July 29, 2024
@urban.artifact/Instagram
Ohio-based Urban Artifact is known for its fruit-infused beers. The company has sued Pennsylvania over rules that restrict how much beer out-of-state companies can sell directly to customers in Pennsylvania.
A Cincinnati-based brewery is taking aim at Pennsylvania's alcohol regulations.
Urban Artifact, a 9-year-old brewery that specializes in fruit-infused beers, filed a federal lawsuit earlier this month alleging that Pennsylvania uses unfair barriers to restrict sales from companies that aren't located in the commonwealth. The suit was filed in U.S. District Court for the Middle District of Pennsylvania.
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The case centers on Pennsylvania's laws regulating direct sales of beer to consumers in Pennsylvania who order from out-of-state companies.
Breweries based in Pennsylvania can sell and ship their beer directly to customers without any additional licensing or limits on quantity and volume. But companies that want to sell their products to Pennsylvania buyers from across state lines have to obtain a direct beer shipping license from the Pennsylvania Liquor Control Board and retail or wholesale license from their home states.
Even with those licenses — which carry fees — out-of-state breweries are restricted to a 90-ounce per month limit per customer. They also may not ship more than 96 ounces of a specific brand of beer to a Pennsylvania customer.
Urban Artifact previously had the required license to sell in Pennsylvania in 2021 but decided to let it expire when the company realized it was cost-prohibitive and didn't satisfy the way their club memberships are set up for customers.
"What's happening here is really unfair to out-of-state businesses," Jeffrey Jennings, the attorney representing Urban Artifact, told Local 12 in Cincinnati. "You shouldn't be discriminated against just because you're located in a different state."
The lawsuit contends that Pennsylvania has violated the constitution by "enacting laws that excessively burden interstate commerce in relation to their putative local benefits." The suit argues the rules should be struck down in federal court because they discriminate against out-of-state economic interests.
"Pennsylvania does not have legitimate nonprotectionist grounds, or indeed any constitutionally justifiable grounds for its discriminatory and protectionist restrictions on out-of-state breweries," the suit says.
The lawsuit names PLCB Chairman Tim Holden and Pennsylvania State Police Commissioner Christopher Paris as defendants, since state police are tasked with enforcing PLCB regulations.
Urban Artifact currently is able to sell its beer online in about eight states and wants to expand to more. Being a federal case, this ruling could end up having broader implications for similar laws regulating interstate beer sales in the rest of the United States.
After booming during the previous two decades, the craft beer industry hit a wall during the pandemic as many small and independent brewers shut down. Despite declining beer sales, the Brewers Association reported the number of breweries in the craft space hit a record high of 9,683 in the United States in 2022. That includes taproom breweries, brewpubs, microbreweries and regional craft breweries.
Pennsylvania has about 500 craft breweries, placing second in the United States behind only California. The state's history of strict beer and liquor regulations gives Pennsylvania a reputation as one of the most restrictive in the country, although it has loosened up many of its laws over the last two decades.
Last year, there were 495 craft brewery openings nationwide, representing a 9.8% drop in new openings compared with the year before. The 418 closures that happened last year marked a 31% increase in the number of such businesses that closed compared with a year earlier.
Urban Artifact has produced several award-winning beers, including three that won gold medals at last year's U.S. Open Beer Championship. Some of its most popular fruit tart beers are the mixed berry-flavored Gadget and the tropical-flavored Kaleidoscope. The company's case is being represented by Jennings at Pacific Legal Foundation, which wrote that Pennsylvania's laws are hampering the industry.
"It is unjust to subject hardworking entrepreneurs to additional, burdensome regulations that limit the same market access and economic opportunity enjoyed by their in-state counterparts simply because of their geographic location," the foundation said.
