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A proposal to ban brewers from buying wholesale beer distributors in Wisconsin has won a key legislative vote, even as both the state's small craft brewers and the world's largest beer maker say it would restrict competition.

The legislation, approved Tuesday night by the Legislature's Joint Finance Committee, is designed to stop Anheuser-Busch from buying wholesale distributors, say its supporters, including a beer wholesalers lobbying group. Opponents say those fears are exaggerated, with craft brewers saying the legislation would hamper their growth prospects.

Most of the nation's beer is sold by brewers to independent wholesalers, which earn a profit by reselling the beer to supermarkets, taverns and other retailers. That three-tier system has operated since Prohibition's repeal, and was created to prevent brewers from forming monopolies making, distributing and selling beer - which existed before Prohibition.

In 2010, Anheuser-Busch won a court challenge to an Illinois law that barred out-of-state brewers from owning beer wholesalers while exempting small, Illinois-based craft brewers. St. Louis-based Anheuser-Busch, part of Belgium-based Anheuser-Busch InBev, successfully argued that the law was unfair because it only affected out-of-state brewers.

The proposal endorsed by the Joint Finance Committee is needed to avoid a similar court challenge in Wisconsin, and to prevent Anheuser-Busch from buying distributors, says Tim Roby, spokesman for the Wisconsin Beer Distributors Association. The proposal also is supported by MillerCoors LLC, Anheuser-Busch's chief rival, and groups representing retailers, including the Tavern League of Wisconsin and the Wisconsin Grocers Association.

The legislation prohibits brewers from buying wholesale distributorships, while allowing brewers that produce up to 300,000 barrels annually to do their own wholesale distribution.

Some Wisconsin craft brewers do their own wholesale distribution. Others sell their beer primarily through wholesalers, while also doing limited self-distribution by selling beer at festivals or filling emergency orders from taverns. The state's largest independent craft brewer, New Glarus Brewing Co., sold about 92,000 barrels in 2010.

Chicago-based MillerCoors, which operates a brewery and eastern division headquarters in Milwaukee, supports the proposal because it shares concerns with wholesale distributors about the possibility of Anheuser-Busch buying wholesalers throughout the country, said company spokesman James Wright.

Anheuser-Busch opposes the proposal, saying it reduces competition, said Terri Vogt, vice president of communications. Brewery-owned wholesalers give brewers competitive access in difficult markets, and allow brewers to provide financial help to wholesalers, the company said.

Anheuser-Busch became a minority owner of Wisconsin Distributors, in Appleton and Sun Prairie, in 2006. Since then, Wisconsin Distributors has expanded its business and hired more employees, the company said.

The provision that allows smaller brewers to self-distribute is designed to convince legislators that craft brewers are being protected, said Jeff Hamilton, president of Glendale-based Sprecher Brewing Co.

However, self-distribution is often less efficient than selling beer through a wholesaler, said Hamilton, Wisconsin Brewers Guild president. As wholesalers have consolidated, there are fewer choices for craft brewers, who often find that larger wholesalers are devoting less attention to selling smaller-volume craft brands, Hamilton said.

Instead of self-distributing, or relying on their current distributors, some Wisconsin craft brewers have discussed the possibility of joining forces to buy or start a beer wholesaler, he said. But the legislation would prohibit that approach, which could restrict future growth for craft brewers, Hamilton said.

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