Nick Fede Jr., Executive Director, Rhode Island Liquor Operators Collaborative.
By Nick Fede, Jr., Director, Rhode Island Liquor Operators Collaborative
Every so often, a familiar argument resurfaces: the three-tier system is outdated, inefficient, or an obstacle to consumer choice. As someone who represents Rhode Island’s independent liquor retailers — and who spends every day working at the intersection of regulation, public safety, and small business — I can tell you plainly: The three-tier system is not an accident of history. It is a deliberate framework with a clear purpose, and it remains essential to a fair, safe, and competitive alcohol marketplace.
To understand why the three-tier system matters, you have to understand why it exists in the first place.
After the repeal of Prohibition in 1933, the United States faced a critical decision. Alcohol was legal again, but the excesses that had fueled the temperance movement — tied houses, aggressive over-consumption marketing, price manipulation, and corruption—were still fresh in public memory. Before Prohibition, large producers often owned or controlled saloons outright, forcing them to sell only certain brands, encouraging over-service, and using alcohol as a loss leader to crowd out competitors. The results were predictable: unsafe consumption, monopolistic behavior, and communities bearing the social cost.
The three-tier system was designed as a way to mitigate the problems that led to Prohibition while allowing for a competitive and responsible marketplace for beer, wine, and spirits. Its core idea is simple: keep producers, wholesalers, and retailers structurally separate. Manufacturers make the product. Wholesalers distribute it. Retailers sell it to consumers. Each tier is independently licensed, regulated, and accountable. No single tier dominates the others, and no one entity controls the entire pipeline from production to point of sale. That separation is not bureaucratic red tape — it is the guardrail.
First and foremost, the three-tier system promotes public safety. By eliminating direct financial control between producers and retailers, it reduces incentives to push excessive consumption. Retailers are responsible for checking IDs, refusing service, and operating responsibly in their communities. Wholesalers ensure that products entering the market meet regulatory standards. Producers focus on quality and innovation. Each tier has a defined role, and regulators know exactly where responsibility lies.
Second, the system protects competition, especially for small businesses. Rhode Island is home to hundreds of independent package stores—family-owned operations that employ local residents and reinvest in their communities. Without the three-tier system, those stores would be at the mercy of vertically integrated giants that could manipulate prices, limit product access, and squeeze out independents. The result would be less choice for consumers, with market control concentrated in the hands of a few national or global corporations.
The irony is that many of the loudest critics of the three-tier system claim to champion “free markets,” while advocating for structures that would actually reduce competition. A truly competitive market requires rules that prevent domination. The three-tier system does exactly that.
Third, the system ensures transparency and accountability. Alcohol is not an ordinary commodity. It is a regulated product with real social costs if mishandled or misused. The three-tier framework allows states to track products, collect taxes efficiently, and enforce compliance with laws. When something goes wrong — whether it’s a labeling issue, a recall, or an enforcement matter — regulators know where to look. That clarity protects consumers and legitimate businesses alike.
It’s also worth noting that the three-tier system has proven remarkably adaptable. It has accommodated craft breweries, small distilleries, and boutique wineries. It has evolved with changes in consumer taste and production methods. What it has not done — and should not do — is abandon its foundational principles in favor of short-term gains or corporate pressure.
Calls to weaken or dismantle the three-tier system are often framed as modernization. In reality, they are about consolidation. They are about allowing the biggest players to control more of the market, at the expense of local businesses and community oversight. Once that door is opened, it is extraordinarily difficult to close.
In Rhode Island, we take pride in our independent retailers. They are neighbors, sponsors of Little League teams, supporters of local charities, and stewards of responsible alcohol sales. The three-tier system is what allows them to compete on a level playing field and serve their customers with integrity.
The three-tier system exists because history taught us hard lessons about what happens when alcohol is controlled by too few, sold too aggressively, and regulated too loosely. Those lessons are still relevant today.
Nick Fede Jr. serves as RILOC’s Executive Director, American Beverage Licensees’ Vice President (Off-Premise) and is a third-generation liquor retailer.
