Monday Morning" logotype identifying the column was inadvertantly left out, causing them to think they were reading a news story rather than somone's opinion.
That was our fault. This column is a weekly commentary on issues affecting the Washington business community. As the title suggests, it's meant to give a Monday morning quarterback's view of business. Sometimes that means rooting for the home team and sometimes it means telling them they don't know how to play the game.