Gregory A. Hall

@gregoryahall

FRANKFORT, Ky. – Anheuser-Busch's takeover of the distribution of its products in Owensboro, Ky., must be approved by state alcoholic beverage regulators under a ruling issued Friday by Franklin Circuit Judge Phillip Shepherd.

The beer maker filed the lawsuit seeking to force the state to approve the transfer of a distributor's license from the existing company in a deal that the world's largest beermaker needs to close by Dec. 31 under the terms of that deal.

Anheuser-Busch alleged that the state was delaying approval in violation of state law. State officials argued the regulators were acting under their authority and doing due diligence.

The transfer is opposed by a number of other distributors and other breweries because they argue that allowing Anheuser-Busch to act as a brewer and distributor limits competition and hurts the three-tier system that in many cases does not allow a party to operate on multiple levels of that producer-distributor-retailer system.

Anheuser-Busch has argued, however, that Kentucky law allows it to be a distributor as it has been in the Louisville area since 1978. Anheuser-Busch also argues that its distributorship hasn't hurt competition, such as craft brews getting in stores.

Shepherd gave the state a week to issue the license to Anheuser-Busch.

Shepherd, as he indicated during a hearing last week, said in the nine-page ruling that the public policy questions are involved, but Kentucky law and court rulings allow a brewer to be a distributor.

The Kentucky battle about allowing brewers to act as wholesalers has been seen recently in other states like Ohio and Illinois. But Anheuser-Busch argues the legal issue in Kentucky was decided almost 40 years ago in a 1978 court ruling that allowed Anheuser-Busch to be a distributor in Louisville — a view Shepherd adopted in his ruling.

"Since ... 1978, it appears that an uneasy truce has existed, and AB made no further attempts to expand its presence as a wholesale distributor until the application currently under consideration," Shepherd wrote.

He also said that the state regulators "provided no rational basis to deny this application, or to delay final action on the license. There are many public policy issues surrounding this controversy that deserve public debate."

But those issues of whether a request like Anheuser-Busch's is anti-competitive are reserved for legislators and alcoholic beverage regulations. "They do not provide a basis for holding this license application hostage," Shepherd wrote.

Anheuser-Busch has argued that the transfer from the Tennessee-based Hand family is a formality in which Malt Beverage Administrator Stephanie Stumbo had no discretion and that, by law, had to be decided within a 60-day period that ended Oct.17. A Nov. 21 administrative hearing is scheduled.

Responses from the state, Anheuser-Busch and opponents of the transfer were not immediately available.

Anheuser-Busch, the American arm of Belgium-based Anheuser-Busch InBev (ABI), says the deal poses no threat to consumers, citing its ownership of a Louisville regional distributorship since 1978 and the availability of craft beers in that market.

On the other side, some out-of-state breweries, in-state craft breweries and some other distributors say allowing Anheuser-Busch to operate as a producer and distributor restricts options for brewers looking to sell their product in Kentucky and, consequently, causes some out-of-state producers to avoid Kentucky.

The opponents also say a win by Anheuser-Busch will lead to a domino effect of the brewing giant trying buy distributorships across the state, reducing jobs and hurting distillers.

Reporter Gregory A. Hall can be reached at (502) 582-4087. Follow him on Twitter at @gregoryahall.