Business: War Between States

Within the hour prior to his sudden death in a committee room in Ohio’s State House last month, President William Forbes Morgan of Distilled Spirits Institute read aloud a lucid eight-page statement urging rejection of a so-called “antidiscriminatory” bill which sought to prohibit liquor imports into Ohio from States whose liquor laws discriminated against Ohio. Performing his most important task since leaving his job as Treasurer of the Democratic National Committee to become front man for U. S. liquor interests (TIME, March 1), Mr. Morgan contended that the legislation: 1) proposed retaliatory measures against honest regulatory systems in 33 States which in fact were not discriminatory; 2) would lead to anti-anti-discriminatory laws, bringing about a set of State tariff barriers the like of which had not been thought of since Colonial days.

Effect of the legislation would have been to bar from Ohio whiskeys distilled in such big producing States as Illinois, Indiana, Kentucky, Maryland and Pennsylvania; brandies from California and New York; rum from Massachusetts. Upon hearing English-educated Mr. Morgan’s distasteful forecast, Ohio’s legislators killed the measure.

Already Missouri has passed an “antidiscriminatory” bill favored by local brewers (but not by U. S. distillers) seeking protection for their home market, which in effect bars from Missouri the alcoholic produce of 30 other States.* Pending in Connecticut, Illinois, Rhode Island and Wisconsin Legislatures are similar bills. Iowa and Nebraska rejected them.

Pennsylvania’s part in the liquor war between the States has been different. One of 17 States which has a monopoly on the sale of liquor, the Commonwealth’s Legislature a year ago levied a 4% relief tax on distillers without allowing them to pass the boost on to consumers at 550 State stores. Valuing the big Pennsylvania market, distillers fell in line. All was well until last November when representatives of the other monopoly States met in Chicago, demanded that either Pennsylvania raise prices 4% or that distillers cut prices to other monopoly States 4%. Pennsylvania refused, chiefly because of the 10% consumer sales tax on liquor.

Result was that 24 of 41 distillers selling in Pennsylvania cut their prices. The Big Three (Schenley, National, Seagrams) refused, preferring to stop selling in the Commonwealth. Before they did this, however, Pennsylvania’s Liquor Control Board placed the largest liquor order on record ($30,000,000), stocked the State’s store shelves solidly. Despite the fact that some nationally advertised brands have been unavailable since January, Pennsylvania State store profits are currently 12% ahead of last year, when the State made more on liquor ($14,000,000) than any one of the Big Three distillers. However, Governor George Howard Earle asked his Legislature not to renew the distillers’ tax after the end of this month.* Absentees last week planned campaigns to recapture lost ground beginning June 1.

Although Forbes Morgan had been occupied with the fight between producers and Pennsylvania at the time of his death, it was not because of this one fight that liquor interests last week badly needed a new front man. On the eve of the Kentucky Derby fortnight ago in Louisville, an assembly of liquor men who make up the Distilled Spirits Institute received word from California that the State Legislature had passed and sent to Governor Frank Merriam an “antidiscrimination” liquor bill not unlike Missouri’s. Prime purpose of the bill is to protect proud California’s wine growers, but provisions are broad enough to exclude alcoholic imports from other States.

Their Derby almost spoiled, liquor men headed by full-faced, mustached Owsley Brown, president of Brown-Formon Distillery Co. and chairman of the Distilled Spirits Institute, penned telegrams to Governor Merriam asking veto of the measure. Joining in the protest barrage last week were the West Coast’s two Governors Martin (Charles of Oregon. Clarence of Washington). At week’s end California’s Merriam still had the bill on his desk, called a conference of objectors to hear their views.

The trend of events in California served to prod liquor men into searching more quickly for a new front man. Because the late Forbes Morgan’s close tie with the White House had caused comment, Chairman Brown and colleagues last week were looking for someone not too closely identified with the Administration, yet on good terms with it. Besides a Washington calling card, the Institute wants a man with a pleasing personality who under no circumstances can be called a stuffed shirt.

* The cleavage between brewers and distillers was emphasized further last week at a Manhattan meeting of the new United Brewers Industrial Foundation, devoted to promoting beer as a mild, nutritious beverage “for the American Home.” Absent were the distillers as brewers talked of disassociating beer and hard liquor as much as possible, a maneuver to help their cause in the event of Prohibition’s return.

*Before New Jersey Legislators last week was a bill to reduce the tax on distilled applejack. Reason: consumption of famed Jersey ”light-nins” has slipped.