Wine Without Borders

Wine Retailer News: The Reality of On-Line Sales to Minors

Weekly Commentary
THE REALITY OF ON-LINE SALES OF ALCOHOL AND MINORS

Alcohol retailers and wineries (both online and brick and mortar) as well as shipping companies need to do a better job of assuring that their products are not sold to nor arrive in the hands of minors. As a new North Carolina Chapel Hill Study released this week showed, minors can too easily buy and obtain alcohol online. The upside of the results of this study is that the problem, the the extent that it exists in the real world, can easily be addressed.

Wineries and retailers that sell online should, if they have not already, invest in online age verification systems that work. Many already have. Still, as consumers continue to migrate to online commerce, more wineries and more retailers should be investing in technology that helps verify that the remote buyer is of age. 

Additionally, shipping companies need to be vigorous in their training of employees who are checking IDs when delivering alcohol. A policy of continued training of drivers will pay dividends not only socially, but economically. 

However, where minors access to alcohol via Internet sales is concerned, one thing is clear: Minors don’t buy online. This crucial fact that ought to drive policy considerations and allocation of state resources on the issue of enforcement was not brought to light in the North Carolina Chapel Hill study. It should have been. Every study that looks at where minors obtain alcohol shows that “online” is never a part of the equation. A recent look at the issue by MADD (Mothers Against Drunk Driving) demonstrated that minors reported obtaining alcohol in the following ways:

1. From a parent, guardian or family member who is 21 or older (26 percent)
2. From someone 21 or older who is not related to the teen (25 percent)
3. From someone under 21 who is not related to the teen (22 percent)
4. Took it from home (10 percent)
5. Took it from someone else’s home (5 percent)

“Online” is not on the list for the simple reason that when not aided by researchers, minors have for more ready sources for quick access to alcohol, and they use them. 

In the limited number of media outlets that covered the released of the Chapel Hill North Carolina study results, too often the researchers themselves suggested or said that online sales to minors were a problem. Nothing could be further from the truth. This should indicate even to the casual observer that the motivation behind the study was to limit online alcohol sales, even though it has meant a boon for adult consumers, a new source of tax income for states and a new sales channel aiding the economic viability of wineries and retailers.

So yes, online alcohol vendors like wineries and retailers as well as the shipping companies that deliver their goods should take measures to make it difficult for minors to use the Internet to obtain alcohol. However, let’s not kid ourselves or try to kid anyone else: Minors don’t buy alcohol online.

WEEKLY NEWS FOR RETAILERS

Buying Alcohol Online? It’s Not Hard for Minors
The LA Times reports on a study out of North Caroline Chapel Hill that showed 45 out of 100 orders made by minors ended up being delivered to the minors. Click to read more…

Minors Don’t Buy Wine Online
While a recent study showed minor are, under certain circumstances, able to purchase alcohol online and have it delivered, the fact remains that minors don’t buy wine online. This blog post explains why by profiling the plight of Little Pete. Click to read more…

Pennsylvania House Committee Sends Direct Shipping Bill to a Vote in Full House: NO Retailers May Apply
The Pennsylvania House Liquor Control Committee voted 24-1 to favorably report HB 845 to the full house. The bill would allow out of state wineries, but not retailers, to ship wine to Pennsylvanians. The original bill, before being amended, would have allowed out of state retailers to ship also. Click to read more…

On Allowing Wine To Be Sold in Maryland Grocery Stores: A Perspective
A “kerfuffle” over a proposal for wine sales in groceries in Maryland exposes the various interests in play when reasonable consumer access laws are considered. Click to read more…

Wine Prices Remain Relatively Low Because of Sluggish Economy
More reporting and background on the state of the economy and where alcohol retailing fits in. Click to read more…

Posted in Retail Report, SWRA Issues | 1 Comment »

Wine Retailer News: Stabbing Your Best Customer in the Back

Weekly Commentary:
STABBING YOUR BEST CUSTOMERS IN THE BACK

We were not completely surprised, though still disheartened, to read the that the head of the most prominent wine wholesaler association in America call its best customers (retailers) black marketeers and tax cheats. In a BBC Online article, Wine and Spirit Wholesaler of America (WSWA) head Craig Wolf reacted to the idea of retailer-to-consumer shipment of wines with simple derision of wine retailers across the country, coming straight out and suggesting wine retailers cannot be trusted:

“It’s a black market because you don’t have the regulatory power to find out who is ordering from where. Once you open the door to direct shipping and you don’t go through a licensed wholesaler, you don’t know whether taxes are being paid, whether minors are getting alcohol, and you don’t know if it’s an illegal source.”

Oddly, this insulting and dismissive view of wholesalers’ most important customers comes just a few weeks after the WSWA’s annual convention at which the WSWA called for all tiers of the alcohol industry to come together and work together to achieve common interests. It’s hard to imagine that Mr. Wolf and the WSWA expects this kind of attitude to ingratiate them with retailers anywhere in the country. 

Unfortunately, this anti-retailer attitude expressed by America’s wine wholesalers is not a new turn of events. For the past two years WSWA worked hard to see passed through Congress a bill that would have stripped every American wine retailer of their constitutional guarantee to be free of state-based discriminatory laws. House Resolution 5034, introduced in 2010 was followed by H.R. 1161, introduced in 2011. The blatantly anti-retailer legislation was understood by nearly everyone as nothing more than wholesalers attempting to run roughshod over retailers, as well as producers, in an attempt to pass federal legislation that protects wholesalers from competition. It appears wholesalers have given up on passing this legislation, while their attack on retailers obviously continues.

Wholesalers successfully lobby at the state level to get protection from competition, such as out-of-state retailers shipping wine directly to consumers. This is their prerogative. However, when they try to to coat this special interest legislation in a veneer of concern for alcohol’s role in society, they come off as cynical promoters of half truths. Worse is when wholesalers come right out and accuse their most important customers, retailers, of being black marketeers and tax cheats.

Until wine wholesalers begin to treat retailers with respect, stop calling them names and release retailers from the pressure of their rhetorical and political jackboots, retailers are unlikely to give any consideration to any agenda wine wholesalers may want to bring the industry together to promote. 

WEEKLY NEWS FOR WINE RETAILERS

U.S. Alcohol Retailers Find Law Changes Hard To Swallow
In a BBC On line article that looks across the pond to evaluate the state of American alcohol regulations, American wine wholesalers tell of the dangers of direct shipping and paste the label of “bootleggers” on their best customers: wine retailers. Click to read more…

Federal Trade Commission to Review Online Alcohol Marketing
The Federal Trade Commission has asked a number of alcohol producers from wineries to brewers to retailers to hand over information about their digital marketing efforts including their Twitter “tweets”. The FTC has not, as far as is known, asked retailers to hand over any marketing materials. Click to read more…

Anti-Alcohol Watchdog Group Calls for Investigation of Campaigns to Promote Moderate Drinking
Alcohol Justice, an alcohol industry watchdog group that sometimes works hand in hand with wine wholesalers, is asking the states’ attorneys general to investigate the various alcohol beverage industry’s “Drink Responsibly” ad campaigns, calling them “cynical” and “deceptive. Click to read more

 Why Can’t the Post Office Ship Beer and Wine?
Time Magazine’s Josh Sanburn examines the history behind the current—and perhaps ending—ban on the U.S. Post Office shipping wine and beer, speaking with the Postmaster General and the Specialty Wine Retailers Association. Click to read more...

Reacting to Wine Fraud
Jancis Robinson, in the wake of the Rudy Kurniawan counterfeit scandal looks at the reaction of those both buying and selling precious and collectible wines. Click to read more…

Posted in Retail Report, SWRA Issues | 4 Comments »

Wine Retailer News: Wine and Post Office Finally Meet

WEEKLY COMMENTARY…
Wine Retailers, The Post Office and the 21st Century

On Wednesday, the U.S. Senate finally passed a bill that would reform the U.S. Post Office, a branch of the federal government that while seemingly essential, had fallen on hard times as more and more correspondence moved electronically and private common carriers took over much of the shipping business. Among the provisions in the bill was one that would allow the U.S. Postal service to ship wine from wineries and, importantly, wine retailers to the consumer. Interestingly, the inclusion of retailers in the bill almost never happened.

It should be noted that before Senate Bill 1789 becomes law, it must first pass through the gauntlet of the House of Representatives, where it could be modified significantly or even die. And if the bill passes, it must be reconciled with the Senate bill. Yet, despite the obstacles, we deem the odds of the wine shipping provision remaining in the bill to be good.

The original Senate bill did not include a provision to allow wine merchants and retailers to utilize the U.S.P.S. to ship wine. Only wineries would have be given that privilege.  The exclusion of retailers from the original bill was short-cited, but pleasing to opponents of retailer wine shipping. Yet, there was no coherent argument for leaving prohibiting wine retailers from utilizing newly granted U.S.P.S. wine shipping. In fact, by doing so, the U.S.P.S. would have been leaving significant revenue on the table as more and more consumers look to wine retailers to overcome the the fact it is often very difficult and often impossible to find the wines they want from local stores, while these wines are almost always available in other states.

These were the arguments that the Specialty Wine Retailers Association made in convincing the committees working on the bill to include an amendment that allows retailers as well as wineries to ship wine via the U.S.P.S. The inclusion of retailers in the Senate bill is important for another reason: the federal government has no business discriminating against retailers as so many states have chosen to do at the behest of wholesalers who too often control the creation of alcohol regulation in the various states for their own benefit. 

If Senate Bill 1798 passes with the wine shipping provision in tact, it will be a step toward bringing the U.S.P.S into the 21st century and will be a symbolic blow to those members of the alcohol industry that choose discrimination and protectionism over inclusion and common sense.

WEEKLY NEWS FOR RETAILERS

Senate Passes Postal Reform Bill Allowing Wine and Beer to be Shipped from Wineries and Retailers
Senate Bill 1789, which reforms how the U.S. Post Office conducts its affairs, passed the Senate on Wednesday. The bill includes a provision that would allow the U.S.P.S. to compete with Federal Express and United Parcel Service in the shipment of wine to consumers. Click to read more…

Silicon Valley Bank Issues Annual State of the Wine Industry Report
Late last week Silicon Valley Bank issued its annual “State of the Industry Report” in which the lender to the wine industry predicted a shortfall in grapes and with this short fall, along with rising demand for wine, an increase in bottle prices for California wines. The outstanding report is filled with much more is a a “must read”. Click to read more…

The Buyer Behind Costco’s Billion Dollar Wine Business
Costco’s wine buyer, Annette Alvarez-Peters , was featured on CNBC where she disclosed how she and her team choose wines for the largest wine seller in the United States. Click to read more..

Wine Wholesalers “State of the Industry” Press Conference Reveals Fear of Losing Control
At a press conference in Washington, D.C. billed as a “State of the Industry” discussion, the Wine & Spirit Wholesalers of America convened a panel to take on privatization and in the process revealed a supreme fear of losing control of the process that generates alcohol distribution regulations. Click to read more…

The New World of Online Wine
A fascinating infographic outlines and details the rise of online “flash sites” and their impact on the wine industry as more and more third party marketers make their way into the world of wine. Click to read more…

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The Wine Retail Report—April 19, 2012

April 19, 2012

Key Report Predicts Higher Grape and Wine Prices Going Forward
Silicon Valley Bank issued its annual report on the State of the Wine industry this week and predicted that conditions are ripe for an recovery for grape growers, a short supply of grapes and and increase in retail wine prices. The substantial report, which is also good reading, often sets perceptions of the industry going forward. Click to read more…

Beer & Wine Wholesalers Behind Groups Push for Voter ID Laws
Reports that the National Beer Wholesalers Association and the Wine & Spirit Wholesalers of America were important participants in the group that crafted a number of Voter ID laws across the country have many scratching their heads. Click to  read more…

Supreme Court to Rule on Legitimacy of “Grey Market” and “Grey Market Goods”
The U.S. Supreme Court will take up a case during its fall session that examines grey market imports—in this case, concerning text books. However, the case may have implications for the wine industry and retailers, many of which are involved in importing grey market wines. Click to read more…

Michigan Breweries and Wineries Want Change to Monopolistic Distribution Laws
Breweries and wineries in Michigan are hoping the committee the Governor called to consider changes in Michigan’s alcohol regulatory structure will reform the monopolistic laws in that state that protect wholesalers from competition and stifle industry growth. Click to read more…

Postal Reform Act in Congress To Be Amended to Allow Retailers to Use the USPS to Ship Wine
A managers amendment to the Senate’s Postal Reform Act will be adopted that changes the original wording of the bill from only allowing producers to use the USPS to ship wine to allowing retailers also to ship wine. The bill remains a contentious issue on Capital Hill and is a ways off from passing, but this amendment represents a victory for retailers and consumers. Click to read more…

Direct Alcohol Shipping is Not a Public Safety Problem
Michelle Minton of the Competitive Enterprise Institute makes the compelling case that the direct shipping of alcohol poses no risk for minors accessing the product and that laws based on this fear should be repealed. Click to read more…

WEEKLY COMMENTARY:
On Wine Retailers and Postal Reform
The 21st Century Postal Reform Act (S.1789) now being debated on Capital Hill is an attempt to address systemic and financial problems with America’s postal system. Cost and profitability issues have plagued the U.S.P.S. Among the provisions in the bill is one that would change Federal law to allow the U.S.P.S. to ship alcohol, something it has been prohibited from doing for years, thereby giving up that part of the shipping business primarily to UPS and FedEx.

The original bill address alcohol shipping by providing that only wineries and breweries would be able to use U.S.P.S. to ship wine. For some reason, it was determined that retailers, the entities primarily responsible for getting alcohol into the hands of consumers would not be allowed to use the system.

We recently learned that the substitute amendment to S.1789, which would make several changes to the original bill, now included provisions that allowed producers AND retailers to utilize the U.S.P.S. to ship wine. This is an important improvement on the bill for retailers, consumers and the postal service.

We applaud those lawmakers and committee staff that made a successful effort to get this new language in the amendments to S.1789. Discrimination against any one sector of the alcohol beverage trade is not the business that the federal government wants to be in. Still, as the bill is still being debated and amended and given that so many stakeholders have an interest in Postal reform, the Specialty Wine Retailers Association will be watching the process closely to assure that special interests do not try to discriminate against America’s wine retailers and prevent the postal service from reaping the economic benefits of fully participating in the alcohol shipment business.

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The Wine Retail Report-April 12, 2012

April 12, 2012

Specialty Wine Retailers Association Names New Board of Directors and Officers
Daniel Posner of Grapes-The Wine Company was elected president of SWRA and will serve a 2 year term. Click to read more

Foxy Wine Wholesalers Ask Hens To Give Up The Hen House
Wine wholesalers ask retailers and producers to work with them on a common agenda now that they lost the battle over the CARE Act and Privatization in Washington State. Click to read more

Will Washington State’s Spirits Privatization Move Wine Off Retail Shelves?
Some in Washington State are speculating that less room will be available for wine as spirits come to groceries and wine and liquor outlets in Washington, though specialty wine retailers may benefit. Click to read more

Wine Store Enhances Customer Experience With App
Hi Times Wine Cellars in Costa Mesa, California is giving their customers more information about store inventory via a new app. Click to read more

Total Wine Offers Details of Their Move Into Dallas Market
With the goal of doubling its sales to $2 Billion within five years, Total Wine is set to open its 80th store nationwide when it moves into the Dallas market. Click to read more.

Pennsylvania Senate Passes Out Wine Shipping Bill 48-0
The Pennsylvania Senate passed a wine shipping bill 48-0 recently, yet the bill has some problems. Click to read more

WEEKLY COMMENTARY
If you read the above article about Pennsylvania passing direct shipping legislation out of the Senate, you will have noted that the chief sponsor of the bill in the PA Senate, Larry Farnese, said “he was disappointed by the approval of a late-surfacing amendment that limited sales to domestic wines and excluded those from overseas.” He went on to note that the legislation shuts out “90 percent of the world’s wine” and that “the people of Pennsylvania are really getting less than what they should be getting.”

What Senator Farnese is referring to is the fact that after PA wholesalers and PA alcohol regulators got done lobbying lawmakers, the provision in the bill that would have allowed PA wine lovers to have wine shipped to them from out-of-state wine stores, Internet retailers, wine clubs and auction houses was stripped from the bill. Another way to understand this common “compromise” when direct shipping legislation is proposed is to realize that only wine retailers are able to sell imported wines in the United States. When retailers are shut out of the direct shipping market, all imported wines are shut out of the direct shipping market.

This notion of allowing domestic wines to be shipped into a state but prohibiting imported wines from being shipped to a states consumers looks like product discrimination to us. More importantly, since the PA state stores are now shipping wine to its state consumers, we know for a fact that not allowing out of state retailers to do the same is commercial discrimination and a violation of the Constitution’s dormant Commerce Clause. 

 It’s cynical. 

The news is that this bill is unlikely to pass through the PA House because in that chamber it is being tied to legislation that reforms the entire alcohol distribution and sales system in PA, which is run by state. Nonetheless, SWRA cannot support this legislation in its current form. Nor should PA consumers or other members of the alcohol beverage trade if they have any  concern for free trade and the interests of consumers.

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Getting the Facts Straight in Michigan

Yesterday Michigan’s Liquor Control Commission, in league with Michigan alcohol wholesalers, began the process of stripping their in-state retailers of the right to ship wine to Michigan residents. What has become clear from news reports only one day after HB 6644 was secretly pushed through a Michigan House Committee is that the coming slap in the face to Michigan retailers and consumers is being pursued on the basis of bad information and no research into the consequences of retailer wine shipping.

HB 6644 was introduced in response to a recent court decision in Michigan that, once again, found the state’s wine shipping laws out of compliance with the U.S. Constitution. Michigan improperly allowed its own wine merchants to ship wine to Michigan residents, but barred out of state retailers from doing the same. The State has appealed the case to the 6th Circuit Court of Appeals, but apparently has realized they have little chance of winning. So, instead of doing the proper thing for the people of Michigan and opening the state to will-regulated direct sales by out of state retailers, the Liquor Control Commission took the suggestion of wholesalers and went to work “leveling down” by barring its own wine retailers from shipping any wine.

The problem is that their explanations for why this is necessary have no basis in fact”

“if hundreds of thousands of unregulated out-of-state retailers are permitted to ship beer and wine to Michigan residents, there’s a likelihood that alcohol will be delivered to underage customers.”
Ken Wozniak, Director of Executive Services, Michigan Liquor control commission.

Mr. Wozniak is talking off the top of his head.

-Had he looked at other states that actually issue permits to out of state retailers and wineries to ship wine into a state he would have found that no more than 20% of all permits issued go to retailers, the rest go to wineries.

- Had Mr. Wozniak done a little research he would have found that no alcohol regulatory official in America and no law enforcement official in America has ever state they have a problems with underage customers obtaining alcohol from via direct shipment.

Then there is this:

” the state eventually could lose hundreds of millions of dollars in revenue that goes to school aid and other purposes. “
Ken Wozniak, Director of Executive Services, Michigan Liquor control commission.

Had Mr. Wozniak done his homework instead of passing off the wholesaler-provided talking points he would have known that in every state that begins issuing permits to out-of-state retailers to ship wine into the state, tax revenues in those states GO UP afterwards.

When businesses’ rights are taken away and when consumers’ rights to access the market are stripped, one would hope that all this is done on the basis of sound information. Not the case in Michigan.

Will Michigan officials actually look into these issues? Will the sponsors of HB 6644 ask the Liquor Control Commission to explain their misunderstandings?

Posted in State Laws, Shipping Legislation | 8 Comments »

Why Won’t Michigan Ask Questions About Wine Shipping?

It has been said that “The first step toward wisdom is asking questions”. This has always made sense to me. And I’m going to suggest that the tactic be investigated by the Michigan Attorney General’s office.

Recently the Michigan Attorney General announced they would appeal the Michigan Federal District Court ruling in the case of Siesta Village Market v. Granholm. This was the case in which Judge Donna Page Hood declared that Michigan’s unequal treatment of in-state and out-of-state wine merchants where shipping wine directly to Michigan consumers is concerned violated the commerce clause of the U.S. Constitution. Why? Because the state could give the court no compelling reason why its blatant discrimination against out-of-state business was the only way to protect state interests. The judge noted that the Supreme Court of the United States had already rejected the reasons the State of Michigan had put forth for defending their discriminatory and anti-consumer regulations.

As was pointed out yesterday in a well argued announcement, one very simple, productive and pro-consumer way of dealing with the unconstitutional nature of the Michigan laws concerning out-of-state retailer shipping into Michigan would be to simply create licenses that out-of-state retailers could obtain from the state that required them to file reports with the state on what was shipped to consumers, to assure a signature of an adult was obtained at the point of delivery, to remit sales taxes to the state and to submit themselves to Michigan legal jurisdiction. Basically, the very same conditions under which out-of-state wineries are able to ship to Michigan residents.

The upside of this approach is obvious. Consumer demand is met, consumer rights are protected. the unconstitutional nature of the Michigan law is fixed and the state raises desperately needed tax revenue from a source quite willing to pay the taxes. But that won’t happen. Why?

According to the report in the Traverse City Record-Eagle, “Ken Wozniak, director of executive services for the Michigan Liquor Control Commission, said the state appealed because the ruling ‘undermines the LCC’s licensing system for retailers.

“We don’t know who these people are or what they had to go through to get licenses in other states,’ Wozniak said.”

I have a simple suggestion for Mr. Wosniak:…..ASK!

That’s right, Mr. Wozniak. Reach out to your peers at other state alcohol agencies and ask them what a businessperson must do to obtain a retail liquor license in those other states. One presumes that Michigan has a modicum of requirements that allows a person to obtain a liquor retailers license in that state. Wouldn’t it be both instructive and less expensive for the people of Michigan to have the Michigan Liquor Control Commission simply spend a day looking at the websites of other state liquor control commissions or making calls to ask questions or penning a letter requesting information about what a retail license holder must do to obtain that license in other states, rather than actually spending hundreds of thousands of Michigan tax payers dollars litigating an appeal they know they are likely to lose?

The fact of the matter is, the ruling that the Mr. Wozniak believes “undermines the LCC licensing system for retailers” does nothing of the sort. What it does do is undermine a system that is easily altered in a way that would no longer punish consumers, drain the state of tax revenue, reduce consumer choice and all for the sake of protecting a regulatory system that for all intents and purposes is primarily responsible for enriching a small group of alcohol distributors and wholesalers who might not make a dollar or two on a wine shipped to a consumer from an out-of-state retailer.

It’s unlikely that the Michigan Attorney General’s office will actually do the sensible thing and start asking around to see if out-of-state retailer wine shipments are feasible; to see if other state’s standards for licensing retailers meet Michigan’s criteria. Michigan Attorney General Mike Cox was the man who, after the Granholm v. Heald Supreme Court decision in 2005, actually suggested, along with Nida Samona—the head of the Michigan Liquor Control Commission, that instead of passing a law allowing out of state wineries to ship into Michigan that instead the rights of Michigan wineries to ship wine to Michigan residents be revoked. That’s right. Their approach was to do what they could to destroy a growing wine industry in Michigan and rip consumers of the most basic right. Happily, they failed in this attempt.

And now it appears it will take hundreds of thousands of dollars of Michigan Tax Payers funds, the time and effort of Michigan staff attorneys and likely many months all to find out that they have again failed in their attempt to continue to offend Michigan tax payers and protect Michigan’s elected officials’ main source of campaign contributions: The Michigan wine and beer wholesalers.

Posted in State Laws, Legal Issues | 7 Comments »

Virtual Seminar for Retailer Wine Shippers

There are still a number of wine retailers that don’t understand that the shipping rules and regulations that apply to retailers are different than those that apply to wineries. In fact, retailers can ship to far fewer states. In addition, the politics that govern the area of retailer to consumer wine shipping are different in significant ways than those that govern winery to consumer shipping.

 To address this difference, ShipCompliant, the wine shipping compliance company, will be holding a VIRTUAL SEMINAR FOR WINE RETAILERS on October 23rd.

What this means is you will not have to book an airline flight, hotel and car rental in order to attend. In fact, you can attend from the comfort of your easy chair as long as you have your computer in front of you and a phone line.

In addition to SWRA participating and presenting on the issue of “The Regulatory Environment” for retail wine shippers,  Jason Eckenroth, Jeff Carroll and Jim Agger of ShipCompliant will walk participants through the various aspects of compliance with state rules and regulations for wine retailers.

SWRA HIGH RECOMMENDS that any retailer currently shipping wine or considering entering the wine shipping channel attend this important conference.

To participate CLICK HERE TO SIGN UP.

Posted in Events | 2 Comments »

Michigan Federal Court Ruling on Wine Shipping Draws Attention

A good amount of attention is being shown in the media toward Tuesday’s Michigan Federal Court decision concerning out-of-state retailer to consumer shipping in that state. As you may recall from yesterday’s post at Wine Without Borders, Judge Hood in Michigan ruled Michigan’s discriminatory, anti-consumer law was unconstitutional. She enjoined the state from enforcing any laws that prohibit Michiganders from having wine shipped to them from out-of-state wine stores.

Specialty Wine Retailers has issued a press release on the matter that can be found HERE.

Wine.com announced it will now begin shipping into Michigan in THIS press release.

Corbin Houchins covered the ruling for ShipCompliant in THIS blog post.

David Eggert of the Associated Press covered the ruling HERE

MichWine, the Consumer Michigan website, covered the story HERE

Joel Goldberg blogged about the important decision in THIS post

Wine & Spirits Daily covered the wine for consumers in THIS story.

Fermentation: The Daily Wine Blog had SOMETHING to say on the ruling.

Most folks are wondering if Michigan’s very active alcohol wholesalers will continue there anti-consumer march through the courts with an appeal or if the state of Michigan will take on consumers with the filing of an appeal. Frankly, the best thing Michigan could do for its consumers and its coffers would be to fashion rules that require out-of-state retailers to obtain a permit to ship into Michigan and require them to remit sales taxes, submit themselves to Michigan’s legal jurisdiction, require regular reporting and, in doing so, free up Michigan’s consumers to finally have access to the real American wine market.

Posted in State Laws, Shipping Legislation, Legal Issues | No Comments »

Consumers and Free Trade Win In Michigan

There is no other way to describe the October 1, 2008 decision in the Michigan case of Siesta Village Market v. Granholm as anything other than a complete victory for consumers, free trade advocates and constitutionalism. Judge Donna Hood ruled that Michigan’s discriminatory laws that allow Michigan wine lovers to have wine shipped to them from in-state wine retailers but prohibit the same from out-of-state wine retailers is unconstitutional.

Of course, this kind of ruling should sound familiar. It is essentially the same decision that the Supreme Court of the United States rendered in May 2005 when it ruled in Granholm v. Heald that the 21st Amendment does not give the state “the authority to pass non-uniform laws in order to discriminate against out-of-state goods.”

And this is exactly what the Michigan law did.

But Michigan is not alone. Among the other states that have similarly discriminatory and unconstitutional laws in place we find California, Washington, Texas, Illinois, New York and New Jersey, just to name a few.

This is the second time this year that a Federal District Court has leveled a stinging rebuke to states that ignore the desires and needs of consumers by instituting laws that discriminate against inter-state commerce. Both in his present case as well as the Texas lawsuit ruled on earlier this year, the courts leaned on the Granholm decision for authority.

It’s unlikely that either of these decisions will convince many of those in the wine community and regulatory community that the principles of Granholm do indeed apply to retailers just as they apply to wineries. Since the Granholm decision came down in 2005 a very cynical, self serving, anti-consumer attitude has infect those that claim that Granholm was only about wineries. This akin to saying that Brown v. Board of Education was only about the rights of little African-American girls to not be discriminated against in school attendance, but didn’t apply to little Hispanic girls. It’s faulty reasoning that can’t be defended.

It should also be noted that Professor Alex Tanford of the University of Indiana School of Law, the lawyer who brought this case to Michigan, should be commended for his outstanding work here on behalf of consumers, retailers and U.S. Constitution. His work led to a straightforward decision by Judge Hood.

What comes next is likely to be an appeal by the State of Michigan as well as the Michigan Wholesalers who intervened in this case. They are likely to ask for a stay of the ruling that requires the State of Michigan from enforcing laws against purchase and shipping of wine from out-of-state retailers to Michiganers. It’s unknown if the stay would be granted. Professor Tanford is sure to argue strenuously against such a blatantly anti-consumer move.

Specialty Wine Retailers Association applauds this latest decision. We continue to work to educate legislators, consumers, courts and the media about the rash of anti-consumer and anti-Free Trade laws that exist across the country and serve to benefit a small clique of very powerful economic interests who use their privileged place within the alcohol distribution system to protect themselves from competition and bar consumers from accessing the full measure of wines in the American marketplace.

Posted in State Laws, Legal Issues | 8 Comments »

Oklahoma Wine Politics—Pain in the Neck

When you spend enough time watching wine politics play out, it becomes a real necessity to be able to laugh…otherwise you’ll spend your time at the chiropractor from shaking your head back and forth in dismay.The wine politics playing out in Oklahoma are both hilarious as well as depressing.

This November, Oklahoma residents will, again, vote on the issue of winery “self distribution”. “Self Distribution” refers to when a winery sells directly to a retailer or restaurant at a higher price than if they sold their wine to a distributor first, who would then sell it to the restaurant or retailer. When the winery sells direct to the retailer, the cost of the wine to the consumer is either the same as what it would be if the wholesaler sold it or potentially less.

For small wineries in particular (and that’s all Oklahoma has) self distribution is very important if only because it places the destiny of their business in their own hands, rather in the hands of distributors who may or may not distribute their brand and, if they choose to, may or may not actually sell it.

In 2000, OK voters agreed by a 2 to 1 margin to allow OK wineries to self distribute. Now, as you might imagine this didn’t sit well with OK wholesalers. Though the monetary loss they would suffer as a result of OK wineries not using them would be minuscule at best, it’s the principle of the matter: Free markets in wine just don’t sit well with wholesalers who have completely controlled wine distribution in OK for decades and liked it just the way it was.

So, upon passage of the self distribution law the OK distributors filed suit. Now get this:

They argued that the law DISCRIMINATED against out-of-state wineries that were not also allowed to self distribute into the state. And it was true. The law did discriminate against out-of-state wineries. They were not allowed, as OK wineries were, to sell direct to retailers and restaurants and bypass the wholesalers.

Before you start feeling all warm and fuzzy about OK distributors who appear to just be looking out for wineries, you need to keep in mind that this lawsuit was brought not to force the state to allow out of state wineries to self distribute, but rather to kill the new law altogether, making sure that OK wineries would be stripped of the right voters had just given them and would be forced, once again, to live under the thumb of distributors.

The irony of course is that distributors don’t care about fairness, the commerce clause or out-of-state wineries being able to access a freer market. So, give them points for creative duplicity.

Well, the voters of OK get vote again in November on the issue of self distribution for wineries. But if you look at this new potential law closely, I promise you’ll end up at the chiropractors office.

The new law would allow both in-state and out-of-state wineries making less than 4,200 cases of wine per year to self distribute to retailers and restaurants in OK. GREAT!!

However, the law says that they may only do so with vehicles that they own themselves. They may not use any other types of carriers.

In addition, the bill says that if any part of this law is deemed unconstitutional, the rest of the bill will be invalidated and wineries may no longer self distribute.

This potential new law is so clearly discriminatory against out of state wineries, and on a number of levels at that, that if challenged it should most certainly be invalidated by the courts.

So…Wait for it…..Do you think the OK distributors will challenged the law once the voters approve it?…And they will approve it!

Here’s the problem. The part of the law that requires wineries use their own vehicles to get wines to retailers is impractical for out-of-state wineries at best and, therefore, discriminatory at worst. When challenged, the state will have to argue that there is no less discriminatory way for Oklahoma to regulate the sale of wine in the state and no less discriminatory way for them to collect taxes on the wine sold. They won’t be able to show this. And the law will be invalidated.

Add to this the fact that the 4,200 case limit on those that are allowed to self distribute under the law and you have another reason to challenged the law since the vast majority of OK wineries fall under this limit. A similar limitation is being challenged in MA.

But here’s the real kicker. If anyone doubts that the requirement that wineries must use their own trucks to to deliver their wine to retailers and restaurants is not in place for purely discriminatory reason, all they have to do is read the following:

“Brad Naifeh of Central Liquor cautioned lawmakers against the bill. Some large winemakers from other states, such as California’s E&J Gallo, sell wines under hundreds of labels that produce less than 5,000 gallons per year, said Naifeh, and could use the proposed law to flood the market in Oklahoma without using a wholesaler.

Morgan said the bill requires both in-state and out-of-state wineries who sell directly to retailers in Oklahoma to transport their wines in vehicles owned by the winery, and requires such deliveries to be transferred directly from the winery to the retailer. Such vehicles must obtain the necessary licensure and permits from the Oklahoma Alcoholic Beverage Laws Enforcement agency. Morgan questioned if it would be cost-effective for an out- of-state winery to drive a few thousand gallons of wine all the way to Oklahoma.”

Morgan is Rep. Danny Morgan, the Oklahoma State Representative who originally introduced the bill that will be considered by voters in November. Rep. Morgan comes straight out here in the article from the  Oklahoma City Journal Record and says that the bill will discourage out-of-state wineries from self distributing. The bill is clearly written specifically to deter out-of-state wineries from self distribution, even though on its face it allows it. If challenged, it’s going down…and everyone knows this.

Oklahoma wineries are generally supporting this new law and recommending its passage. And why shouldn’t they? It gives them the most basic right any producer of a product should have: the ability to control the sale and distribution of their own product. But they should know that they are heading for a surreal situation where once again the OK distributors end up stripping this basic right away from wineries on the premise that it is discriminatory against the very out-of-state wineries that distributors will do whatever it takes to discriminate against. Has anyone asked OK distributors if they plan to challenge this law in court if it passes? Someone should.

My neck hurts.

Posted in State Laws, Three Tier System, Legal Issues | 14 Comments »

7th Circuit Court Gives Wine Shipping a Boost

A very interesting thing happened on the way to Baude v. Heath

Last week Judge Easterbrook of the 7th Circuit Court of Appeals issued their ruling in a case that challenged Indiana’s requirements 1) wine be purchased in a face-to-face transaction before being shipped and 2) anyone licensed as a wholesaler in another state may not ship to a consumer in Indiana.

Judge Easterbrook upheld the face-to-face transaction statute but struck down the wholesaler-related requirement. But something very interesting came out of the decision that states covered by 7th Circuit decisions (including Illinois) should take note of. And that was this part of Judge Easterbrook’s ruling:

“once a state allows any direct shipment, it has agreed that the wholesaler may be bypassed.”

We think this is a significant statement on the part of the Judge.

We think it makes perfect sense.

We think it meshes with the Constitutional principles enunciated in Granholm  v. Heald

And we think it demonstrates the Constitutional invalidity of Illinois’ law that prohibits out of state retailers from shipping to Illinoisans, while allowing in-state retailers, in-state wineries and out-of-state wineries to ship to Illinoisans.

Posted in SWRA Issues | 4 Comments »

Illinois and its Payoffocracy

Since 2005 when Illinois Governor Rod Blagojevich declared it so, September is Illinois Wine Month in that state. That month is coming up and the outstanding Illinois wine industry will get some well deserved recognition. The industry has come a tremendous distance in the past 20 years producing outstanding wines and delivering Illinoisans and visitors with a new attraction.

It’s an unfortunate occurrence however, that this will be the first Illinois Wine Month since the Illinois legislature decided to punish its most successful wineries. A law was passed in 2007 and took effect this past June that prohibits Illinois’ largest wineries from “Self Distributing” wine to retailers and restaurants. Up until this past June, Illinois’ most successful wineries, Galena and Lynfred, as well as every other winery in the state, had been able to choose to sell their wines to wholesalers for distribution to retailers and restaurants or they could have sold their wine directly to restaurants and retailers. House Bill 429 changed the law so that only wineries making less than 25,000 gallons  of wine per year would be allowed to bypass the wholesalers and sell directly to restaurants and retailers on their own. And even then, they can only sell 5,000 gallons per year in this manner.

Because states may not discriminate against out of state wineries, they too may sell directly to Illinois retailers and restaurants directly—if they make less than 25,000 gallons per year.

25,000 gallons amounts to a little over 10,000 cases of wine annually. The 5,000 gallons of wine wineries under this production cap may sell amounts to a little over 2,000 cases.

It is of course true that there is no legitimate public policy justification for shutting out Illinois’ largest wineries from the self distribution channel and forcing them to use very expensive wholesalers to distribute their wine. None. The only reason this provision is in place today is to serve to protect Illinois’ obscenely politically well connected alcohol wholesalers from competition.  Illinois wholesalers have been able to purchase a near monopoly on distribution of wine in Illinois to the detriment of Illinois wineries, Illinois retailers, Illinois restaurants and Illinois consumers.

How could this be possible?

In 2007 alone Illinois alcohol wholesalers contributed nearly $700,000 to state political campaigns—more than $1,900 per day in political payoffs contributions. The Associated Beer Distributors of Illinois alone contributed $460,000 of the $700,000, making them the single largest individual contributor in Illinois in 2007.  Between 2000 and 2006, Illinois alcohol wholesalers contributed more than $5.7 million dollars to state political campaigns.

This is how a completely unjustified new law with no visible public policy benefits gets enacted and how Illinois’ most successful wineries get punished. All it takes is money.

Were the state of Illinois not a Payoffocracy and instead a real democracy, Illinois wholesalers would not be protected from competition and would be forced to demonstrate their usefulness to the very wineries that are now forced by law to use their “services”. It should also be noted that were the services of Illinois wholesalers in anyway an absolute necessity to Illinois wineries or to out-of-state wineries and if Illinois wholesalers were capable of competing without economic protection from the state, they would never have forced this repugnant law on the state.

It’s worth noting how the Illinois Beer Wholesalers Association and other supporters of HB 429 justified this legal abortion of a law. Donna Spagnola, chairman of the Board of Directors of Associated Beer Distributors of Illinois said, It’s a safety issue. What happens when you ship things direct is you lose that ability to trace it. It (distribution) addresses quality and freshness issues. It ensures the product is rotated, ensures you don’t have tainted products.”

You know what Ms. Spagnola is talking about when she discusses things like “the ability” to trace wine don’t you? She’s talking about the filing of a piece of paper with the state. Thank God we have alcohol wholesalers to carry out the complex task of filling out paperwork and putting it in an envelope, stamping it and carrying it to the mail box.

So, as Illinoisans and Illinois wineries enjoy their well deserved recognition via Illinois Wine Month in September, they also might take a moment to appreciate the price the state pays and its residents pay in integrity and honesty in order to get wines to market.

Posted in State Laws, Three Tier System, Legal Issues | No Comments »

The Road To Reason and New Orleans

The road to reason and commonsense is often twisted and curvy. Take the continuing effort to bring wine sales into the 21st century.  This effort most recently lead to hot and sweltering New Orleans where the National Conference of State Legislatures held their Annual Conference. Along with literally hundreds of other topics and issues, direct shipment of wine was on the agenda in the form of a session entitled, “What Hath Granholom Wrought”.

Specialty Wine Retailers Association attended the Conference and the “Granholm” session in order to meet those people who find themselves interested both in the issue of direct sales of wine as well as legislation.

The panel consisted of  Tracy Genesen of Kirkland & Ellis and one of the leading wine lawyers in America, Steve Gross from the California Wine Institute , Stephen  Diamond of the University of Miami School of Law and Associate General Counsel Karin Moore of the Wine and Spirits Wholesalers of America. The panel was moderated by New Mexico Senate Majority Leader Michael Sanchez.

Of late, the rhetoric of those opposed to adults ordering wine from retailers outside the state has hardened into a fairly simple and predictable refrain: “they want to tear down the system that has worked for more than 75 years.” This idea was repeated, again, by the WSWA’s Moore and Professor Diamond.

It is, and always has been, telling that opponents of access to wine and consumer rights tend not to make a positive argument for denying these things, but rather try to cast retailers and direct shippers in the light of barbarians at the gate, wanting only to tear something down. It’s usually necessary to explain that barbarians rarely ask to be taxed, to be subjected to legal and regulatory jurisdiction and to be required to file reports with the state at who’s gates they stand. 

The debate over direct shipment of wine to consumers will now move down another road and stop at another venue where the benefits of commonsense and reason will be again be unfurled for another audience.

Posted in Three Tier System, Events | No Comments »

How Texas Wine Consumers Can Respond

In the comment section of a the previous post on the current state of wine shipping in Texas, Josh made a simple request:

“I wish you would also publish information on how consumers can fight against this kind of industry abuse. Where can we donate money? Who are the politicians in Texas supporting this anti-competitive thrust?”

The fact is, no organization in America besides Specialty Wine Retailers Association is actively standing up for adult consumers who wish to access wines their local wholesalers won’t bring into the market and provide to retailers for resale. Specialty Wine Retailers Association is the only organization in the United States, let alone Texas, that is working on behalf of adult consumers and fine wine retailers to overcome the discriminatory laws that alcohol wholesalers spend millions of dollars to keep in place.

SWRA litigates, lobbies and educates on this issue in states across the country, including Texas.

Consumers who want to join the effort to put an end to blatantly protective and discriminatory laws that block retailers and adult consumers from doing business can DONATE to Specialty Wine Retailers in in amount BY SIMPLY CLICKING HERE.

SWRA is largely funded by retailers of all stripes from across the country. They include brick and mortar retailers, Internet wine retailers, wine clubs and auction houses. But this organization has also seen numerous consumers who are fed up with “protection politics” step up and donate to this cause.

Yet while SWRA is outspent by wholesalers at ever turn and while this battle is enormously expensive to fight, consumers do have one tool at their disposal that costs them nothing and that does make a difference: Their Pens.

If you live in a state that prevents you from purchasing wine from an out-of-state wine retailer and if you are fed up with wholesalers telling you to sit down, shut up, and like the pitiful selection of wines they provide you with, then pick up your pen and write your state legislators and tell them your thoughts. Finding their email o the Internet is simple. Writing an email is simple. Telephoning them is simple. The more people they hear from on this matter, the more likely they will be to listen when the issue comes before them. And the issue will eventually come before them.

As for Josh’s question concerning which legislators in Texas support anti-competitive laws in Texas, the best indication is to look at which legislators voted for Senate Bill 1229 in 2007.

This bill was passed at the behest of Texas alcohol wholesalers who thought that by implementing a law that restricts Texas retailers from shipping wine anywhere outside the county in which their store resides they would be able to thwart a lawsuit that SWRA had brought against the state for its unconstitutional discrimination against out-of-state retailers. The judge in our Texas lawsuit correctly noted that this desperate attempt by wholesalers and their protectors in the Texas legislature did nothing to overcome the discriminatory nature of the Texas law.

Those members of the Texas Assembly that voted for this anti-consumer bill include:

Allen; Alonzo; Anchia; Anderson; Bailey; Berman; Bolton;
Bonnen; Branch; Brown, F.; Burnam; Callegari; Chavez; Cohen; Coleman; Cook,
B.; Cook, R.; Crownover; Davis, J.; Davis, Y.; Delisi; Deshotel; Driver; Dukes;
Dunnam; Eiland; Eissler; Elkins; England; Escobar; Farabee; Farias; Farrar;
Flores; Flynn; Frost; Garcia; Geren; Giddings; Gonzales; Gonzalez Toureilles;
Goolsby; Guillen; Haggerty; Hamilton; Hardcastle; Harless; Harper-Brown;
Hartnett; Heflin; Hernandez; Herrero; Hilderbran; Hill; Hochberg; Hodge;
Homer; Hopson; Howard, C.; Howard, D.; Hughes; Isett; Jackson; Jones; Keffer;
King, P.; King, S.; King, T.; Krusee; Kuempel; Latham; Laubenberg; Leibowitz;
Macias; Madden; Mallory Caraway; Martinez; Martinez Fischer; McCall;
McClendon; McReynolds; Menendez; Merritt; Miles; Miller; Morrison; Murphy;
Naishtat; Noriega; O D’ ay; Oliveira; Olivo; Orr; Ortiz; Otto; Parker; Patrick;
Paxton; Pen˜ a; Pickett; Pitts; Puente; Quintanilla; Raymond; Riddle; Ritter;
Rodriguez; Rose; Smith, T.; Smith, W.; Solomons; Strama; Straus; Swinford;
Taylor; Thompson; Truitt; Turner; Van Arsdale; Vaught; Villarreal; Vo; West;
Woolley; Zedler; Zerwas.

In the Texas Senate, every member voted YES to this anti-consumer bill, save for Senator Estes.

So to answer Josh’s question about who supports anti-competitive and anti-consumer legislation concerning wine shipping: JUST ABOUT EVERYONE!

How could this be the case? Since the year 2000, Texas alcohol wholesalers have given more than $7.5 million in contributions to Texas political campaigns, an amount that dwarfs the contributions by wholesalers in every state in the Union for that same time frame.

Posted in Shipping Legislation, Legal Issues | 2 Comments »

The Strange Case of Texas

For two years since Specialty Wine Retailers Association opened its lawsuit against the state of Texas challenging the constitutionality of its ban against out-of-state retailer shipping to Texans, the state has remained open to shippers. The mechanism by which consumers were still able to procure wines from out-of-state retailers was an agreed to preliminary injunction. Not only did the PI allow retailer to continue to serve their numerous customers in Texas, but it assured that Texas could still procure the thousands of fine wines not available to them due to the state’s wholesalers only bringing a fraction of the wines available into the state.

That agreed to PI is no longer in effect and, due to the January decision (Siesta Village Market v. Perry) in our case by a Texas District Court Judge, a strange situation has arisen.

Properly, the Texas judge ruled that the 2005 Supreme Court decision Granholm v. Heald did indeed apply to retailers as well as wineries. This meant the principle in Granholm, that a state may not discriminate against out-of-state economic interests to favor its own, applies retailers, a position most wholesalers and state attorney generals opposed. However, the judge also ruled that Texas may require out-of-state retailers to purchase the wines they intend to ship into the state only from Texas wholesalers.

In response to this ruling, the state of Texas issued the following announcement:

“The judge ruled that once receiving the permit, out-of-state retailers must also abide by relevant Texas laws, such as the one that mandates that all retailers purchase their product from a Texas wholesaler. In turn, they are then able to do whatever the law allows Texas retailers to do, such as shipping wine directly to consumers in Texas.

“Therefore, effective immediately, out-of-state retailers may not ship wine directly to Texas residents without obtaining the relevant Texas retailer’s permit. Since 2005, out-of-state wineries have been eligible for an Out-of-state Winery Direct Shipper’s Permit. In accordance with the court ruling, out-of-state are now eligible for a Wine Only Package Store permit.

“Be aware that purchasing product from a Texas wholesaler could jeopardize the permit held by an out-of-state retailer in their home state. Out-of-state retailers should check with their home state alcohol regulatory agency to find out if they are authorized to purchase product from a Texas wholesaler.”

Suffice to say, out-of-state retailers must consult with their lawyers before continuing shipping to Texans because the situation that currently exists is, in a word, strange.

1-Texas has invited out-of-state retailers to apply for a Texas Wine Only Package Store Permit.

2-The Permit allows one to ship to Texans, but requires Retailers buy wine from TX wholesalers

3-Obtaining such a permit will in most states violate the terms of their current permit

4-Texas is disallowed from issuing permits to business that are in violation of the law, which they would be if they obtain a Texas Wine Only Package Store Permit.

In the Texas District Court decision, the judge acknowledged that his remedy, allowing out-of-state retailers to obtain a Texas retailer permit, was “somewhat awkward”. This statement still remains the Understatement Of the Year.

The case is currently under appeal in the 5th Circuit Court of appeals and briefs have been filed by SWRA, The State of Texas, Texas Wholesalers, with Amicus briefs filed by a number of interests. More briefs are to be filed, followed by oral arguments, likely in the fall.

It is likely that most retailers will discontinue shipping to Texas until this case and the law is clarified. This is  a real loss to Texas consumers. With Texas wholesalers unable and unwilling to provide access to many of the wines Texans used to procure from out-of-state retailers, consumers will be at the mercy of the Wholesalers who will decide exactly what wines they believe Texas consumers should be able to access and nothing more.

When there were a limited number of American wineries and a limited number of imported brands and when Americans’ interest in wine was itself limited, this oligarchic arrangement was not terribly distasteful. But today, when literally many thousands of wines are available to Americans and when American interest in wine has exploded, the arrangement that exists is nothing less than anti-consumer and unethical, not to mention highly unAmerican.

Texas wholesalers, in their briefs filed in the Texas case, have suggested that all direct shipping be made illegal  in the state, including shipping from Texas retailers to Texas residents, essentially putting Texas consumers at the mercy of their local stores or forcing them to drive many miles to obtain wines they may want. Not the best situation for consumers nor for a country where energy is increasingly expensive.

The wholesalers have taken the position that consumers are simply asking for too much in their desire to obtain wines that aren’t provided to them through the oligarchic system. Craig Wolf, CEO of the Wine & Spirit Wholesalers Association recently noted, “Most Americans were satisfied with the system as it is except for a small, very vocal segment who say they can’t get their bottle of 1997 whatever.”

You don’t see this kind of disdain for consumers from retailers, rather just from wholesalers. However, wholesalers don’t ever deal directly with consumers, so this dismissive attitude is perhaps best explained by the wholesalers’ ignorance of the consumers and the current state of the American wine market.

Posted in State Laws, Three Tier System, Legal Issues | 14 Comments »

Unintended Consequences

Maybe the motto should be: “Cogitate before you legislate”.

This is the lesson that a number of people might want to take away from bad direct shipping legislation in California and Illinois that brought with it unintended consequences.

ILLINOIS RETAILERS
In the case of Illinois, that state’s recent ban on out of state retailers being able to ship to Illinois residents has the unintended consequence of preventing Illinois’ own retailers from being able to ship into Missouri and California.

Missouri has a reciprocity law in place for retailers that explains if another state allows MO’s wine retailers to ship in, MO will allow that state’s retailers to ship wine direct to consumers in MO. Now that Illinois has banned out-of-state retailers from shipping to Illinois residents, the reciprocal arrangement the two states had shared up until June 1st is no longer in existence. The Illinois legislature just cut off its own retailers from a lucrative neighboring market.

Illinois retailers will face the same fate with regard to CA come January 1, 2009. That’s the date when an agreement between the CA Attorney General and litigants in a lawsuit will no longer be in force. The agreement had the California ABC NOT enforcing a ban on shipping into the state by out-of-state retailers through 2008. The CA ban was put into effect with the passage of California Senate Bill 118 passed in 2005. The law kept reciprocity in place for retail sales. Like in Missouri, Illinois’ ban on out-of-state retailers shipping into the state will lead to Illinois retailers being completely shut out of the CA market.

 CALIFORNIA WINEMAKERS SHUT OUT OF IL
Then there is the issue of CA winemakers being prohibited from shipping into Illinois. Illinois’ new anti-retailer shipping bill provides that only those winemakers in other states licensed to “produce” wine are eligible for the state’s new wine shipping permit. The intention of this bill was to protect Illinois wholesalers as much as possible from competition while not prohibiting its own wineries from shipping wine direct. In order to allow its own Illinois wineries to ship wine to Illinois resident, the state must give the same privilege to out-of-state wineries. There was no way Illinois wholesalers would make a stand against its own in-state wineries so they exacted a price for their support: ban retailers from shipping into Illinois even though they had been allowed to for 15 years.

However, it turns out that hundreds of CA winemakers don’t have a license to produce wine. That is, they don’t hold a “Type 02″ producers licenses. Rather, their wine is produced at an off-site facility and these “virtual wineries” receive “Type 17″ and “Type 20″ licenses. These licenses are essentially licenses to retail and distribute wine. They are the same combination of licenses that many Internet retailers and brick and mortar retailers receive. As a result of not having the “Type 02″ license, these winemakers will be shut out from the Illinois shipping market because they are not eligible for the new Illinois Wine Shipping License.

RETALIATORY CONSEQUENCES
Finally, there is the unintended consequence of retaliation. When California was in the process of banning out of state retailers from shipping into the state via SB 118 in 2005, legislators and others were told that other states would retaliate by passing laws that banned CA’s own substantial number of retailers from shipping into their states. During the debate over the Illinois anti-shipping legislation, HB 429, legislators and advocates of the ban brought up the fact that, “Well, doesn’t California ban out-of-state retailers from shipping into their state?!?”

California’s own legislators and those who backed the bill that banned out-of-state retailers from shipping into the state effectively played a key role in seeing millions of dollars in wine sales lost from California’s fine wine retailers and hundreds of its winemakers.

The Lesson: There are unintended consequences to poorly written, poorly thought-out and discriminatory laws.

Posted in State Laws, Legal Issues | 6 Comments »

Mmmmm..Grapes of Greed

From the Chicago Tribune—May 27, 2008

For some reason, the state legislature decided that Illinoisans should not be allowed to have wine shipped to them from Internet wine shops and out-of-state wine stores. On June 1, the law will strip Illinois wine lovers of the right to buy wine from out-of-state wine stores; that’s a right they’ve had for 15 years.

It turns out that in the course of losing your right to access the wines you want so distributors can have their profits protected, Illinois has given up millions of dollars in tax revenue that would have come from taxing Internet sales of wine. Hey, who needs a few roads fixed any way? And who needs more funding for schools? Priorities, you know?

READ THE REST HERE...

Find more information about the Illinois Anti-Shipping law here

Posted in Shipping Legislation | 1 Comment »

How Illlinois Wine Lovers Lost Their Rights

HOW ILLINOIS WINE LOVERS GOT SCREWED

In October 2007, Illinois Governor Rod Blagojevich signed HB 429 into law. Taking effect June 1, 2008, the new law prohibited Illinois consumers from buying and having shipped to them wine from out-of-state wine merchants and on-line wine stores. The new law stripped consumers of a right they had for the past 15 years. HB 429, however, explicitly gave Illinois-based wine merchants, Illinois wineries and out-of-state wineries the right to ship to Illinoisans.

The restrictions on buying wine from out-of-state retailers was demanded most ardently by Illinois wholesalers, who have given more than $6.3 million to Illinois legislators since 2000 and who benefit financially from forcing all retail sales of wine in Illinois to result from a transaction that starts with them. However, the law was also supported by most wineries inside and outside Illinois as well as Free the Grapes and the California Wine Institute. Despite being informed that the new law violated the U.S. Constitution and despite being contacted by hundreds of Illinois consumers who opposed the new restriction on consumer freedoms, the Illinois legislature passed the law anyway.

THE CONSEQUENCES
-Illinois Wine Lovers will lose access to thousands of wines that Illinois’ wholesalers do not bring into the state .

-Illinoisans will lose access to wines that might have sold out in Illinois, but are still readily available from other wine merchants across the country

-Illinoisans will lose access to thousands of wines produced by California’s virtual wineries that do not hold “producer licenses”

-Illinoisans will no longer be able to have shipped to them wines they’ve purchased at most wine auction houses across the country

-Illinoisans will have to stop purchasing wine from most retail wine clubs across the country.

-The state of Illinois has lost out on millions of dollars in tax revenue that would have resulted from taxing the sale of wine from out-of-state retailers, a condition retailers were happy to comply with.

-The state of Illinois and its residents will be exposed to the prospect of extraordinarily costly litigation in order to rectify the unconstitutional nature of the law.

WHO DID AND DID NOT SUPPORT HB 429

Supporters of the Unconstitutional and Anti-Consumer HB 429
Associated Beer Distributors of Illinois
Wine & Spirit Distributors of Illinois
California Wine Institute
Free The Grapes
Beverage Retailers Alliance of Illinois
Illinois Grape Growers and Vintners Association

Opposition to the Unconstitutional and Anti-Consumer HB 429
Specialty Wine Retailers Association
Illinois Winemakers Alliance
Consumers
Rep. Julie Hamos
Sen. John Cullerton

WHY IS HB 429 UNCONSTITUTIONAL
In 2005, the Supreme Court of the United States reconfirmed its long history of enforcing the economic non-discrimination principle of the U.S. Constitution’s Commerce Clause when it wrote in Granholm v. Heald:

“Time and again this Court has held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter…This rule is essential to the foundations of the Union. The mere fact of nonresidence should not foreclose a producer in one State from access to markets in other States…States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.”—Justice Anthony Kennedy writing for the Court in Granholm v. Heald (2005)

The basic principle of the Constitution’s Commerce Clause is that at state may not favor in-state business by discriminating against out-of-state business. This is exactly the situation that exists in Illinois after HB 429, which allows in-state wine retailers to ship wine to Illinois residents but prohibits out of state retailers from doing the same.

The principle of non-discrimination was most recently upheld by Federal Judge Stanley Fitzwater in Texas who struck down an identical anti-wine retailer scheme in that state. Judge Fitzwater relied on the ruling in Granholm v. Heald to overturn the protectionist laws in Texas.
HOW DID A LAW AS BAD AS HB 429 EVER GET PASSED?

Money.

Since 2000, Illinois wholesalers have contributed more than $6.3 million to Illinois state political campaigns. Among the 15 co-sponsors of HB 429 in the Illinois House and Senate, 13 of them count the Associated Beer Distributors of Illinois as among their top campaign contributors in 2006.

According to “FollowTheMoney.Org”, which tracks state campaign contributions, the lead sponsor of HB 429 in the House, Representative Edward Acevedo, has received $32,000 from alcohol wholesalers since 2000, including $10,000 since the legislation was introduced last year. One Senate sponsor of HB 429, James Clayborne, Jr., has received $85,000 from alcohol wholesaler interests since 2000, including $15,000 since the legislation was introduced. The lead sponsor of HB 429 in the Illinois Senate, Ira Silverstein, could count the Associated Beer Distributors of Illinois as his most generous sponsor during his last election in 2004. Since 2002, Governor Rod Blagojevich, who signed HB 429, has received more than $500,000 just from alcohol wholesalers in Illinois.

HOW TO MAKE YOUR VOICE HEARD:

There are various ways to make your voice heard. For example, you might contact any of the following who supported HB 429 and voice you distaste:

Associated Beer Distributors of Illinois: info@abdi.org
California Wine Institute: http://www.wineinstitute.org/contact
Free The Grapes: Fedup@freethegrapes.org
HB 429 House Sponsor: Edward Acevedo: eacevedoed@ilga.gov
HB 429 Senate Sponsor, Ira Silverstein: silverstein@senatedem.state.il.us

You can also find your own Representative or Senator in Illinois by going here (click on “by address”): http://www.elections.state.il.us/DistrictLocator/SelectSearchType.aspx

Posted in Shipping Legislation, Legal Issues | 5 Comments »

Discriminating Against Imported Wines

It should be clear to all those that think about the impact of the various state laws meant to discriminate against retailer wine shipping that on another level these laws disproportionately hurt imported brands.

In a number of states consumers may have wine shipped to them from American wineries across the country, but they are prohibited from purchasing wine from retailers across the country. This leaves wine lovers with an extremely limited choice in the area of imported wines. They are able to purchase only those imported wines that wholesalers in their respective states choose to carry and sell to brick and mortar retailers.

Those anti-consumer states include: WA, ID, AZ, CO, KS, MN, IA, WI, MI, IN, KY, GA, FL, SC, NC PA, NY, VT, CT, RI and soon IL.

While the number of domestic wineries has increased significantly over the past 20 years, so too have the number of wine brands imported into America. As well as the traditional wine exporting nations of France, Italy, Spain and Germany, today thousands of brands arrive on American shores from Australia, New Zealand, South Africa, Austria, Hungary, Chile, Argentina, Canada and other counties. While thousands of brands are imported into America, discriminatory state laws concerning retailer-to-consumer shipping assure that consumers only have access to a tiny percent of the wines available.

The reason for this kind of discrimination is well established: wine wholesalers have purchased legislative protection against competition.

It should be noted that this kind of discrimination against imported wines might indeed violate American treaties. Consider the principle of “National Treatment” embodied in the World Trade Organization:

“National treatment: Treating foreigners and locals equally
Imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. This principle of “national treatment” (giving others the same treatment as one’s own nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these.” (Click Here For More Info on WTO Trading Principles)

In those cases where states allow their in-state wine retailers to ship to residents but prohibit out of state retailers from shipping there is a clear violation of the U.S. Constitution’s Commerce Clause.  However, It may also be that not only in these blatantly discriminatory cases but also in those cases where only American wineries are allowed to ship into the state that there are violations of international treaties.

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