The revelation that state alcoholic beverage regulators are investigating local bar owners, beer distributors, and brewers for engaging in illegal pay-to-play activity has rocked the Boston beer community. But at the same time, there should be nothing surprising about the ongoing investigation, because pay-to-play is a natural byproduct of a system the state of Massachusetts has cultivated for decades.
The state's alcohol regulations are designed to vest power in the hands of a few entrenched incumbents, so dysfunction is marbled throughout the system. Small, independent brewers are at the mercy of their distributors and retailers, both of whom are legally protected from competition. The regulators who oversee the whole operation are outgunned and out of touch.
If the current investigation just uncovers some instances of bars and beer distributors swapping cash for tap lines, but doesn't lead to broader reform in the system that the pay-to-play scandal erupted from, it will be a failure. The whole business is borderline-dirty by design, and it hurts small businesses and consumers alike.
The pay-to-play scandal burst into view last month, when Dann Paquette, co-founder of the Somerville-based Pretty Things Beer & Ale Project, took to Twitter and accused a Boston restaurant group of selling draft beer lines to other brewers and distributors, and shutting off brewing businesses who wouldn't play along. "Boston is a pay-to-play town and we're often shut out for draft lines along with many beers you may love," Paquette wrote in a series of late-night tweets. "A great beer culture deserves more than greedy, shifty bar owners and brewers [trying] to fill their pockets."
The shakedown Paquette alleged is illegal under federal and state law. The Globe reported last week that a number of local breweries, beer distributors, and retailers have been subpoenaed in what appears to be a wide-reaching investigation into the practice by the state's Alcoholic Beverages Control Commission.
Paquette never set out to become a crusader against pay-to-play practices. He's certainly not the first person to vent his anger, late at night, on the Internet. But his allegations have struck a deep chord. "People talk like I dug up these backroom deals, when it's been completely, 100 percent, out in the open," he says. "I've spent the better part of 20 years hearing about it."
Paquette is the type of businessman Massachusetts should be celebrating. He's a local who spent several years living abroad. When he returned to Boston in 2008, he only had enough money to brew a single batch of beer; that one batch became Pretty Things, now a local brewing institution. Paquette and his wife, Martha, took a risk, worked long hours, and built a successful business. But instead of being hailed as entrepreneurs who helped inspire a wave of local brewing startups, the Paquettes are now best known as the couple who were asked to pay money, just to sell their excellent beer. That isn't right.
In Massachusetts, alcohol producers, distributors, and retailers each form the legs of a three-legged regulatory stool. The brewing leg of the stool has seen explosive growth over the past several years. Meanwhile, Massachusetts law insulates the two other legs, the retailers and the distributors, from competition.
At its heart, the pay-to-play scandal is self-dealing between the distributors and the retailers. The shakedown enterprise is a symptom of a broader system that values powerful, entrenched interests above free markets, consumers, and entrepreneurs. When Beacon Hill declines to break distributors' stranglehold over small brewers, and when it refuses to tie something as simple as a local liquor license to supply and demand, it's smothering competition, and seeding the kind of corruption seen in the pay-to-play allegations.
Several dozen Massachusetts breweries are now spread between the Berkshires and Gloucester. New breweries have brought creative energy and badly-needed investment to cities like Pittsfield, Holyoke, Worcester, Haverhill, Everett, and Chelsea. They've made Massachusetts a great brewing destination. There's huge economic potential, both regionally and nationally, in the cluster of small breweries that has emerged recently. But these breweries can't succeed as long as the system that brewers operate within remains stacked against them.
Paul McMorrow is an associate editor at Commonwealth Magazine. His column appears regularly in the Globe.