Conjuring up memories of Al Capone and the forces that led to prohibition, the country's leading liquor supplier groups are battling the Reagan administration's moves to dismantle the agency that regulates them.
"We're dealing with a product that has a history, to our regret, a dark history, before and during the prohibition. We're different from other industries," said Abraham Tunick, Washington counsel for the Wine and Spirits Wholesalers of America.
"We're not in favor of overregulation. Our concern is that there not be a return to those conditions which led to prohibition," said Rex Davis, president of the National Association of Beverage Importers.
The administration wants to abolish the Treasury Department's Bureau of Alcohol, Tobacco and Firearms and transfer alcoholic beverage regulation to the Customs Service. While the number of employes performing BATF's old jobs would drop by about one-fourth, the number of staffers who enforce federal alcohol regulations would drop by 75 percent, from 400 to 100. "Our intention is to have a minimal amount of compliance with the Federal Alcohol Administration act," said Robert Powis, deputy assistant treasury secretary for enforcement.
But department officials dismiss the liquor suppliers' concerns. "That's utter nonsense," said one official involved with the issue. "There was a greater threat in earlier times that the industry might be dominated by the criminal element. I don't think that's a threat today." He added that the regulation imposed by the alcohol administration act is "excessive."
The issue is before Congress, which last year forced the Treasury Department to continue to enforce the FAA act fully by including a provision to that effect in the continuing resolution that funds the department through March 31. The Senate Appropriations subcommittee that oversees the department is holding hearings on BATF's budget and the question of alcohol regulation today.
Powis stressed that "if Congress so directs us, there will be full compliance," and all 400 enforcement positions will be kept.
Under the administration's plans, the federal government would continue to issue basic permits for distillers, importers, and wholesalers. It does not have jurisdiction over brewers, largely because of their strong lobbying effort when the law was written in 1935, according to industry observers. Licensing of retailers is normally done at the state or local level.
The federal government would also continue to review alcoholic beverage labels to guarantee that they include the required information in the proper form. But it would no longer test the contents to ensure that what's in the bottle corresponds with what is on the label, according to Powis. Wholesale, import and consumer groups have urged the government to continue enforcing this regulation. "It ensures the integrity of the product and is important for the American consumer," said Davis of the importers' group.
The government would also stop enforcing trade and advertising restrictions enacted in 1935 to bar practices that helped organized crime gain control of the industry.
Before and during prohibition, unscrupulous liquor manufacturers and wholesalers often tried to force retailers to deal with them exclusively by threatening to cut off supplies, requiring the purchase of products that were plentiful to get products that weren't, and offering cash, merchandise, discounts and free advertising. They also tried to get control over retailers by loaning money for licenses, property and other expenses.
Tunick said liquor wholesalers "are very concerned" that such practices might become a problem again if the restrictions are not enforced. "We feel we have to be restrained," said Tunick.
But a Treasury Department official said, "With antitrust enforcement by the Justice Department, Treasury Department action is superfluous. The worst excesses can be handled by the antitrust laws and by the basic permit process which gives us control over who enters the market."
Treasury officials speculate the real reason the wholesaler and importer associations are distressed is that they represent smaller companies that might go out of business if the larger companies had more freedom to lure retailers with promotional merchandise or advertising deals.
They note that the distillers are less vigorously opposed to the change. F. A. Meister, president of the Distilled Spirits Council of the United States, wrote Treasury in October, cautioning that any drastic change should be thought out carefully. He wrote that the "public benefits substantially" by government "control of persons engaging in this socially sensitive industry with the principal purpose of excluding organized (and unorganized) criminal elements, and in ensuring a competitive market for alcohol products . . . ."
But Duncan Cameron, the group's communications director, said the council has not taken any position on the specific changes proposed.
The importers' Davis acknowledged that it might be considered unusual for an industry to be fighting to save its federal regulator. "But," he said, "not too many other industries have been the subject of two constitutional amendments."
"There's no profit issue involved," he insisted. Unlike most other products, he said, there are active groups that want to control the availability of alcohol. "We certainly do not want a condition to occur that would give these groups ammunition. That would cost the industry." But he added, "I guess ultimately there is a certain amount of self-interest involved."
Cameron said the distillers association's major concern is that any change in policy be approved by Congress. "If enforcement is dropped" without changes in the law, "honest firms will be penalized," he said.