Bottleneckers. William Mellor

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      Even when stakes were at their highest, three-tier advocates could not cobble together enough convincing evidence to support the benefits. In Juanita and David’s case before the US Supreme Court, attorneys for the states asserted the aforementioned benefits of regulatory systems but could not substantiate their claims in any way that proved compelling to the court.¹¹⁸

      On the other hand, there is plenty of evidence for the negative economic effects of alcohol bottlenecking. For consumers, the three-tier system restricts the diversity of available products and forces them to pay more.¹¹⁹ Conservative estimates put the distributor markup on alcohol at somewhere between 15 and 25 percent,¹²⁰ with some appraising it as high as 30 percent, earning wholesalers the title of “fat cats” from small alcohol producers.¹²¹ As Deb Carey of Wisconsin’s New Glarus Brewing put it, “This debate boils down to the fact that the wholesalers do not want a drop of beer going to market . . . without them making their 30 percent profit from it. That’s it.”¹²²

      In fact, as analysts cited by the Federal Trade Commission concluded, the alcoholic beverage industry in the United States has “the most expensive distribution system of any packaged-goods industry by far, with margins more than twice those in the food business.”¹²³ Additionally, by limiting the number of businesses that are issued permits at each tier and prohibiting out-of-state producers like Juanita and David from selling within their borders, states can control the types and amounts of alcohol sold. Bottleneckers assert that these burdens to the market are outweighed by the benefits to public health and safety, but, as discussed, little evidence exists to suggest that the three-tier system promotes such benefits.¹²⁴

      Small family producers like Juanita and David feel the harm caused by the bottleneckers. Despite the increased demand for a greater diversity of products, small producers struggle to place their products on the shelves.¹²⁵ Burdensome state laws continue to make interstate commerce difficult, and distributors have little incentive to expend efforts and resources to distribute products with comparatively small returns on investment. Although Internet wine sales and microbreweries have expanded options for some consumers, these products represent a tiny fraction of the alcohol market and pose little threat to the dominant position of distributors, which continue to wield their considerable clout to maintain that dominance.¹²⁶

      BOTTLENECKERS OF A DIFFERENT BRAND

      As will be demonstrated in the chapters that follow, distributors are not alone in their use of government levers for personal gain. Although our use of the term bottleneckers originates from the actions and effects of alcohol distributors, it is an appellation that aptly describes many interest groups that enlist the power of the government to establish an economic advantage through occupational licensing.

      When describing a licensing system for the alcohol industry, the authors of Toward Liquor Control warned:

      Under the license system, the will to survive permeates every department of the trade, and the means to press a tenacious fight for survival are abundant. As proposals to dismember any part of the liquor selling business become more threatening, the entire trade combines more solidly to protect itself. In brief, a licensed liquor trade, once established, cannot easily be dislodged.¹²⁷

      The following chapters show that Fosdick and Scott might as well have been describing occupational licensing across almost all occupations. Some of the licenses we chronicle—such as those in interior design—are new enough that we can see how the genesis of the law was entirely a product of creative and intensive lobbying by industry representatives, rather than consumers asking for protection and relief from harm. Other licenses—such as those in cosmetology—have existed for decades, their precise origins often lost to the passage of time. Yet the bottleneckers’ efforts to preserve their licenses at the present time illustrates all too well how a bottleneck, in any occupation, “once established, cannot easily be dislodged.” In chapter 2, we see both how a license for selling a product to dispose of the dead is brought to life and how bottleneckers fight for the license’s survival when someone attempts to kill it.

       CHAPTER 2

       Casket Cartels

       Robbery without a Pistol

      Death is big business in the United States. Each year, Americans arrange more than two million funerals for family members and friends.¹ Almost twenty thousand funeral homes handle most of those funerals, resulting in a $16 billion industry.² On average, families spend between $8,000 and $10,000 for funeral and cemetery costs.³ Of all the elements of a funeral—flowers, music, burial clothes, transportation, the grave plot, and so forth—the single-most-expensive item is typically the casket.⁴ Average casket costs hover around $2,000 but can easily extend up to $10,000, and sometimes twice that, for ornate hardwood caskets equipped with inner-spring mattresses, satin linings, and hermetic seals. Such prices yield big profits for funeral businesses.⁵ Funeral home customers pay markups of anywhere from 250 to 600 percent.⁶

      In 1998, Pastor Nathaniel Craigmiles of Chattanooga, Tennessee, was one of those customers. For his mother-in-law’s funeral, Pastor Craigmiles and his family paid $3,200 for a canary-yellow casket that they purchased from a local Chattanooga funeral home. A few months later, while traveling in New York, he was stunned to find an identical casket for sale at a casket retailer for $800.⁷ Like most consumers, the pastor knew little about the economics of the death-care industry, even though he had ministered to many parishioners as they grieved the loss of loved ones. His own experience compelled him to research the industry; what he found was bottleneckers of what he called “criminal proportions.”

      BUILDING MONOPOLIES IN DEATH CARE

      Up until the past hundred years or so, American funerals were fairly simple affairs.⁸ Embalmings and viewings took place in people’s homes, and parlor doorways were purposely built wide enough to allow a coffin to pass through.⁹ Furniture makers manufactured coffins as a side business, and some of them soon began serving as undertakers, or those who would “undertake” to prepare a body for burial.¹⁰ Near the end of the nineteenth century, as funerals started becoming more elaborate and the people who worked at them more specialized, companies sprang up to make coffins.¹¹

      With the funeral home emerging as the primary service provider for the preparation and disposition of the dead, undertakers organized their trade so that they could control funeral prices.¹² They did so, in the words of the National Funeral Directors Association, to “protect themselves from excessive and therefore harmful competition from within their own ranks . . . [and to] bring a sense of professionalism to what had formerly been for many a mere trade or sideline.”¹³ The first formal organization of undertakers was the Undertakers Mutual Protective Association of Philadelphia, founded in 1864.¹⁴ In most of the major American cities during the period from 1865 to 1880, undertakers formed associations for the purposes of mutual protection.¹⁵

      State-level undertakers’ organizations formed soon thereafter; the first of them in Michigan.¹⁶ From the beginning, associations in states, like those in the cities, were formed to advance the economic interests of their members by protecting them from competition.¹⁷ The founding documents of Michigan’s Association of Funeral Directors, for example, stated its purpose as “mutually disseminating the most correct principles of business management, the best methods of protecting our own interests in professional practice, and the general good of all recognized legitimate undertakers.”¹⁸ The various city and state undertakers’ СКАЧАТЬ