STAND. COM. REP. NO. 925________

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 1622
                                     H.D. 1

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committees on Consumer Protection and Commerce and
Judiciary and Hawaiian Affairs, to which was referred H.B. No.
1622 entitled: 


beg leave to report as follows:

     The purpose of this bill is to amend the liquor law to allow
the holder of a liquor manufacturer's license to also hold any
interest in a wholesale liquor license.

     Your Committees received testimony supporting this bill from
Anheuser-Busch Sales of Hawaii, Inc., (Anheuser-Busch), and the
Hawai'i Restaurant Association (HRA).  Testimony in opposition to
the bill was submitted by the Hawaii Teamsters and Allied
Workers, Local 996 (Local 996), who objected to the bill because
allowing a manufacturer and wholesaler to become one in the same,
would remove the wholesaler from the business equation and confer
a definite marketing advantage on the manufacturer.

     Anheuser-Busch testified that in July of 1996 it had
obtained a wholesale license from the Maui Liquor Commission
(Commission), and purchased a distributorship allowing it to
operate in four counties of this state on July 29, 1996.
Anheuser-Busch's Maui license was due to sunset in 2002, and
after many hearings of the Commission, the question of renewal or
grandfathering of that license had not yet been resolved.  In
December 1998, the Commission deferred to the Attorney General

                                 STAND. COM. REP. NO. 925________
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for resolution of the question of whether Anheuser-Busch may hold
a wholesale license.

     Anheuser-Busch testified that the uncertain status of its
Maui license had caused considerable disruption of its normal
business planning and long-term decisionmaking, and had generated
a tremendous amount of employee stress.  Anheuser-Busch stated
that it had tried to be a good corporate citizen.  When it
acquired the Hawaii distributorship, it retained all existing
personnel and brought in only five persons from the mainland.  It
employs over 200 persons, contributes $13,000,000 in state and
local taxes, and has invested over $33,000,000 in its in-state
holdings.  Its community activities have included flying 100 of
Hawaii's children stranded in Atlanta during the 1996 Olympics
back home to the state, and contributing heavily to many
charitable and nonprofit groups.

     HRA stated that the question to be addressed by the Attorney
General was whether "manufacturer" in section 281-31, Hawaii
Revised Statutes, included a company like Anheuser-Busch, whose
brewery is located outside of the state and that operates a
wholesale in-state business.

     A consultant for Anheuser-Bush who served as Deputy Director
of the federal Bureau of Alcohol, Tobacco and Firearms, testified
regarding the unlawful practice provisions of the Federal Alcohol
Administration Act of 1935 (FAA Act), referenced in section 281-
42(c).  The consultant testified that the FAA Act outlawed
monopolistic trade practices in the liquor industry and was
consistent in prohibiting wholesaler and manufacturer ownership
of retail outlets, but never prohibited manufacturers from owning

     Your Committees find nothing to show that ownership of a
wholesale dealer's license by Anheuser-Busch has been the source
of detrimental consequences for the community.  Your Committees
also find that the ambiguity in the state's liquor laws that
first allowed Anheuser-Busch to establish its wholesale business,
and that has subsequently generated the problems that Anheuser-
Busch has encountered in doing business in this state, should be
resolved.  Your Committees, cognizant of the concerns of Local
996, have narrowed the bill to reduce its effect on competition
in the liquor industry by:

     (1)  Removing provisions allowing holders of a
          manufacturer's license to hold any interest in a
          wholesaler's license; and

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     (2)  Replacing these provisions with language authorizing
          brewers of beer within or without the state, to hold
          any interest in a wholesale dealer's and a
          manufacturer's license, limited to manufacturing or
          wholesaling the beer brewed.

     As affirmed by the records of votes of the members of your
Committees on Consumer Protection and Commerce and Judiciary and
Hawaiian Affairs that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
1622, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as H.B. No. 1622, H.D. 1, and
be placed on the calendar for Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Consumer
                                   Protection and Commerce and
                                   Judiciary and Hawaiian

______________________________     ______________________________
PAUL T. OSHIRO, Chair              RON MENOR, Chair