Wine Without Borders

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.

Posted in State Laws, Legal Issues | 1 Comment »

Maryland Wine Lovers Fall Prey To Wholesalers

These last three days I was at the National Alcohol Beverage Control Association’s Annual Legal Symposium. That organization of control states was kind enough to ask me to sit on a panel and discuss retailer-to-consumer shipping.

In the course of the talk I gave I made the point that retailer-to-consumer shipping was likely to come about through litigation, rather than legislation. The reason for this and the reason for telling them that SWRA or another organization would likely be coming to their state with a threat to sue them is because America’s wholesaler’s appear to have a stranglehold on each and ever legislature across the country that results from $50 million being spent in this decade alone on contributions to state political campaigns.

That kind of political largess, I told the folks in the room, results in a lot of favors and a lot of legislative deference.

If anyone needs to see what I mean by this all one had to do is look at what happened recently in the State of Maryland.

In Maryland the legislature was considering a bill that would have allowed direct to consumer shipping for both retailers and wineries whether in-state and out-of-state. If passed into law, Maryland consumers would have much greater access to wine, the state would have collected considerably more taxes on the sale of alcohol and this would have occurred with no harm done to the three tier system.

The bill was killed in committee…even though considerably numbers of legislators, consumers and industry folk supported it.

Allow me to quote liberally from an article on this fiasco from the Maryland Gazette:

“The proposals met heavy resistance from distributors and their lobbyists, who argued the state’s three-tiered system linking producers, distributors and retailers would suffer if consumers could purchase wine directly from wineries.

Wholesalers argued that wine would be more available to minors through Internet sales, and would be less profitable for the state and less regulated.”

It’s important to be very clear about the character of the claims that were made by those who opposed this legislation: They are lies. Not only would the three tier system in Maryland have been effected in no way whatsoever, but minors would not begin buying wine via the Internet. They never do.  But of course, these issues were not the main issues in play. Even the wholesalers admitted as much:

‘‘Of course it would have a direct impact on the distribution business,” said Nicholas G. Manis, deputy director of the Maryland Beer Wholesalers Association. Give Mr. Manis credit for admitting publicly that the real concerns is not for consumers or proper and appropriate regulation, but rather for the financial interests of the wholesalers.

The fact of the matter is that the wholesaler lobbyists didn’t even need to show up to these hearings. They made their appearance in front of the legislature long before when they delivered checks, a great many of them, to the lawmakers who vote on these issues.

So while it seems that in reality nothing has or will happened in Maryland on the issue of Direct Shipping, the killing of this bill does have consequences:

1. Marylanders will pay higher prices for wine.
2. Marylanders will have a diminished selection of wine to choose from.
3. The State of Maryland will not benefit from increased tax revenue.
4. The environmental benefits that flow from direct shipment vs. the Three Tier System will not accrue to the state.

Posted in SWRA Issues | 10 Comments »

Maine & Direct Shipping Education

No one ever claimed the issues surrounding direct to consumer shipping were not complicated and often difficult to understand. Add politics to the mix and you often have mistaken understandings of the issues at hand as well as very problematic interpretations of what a direct shipping bill does for a state.

Maine is a a case in point.

Yesterday the Veteran and Legal Affairs Committee of the Maine Legislature heard testimony on LD 1987, a bill that would allow Maine residents to purchase and have shipped to them wine from out-of-state wineries and retailers. The provisions of the bill are:

1. The state will issues shipping permits to out-of-state wineries, importers, distributors and retailers.
2. Wine can only be delivered to a person 21 and older and the package must display the following language: “CONTAINS ALCOHOL: SIGNATURE OF PERSON 21 YEARS OF AGE OR OLDER REQUIRED FOR DELIVERY.”
3. The annual cost of the shippers permit is $100.
4. Shippers must pay Maine taxes and file an annual report on its shipments.
5. Shippers must submit to Maine-initiated audits as well as Maine legal jurisdiction.

It’s a standard direct shipping bill.

Yet, State police Lt. David Bowler was able to say this at the hearing:

“A credit card and a few key strokes is all that would be required for an underage person to acquire alcohol if this bill passes.”

This is of course untrue. The underage person would not only have to have a credit card, but they’d also have to be at home when the wine arrives, have access to identification that demonstrates they are 21 and they’d had to be able to do this either with the consent of their parents or when their parents are not at home. Whether Lt. Bowler was simply mistaken or leaving out the crucial information in his testimony is unknown. What is known is that that he was mistaken.

Then there was the comment of Scott Solman, the owner of Maine Distributors, who said the bill would “give out-of-state companies a competitive advantage over Maine companies (that) abide by the laws and regulations that govern our industry.”

I’m unsure how a retailer who might be 3000 miles from Maine and who must charge shipping to the recipient is somehow at an advantage over Maine companies that sell wine and who are within driving distance for the purchaser. Perhaps Mr. Solman was suggesting that Maine companies will follow the law while out-of-state companies will not. This latter possibility is certainly not the case. Whether Mr. Soloman was simply mistaken or whether he choose not to explain the whole story is unclear. What is clear is that his testimony was mistaken.

Finally, the sponsor of the bill, Lynn Bromley, was mistaken in her assertion that, “in addition to benefiting Maine consumers, [the bill] would expand the out-of-state market for Maine wines. Noting that most states allow their residents to have wine delivered, Bromley said some of those states bar shipments from Maine wineries because of Maine’s shipping ban.”

Senator Bromley is referring to the notion of “reciprocity”, a system that has largely gone out of use in the U.S. and whereby states passed laws allowing other states’ companies to ship their wines as long as those states allowed the other state to ship its wines. Today, no more than 3 states have reciprocity agreements in place.

The state of Maine has attempted many times to pass a Wine Shipping Permit Bill. Whether this one will pass is unknown. What is known is that more than anything else, legislators and interested parties need to be educated on the issue of direct shipping.

Posted in Shipping Legislation | 1 Comment »

Ignorant or Misleading?

Recently the U.S. Supreme Court ruled in Rowe v. New Hampshire Motor Transport that the state of Maine may not required a common carrier (FedEX, UPS, etc) to obtain a signature from someone to whom cigarettes are being delivered. The court reasoned that such a state requirement ran afoul of the federal government’s responsibility, not the states, for regulating interstate commerce.

The question has been raised, does this ruling mean that a state may not require a signature for wine deliveries?

The answer is NO and here’s why:

In the various direct shipping permit regulations and laws that exist across the country, the requirement to have to get a signature before the delivery of wine is placed on the winery or retailer who sold the wine, not on the common carrier, as was the case with the Maine law. Retailers and wineries contract with the common carrier to obtain the signature.

Here’s the bottom line: The Supreme Court, properly, made no comment on whether a private company can contract with private company to obtain a signature at the door step.

The above is the rational explanation of this recent Supreme Court decision. Below is the irrational, fear mongering explanation of the decision:

What we have as a result of this decision is basically the Wild West with regard to direct shipping, because every law out there with this particular age check component is now rendered unenforceable. The sellers of these products are not being held responsible, and now the courts have said the carriers cannot be held responsible either.  So how exactly are states going to ensure that alcohol shipped direct does not wind up in the hands of minors?  This opinion calls the practice of direct shipping into question entirely, because it creates an environment lacking any kind of control and accountability.”
Craig Wolf, Wine & Spirit Wholesalers Association

You might want to give the Wine & Spirit Wholesalers Association a pass for such a comment assuming that they are simply ignorant. But assuming they are not ignorant about the actually meaning of this case, then you have to ask yourself why they want to deliberately mislead alcohol regulators, lawmakers and consumers?

This would not be the first time the WSWA has misled due to either ignorance or purposefulness. It’s probably best to recognize that when a deceptive argument like this is made it is done so simply because no rational argument is available.

Posted in Legal Issues | 2 Comments »

Who Are The Greedy Ones?

“All they care about is their own greed, about selling wine.”

One must be struck by the extraordinary disregard some people have for their own integrity.

On Monday, the state of Maryland heard testimony in committee on HB 1260, a bill that would allow wineries and retailers both inside Maryland and outside Maryland to sell and ship wine directly to Marylanders. The bill is being pushed by Scott Ehlers, executive director of Marylanders for Better Beer and Wine Laws and the bill’s sponsor Senator Sen. Jamie B. Raskin.

The usual course of a bill is that it is heard by a committee. The Committee votes on whether to send the bill on to the full legislature for a vote. When bills don’t become laws it’s usually because they “die” in committee either because they don’t come to a vote or the committee votes not to send it to the legislature for a vote.

This is why it’s most often in these committees where you hear the most extreme sort of rhetoric from opponents and proponents of a bill. This committee hearing was no exception.

Before commenting on the accusation of greed by wineries made by Bruce C. Bereano, a lobbyist for Licensed Beverage Distributors of Maryland, let’s first review the situation in Maryland.

In Maryland it is illegal for any wine to be sold that does not first go through the hands of a Maryland distributor. Put another way, a very small set of private company’s are in a position of authorizing who may do business in Maryland. Usually it is the state that issues things like permits or licenses for people to do business. In Maryland, it’s distributors who have complete say as to which wineries may do business in the state and which wines a Marylander may purchase. (no, believe it or not, this isn’t the part about “greed”).

Put another way, if Maryland distributors don’t want to carry a wine from an out of state winery, that winery may not do business in the state because it may not sell its wines directly to consumers, to retailer or to consumers, no matter how much their wines may be desired. I wonder when Maryland decided that it would cede its oversight of alcohol sales to distributors?

One would think that if you are going to give a very small, but powerful cartel of distributors total say over alcohol distribution in the state, if you are going to guarantee that this cartel get a 33% cut of every bottle of alcohol sold in the state whether they do anything to earn it, you might at least mandate that wholesalers be required to accept do business with any winery anywhere that wants to do business in the state. Not the case.

So imagine when the distributors cartel’s paid flunky gets up in front of the Maryland committee and says, “They don’t give a damn about the state of Maryland. All they care about is their own greed, about selling wine.”

The retailers and wineries in and outside Maryland aren’t asking for a free pass. Maryland consumers, whose choice in wine is terrible due to the distributors’ inability and unwillingness to sell even a fraction of what is available, to bypass paying taxes. All that’s being requested is that Wineries and Retailers be able to do business directly with one another, that they each be able to remit taxes to the state and that they each accept restrictions on how much they can sell and buy.

Meanwhile, Bruce and his distributors are demanding that every single bottle of alcohol sold in the state of Maryland only be sold if they get a cut. They are demanding that they have complete control over which wines are sold in the state.

Now, who is the greedy one?

The state of Maryland has a long history of not merely caving in to the craven greed of the distributor cartel but of doing the dirty work for them. Early on back in the 1990s when the direct shipping issue came to the fore, Maryland actually passed a law making it a FELONY for winemakers to sell a bottle of wine to a consumer. A Felony. Just like Rape, Murder, and Kidnapping.

Who are the greedy ones?

Posted in SWRA Issues, Shipping Legislation | 2 Comments »

Washington State Wine Shipping: A Post Mortem

Specialty Wine Retailers Association, wine merchants and many a wine lover had very high expectations for a very good piece of legislation that had been introduced in Washington State by Senator Brian Weinstein. SB 6384 would have created a permit issued by the the state of Washington to out-of-state retailers allow them to ship wine to consumers in the state just like out-of-state wineries receive such permits. The bill provided for taxes to be paid by out-of-state retailers, for retailers to submit to WA legal jurisdiction and for retailers to allow audits of their books by the State of Washington.

SB 6384 died in committee.

This was not for lack of consumer support. In fact, the chair of the committee in which the bill was heard noted publicly that she had received more positive email on this piece of legislation than on any other bill under consideration this year.

So why did SB 6384 die?

Washington Wineries had the bill killed. More specifically, it was the Washington Wine Institute that worked to kill the bill.

Intuitively, one understands that retailer shipping is good for Washington wineries. The more outlets there are to sell Washington wines, the more Washington wine that gets sold.

Nevertheless, the Washington Wine Institute did everything they could to kill Washington wine lovers’ access to wine.

The reason, according to insiders, is the issue of reciprocity. Apparently the WA wine institute does not like the fact that there is no law in CA that allows Washington retailers to ship to CA consumers. Furthermore, it appear that the WA wine institute does not like the fact that CA, like Washington, does not allow CA retailers to buy direct from out-of-state wineries. This was enough for the WA Wine Institute to stick it to Washington consumers.

Yet, consider that CA retailers spent very good money, time and effort working out an agreement with the state of CA that has been in place for over a year and runs through the end of this year that assures the state of CA will not enforce any laws against out-of-state retailers shipping into CA. This fact however wasn’t enough to overcome the pettiness that exists inside the Washington Wine Institute.

Nor was the fact that Washington is clearly out of compliance with the U.S. Constitution when since it discriminates against out-of-state retailers since it allows its own retailers to ship to Washingtonians but prohibits out of state retailers from doing the same. The least we can say is that principles are not taken in to consideration when WA Wine Institute politics are in play.

It should also be known that a good many consumers and companies worked hard to educate everyone involved in this bill. SWRA spoke with every member of the committee involved in passing this legislation and/or their representatives. Wine.com worked tirelessly to try to get this bill passed. The CA Wine Institute worked hard on passing this bill. As did Costco. And, again, WA consumers weighed in on this bill in droves, supporting it wholeheartedly.

The lessons of SB 6384 are clear:

1. Never assume wineries have the best interests of consumers at heart when it comes to access to wine

2. Only progressive retailers can be counted on to always support the interests of wine lovers

3. Forcing litigation, that will cost the state and citizens of WA and other states hundreds of thousands, if not millions, of dollars is preferred by pettier folks to doing the right thing.

A great deal of late has been said of retailers shipping into Washington State. This bill would have allowed consumers to obtain the wines they obviously want, provide the state with needed revenue and put the state back in compliance with the U.S. Constitution. But instead, pettiness wins out over common sense.

Anyone interested contacting the Washington Wine Institute and voicing their opinion on this issue can do so this way:

Washington Wine Institute
Ms. Jean Leonard, Executive Director
call: 360.352.1557
email: info@washingtonwineinstitute.org

Posted in State Laws, Shipping Legislation | No Comments »

Why Allowing Retailer-to-Consumer Shipping is Good Public Policy

Across the country a variety of states are currently considering direct shipping legislation that addresses retailer-to-consumer shipping. In most states the same issues tend to arise. Below are the most important issues that have been arising and the points that should be raised in each case

1. CONSTITUTIONAL ISSUES CONCERNING DIRECT SHIPMENT OF WINE & RETAILERS
-According to the Supreme Court in Granholm v. Heald (2005), “States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.”

-According to the U.S. District Court of Northern Texas in Siesta v. Perry, the state “cannot prohibit consumers from purchasing wine from out-of-state retailers who comply with the Code3 and TABC regulations. Accordingly, the challenged ban on consumer imports of wine…is also unconstitutional.”

Conclusion: STATES MAY NOT PROHIBIT OUT-OF-STATE RETAILERS FROM SHIPPING INTO A STATE IF IT ALLOWS ITS IN-STATE RETAILERS TO SHIP WITHIN THE STATE.

2. THE FISCAL IMPACT OF RETAILER-TO-CONSUMER SHIPPING
-There is no evidence to support the notion that allowing out-of-state retailers to ship into a state will result in a loss of tax revenue.

-In fact, the experience of New Hampshire, Nebraska, North Dakota and Wyoming is that allowing retailer shipping results in increased tax revenue.

-Consumers use out-of-state resources when they cannot obtain the wines they want locally.

Conclusion: STATES THAT ISSUE PERMITS TO OUT-OF-STATE RETAILERS CAN EXPECT AN INCREASE IN TAX REVENUE AS A RESULT.

3. ESTIMATION OF NUMBER OF RETAILER SHIPPERS
-When shipping permits are issued to both out-of-state retailers and wineries, the vast majority of permits will be issued to wineries, not retailers.

-According to a survey of those states that issue permits to both retailers and wineries, retailers represent 15-20% of the permits.

-Most retailers in America serve a local market, not a national shipping market.

Conclusion: STATES THAT ISSUE PERMITS TO OUT-OF-STATE RETAILERS CAN EXPECT ONLY A MINIMAL NUMBER OF OUT-OF-STATE RETAILERS TO SHIP INTO A STATE RELATIVE TO THE NUMBER OF WINERIES THAT SHIP INTO THE STATE.

4. WHO BUYS FROM OUT-OF-STATE RETAILERS AND WHY?
-The vast majority of wine is purchased on-premise. It is much more convenient for consumers as well as less expensive since shipping costs can range from $25 to $60 to ship a case of wine.

-Out-of-state sources tend to be used only when the specific, specialty wine desired is not available locally.

-America now hosts 5,000 wineries with thousands of more specialty wines imported from Europe, Australia and South America.

Conclusion: CONSUMERS BUY LOCALLY, AND ONLY LOOK ELSEWHERE WHEN THEY CAN NOT FIND IN LOCAL STORES ONE OF THE 1000S OF WINES THAT ARE NOW AVAILABLE IN THE UNITED STATES

5. MINOR ACCESS VIA SHIPPING
-Supreme Court of the United States, the Federal Trade Commission and regulators across the country have admitted that on-line sales to minors are not a problem

-Online age verification systems adopted by retailers, the necessity of using credit cards, the requirement to obtain adult signatures before delivery, and the necessity of minors to have to have wine delivered without parents knowing all conspire to make it far less likely that a minor will obtain wine via the Internet.

-The vast amount of alcohol falling into the hands of minors is obtained from Brick & Mortar stores and from the home.

Conclusion: THE INTERNET IS THE LEAST LIKELY PLACE MINORS WILL LOOK TO OBTAIN ALCOHOL

6. ELEMENTS OF A MODEL RETAILER SHIPPING PERMIT LAW

-In order to assure the state retains regulatory control over out of state retailers, any law allowing shipping should contain:

-A process for issuing annual permits to out-of-state retailers.
-Provisions that require out-of-state retailers to remit taxes to the state
-Provisions that require out-of-state retailers to submit to local legal jurisdiction
-Requirements that out-of-state retailers allow States to audit retailer books
-Requirements that all shipments are marked as containing alcohol and require a signature by an adult 21 or over

Conclusion: LEGISLATION ALLOWING OUT-OF-STATE RETAILERS TO SHIP INTO A STATE CAN BE CRAFTED SO THAT THE STATE RETAINS SIGNIFICANT REGULATORY CONTROL OVER THE RETAILERS AND THEIR ACTIONS

Posted in State Laws, Shipping Legislation | No Comments »

The Fallacy

“The world sees the Internet as their friend, they don’t see the danger in it. I guarantee you, if I gave my daughter a gift card or a credit card tomorrow she could order a bottle of vodka on the Internet and get it three days later. They don’t see alcohol as different from other products. We regulate alcohol on a social model, not a business model.”
Craig Wolf, CEO, Wine & Spirit Wholesalers Association, in Eric Asimov’s blog “The Pour”

Let’s do away with this fallacious set of ideas.

“The world sees the Internet as their friend, they don’t see the danger in it.”
First, the Internet is not dangerous. The Internet is a connected series of computers. It is a communications system. The Internet is no more dangerous than the daily paper is dangerous. This kind of comment suggests what many of us have known for some time: generally, alcohol wholesalers and their representatives like Craig Wolf have very little knowledge about those things they attempt to discuss.

“I guarantee you, if I gave my daughter a gift card or a credit card tomorrow she could order a bottle of vodka on the Internet and get it three days later.”
Mr. Wolf can not guarantee his daughter would take possession of a bottle of vodka that she ordered over the Internet. This kind of comment is nothing but either ignorance or sheer rhetoric. Ordering alcohol over the Internet is the same as putting a bottle of vodka on the checkout stand at a liquor store. Just because it has been placed there doesn’t mean the teen will walk out with it and end up drinking it. There are in place age verification service, there is the necessity of getting a signature of an adult at the place of delivery, and there is the small problem of the teen being home alone, without their parents, when the bottle arrives.

“They [I think he means wine drinkers] don’t see alcohol as different from other products.”
Sure we do. We understand that wine is different. You can tell by the fact that it is one of the only products that is still given over to monopolists to control for the benefit of their own bottom line. We see that alcohol is different than soap because we see that the government does not give any single, small, parochial industry complete control over its distribution to the detriment of soap lovers.

“We regulate alcohol on a social model, not a business model.”
This is hard to disagree with. However, I just can’t think of another product or business that is assumed to have changed not at all in the past 70 years. Craig Wolf treats the wine business as though we are still living through the Depression, FDR is in the white house, and a loaf of bread coast 5 cents. And let’s not forget that the wine wholesalers entire business models is predicated upon no one taking not of the fact that we live in the year 2008. The status quo has been good to the business model that wholesalers have come to be fat and wealthy by protecting.

Consumer of wine who read this and wonder why they can’t get their hands on the 1000s of wines they want know who blame for this set of circumstances. There’s something you can do about it.

Posted in Three Tier System, Legal Issues | 1 Comment »

ALASKA-The State of Retailer Shipping

Alaska has enacted one of the country’s most progressive set of wine shipping regulations. Assuming the wine can be delivered free from damage by the state’s often inclement weather, Alaskans have access to a world of wines.

The Law: “An individual who is not in the liquor business may import, without a license, a reasonable quantity of intoxicating liquor for personal use and consumption.”

Who May Ship: Retailers, Wineries, importers

Taxes: None

Reporting: None

Jurisdictional issues: None

Common Carriers: Fed EX and UPS

CONTACT
Department of Public Safety
Alcoholic Beverage Control Board
5848 E. Tudor Road, Suite #350
Anchorage, AK 99507
Phone: 907 269 0350

Posted in State Laws | No Comments »

On The Wine.com Controversy

Many readers of this blog will have already become familiar with the “Wine.com Episode” of recent weeks. How could you not be. Wine.com’s concern with the legality of much shipping of wine into Washington and its subsequent in-house stings of various retailers followed up by their visit to the Washington State Liquor Control Board with stung wine in hand, followed then by letters from the Control Board to the wineries that shipped has been well covered in the media and among commentators at various online wine sites.

The Wine Spectator covered the issue HERE.
Yesterday Decanter covered the issue HERE.
A very long discussion of the issue at Vinography can be found HERE.
The Wine Market Report’s coverage can be found HERE.

One things should be made clear. In various places it has been suggested that Specialty Wine Retailers Association supports what is considered illegal shipping to a variety of states. I don’t believe any representative of SWRA has ever suggested, let alone said, such a thing. SWRA is in business to CHANGE the shipping laws in states where laws discriminate against retailers and their own consumers. SWRA does not exist to promote illegal shipping.

Yet, we are not the Wine Police Force either. While we recommend retailers follow the laws, our charge is not to investigate our members shipping habits. We leave that to the regulators in various states and other private entities.

Yet in the course of the debate, which had been joined by Wine.com’s CEO at Vinography, it was suggested that SWRA create a code of conduct whereby we recommend the proper way to go about doing business as a wine retailer that ships wine to consumers. Although this could never be a required code of conduct since no association in this business that I’ve ever heard of has, or would, create for themselves a police power, the idea of creating a Code of Conduct that we ask members, and even non members, to adhere to is a very good one indeed.

This organization will in fact be looking very closely at such a Code.

It should also be noted that while a great deal of ugly things have been leveled at Wine.com primarily by consumers who have observed the episode, SWRA itself appreciates Wine.com’s contribution to the realm of retailer-to-consumer sales. It is a pioneering organization that has raised awareness of the availability of on-line wine. And though we may take issue with the way it has recently addressed the issue of how laws are applied to wine shippers, we also recognize that it has played a role in getting many people thinking about the issue of retailer to consumer sales of wine. SWRA would in fact welcome Wine.com as a member as we take them on their word when they write:

“The biggest barrier to growth in online wine is the current stalemate on state laws….Wine.com wants two things: First and foremost, open markets. We’d like to see all states open up to interstate shipping of wine. This would be best for consumers, best for the health of the online wine business and best for Wine.com and our customers.”

Posted in Shipping Legislation, Legal Issues | 1 Comment »

Fighting Back With Riesling and Gruner Veltliner

On a regular basis we are asked, “how can I help SWRA fight its fights for retailers and consumers”. The truth is there are any number of ways this can be done. We are taken however by one recent effort by a very small online retailer: WineMonger.

In the wake of the most recent controversies and attention being paid to the issue of retailer to consumer shipping, Emily and Stephen of WineMonger combined their passion for this cause and their knowledge of Austrian wine to create a specific case (twelve bottles) of wine they’ve dubbed STING OP 007. In addition to giving those purchasing this case a 15% discount, they are delivering 10% of their proceeds back to Specialty Wine Retailers. What’s in the case? It’s a gorgeous collection of some of the best Rieslings, Gruners and dessert wines from Austria, just the kind of wines they specialize in providing.

Gritsch Mauritiushof 1000-Eimerberg Riesling Smaragd 2003
Wenzel Bandkraften Blaufrankisch 2002
Heiss Cabernet Sauvignon / Blaufrankisch Ice Wine 2005
Wenzel Kleiner Wald Pinot Noir 2004
Feiler-Artinger Pinot Cuvee Ruster Ausbruch 2004 Hogl Riesling Ice Wine 2003
Tschida Muscat-Ottonel Ice Wine 2005
Braunstein Mitterjoch Zweigelt 2006
Hogl Ried Schon Gruner Veltliner Federspiel 2006
Hogl Terrassen Spitzergraben Riesling Federspiel 2006
Donabaum Spitzer Point Gruner Veltliner Smaragd 2006
Gritsch Mauritiushof Singerriedel Gruner Veltliner Smaragd 2006

Specialty Wine Retailers Association will never be the kind of advocacy group that can simply reach down into its coffers and pull out the millions of dollars it takes to match the spending of those who would fight to the death to keep retailers and consumers from doing business with each other and who happen to have the kind of pockets that are lined with state-mandated gold.

Rather, SWRA will always be the kind of grass roots organization that partners with retailers like Emily and Stephen of WineMonger to come up with interesting (and delicious) ways of raising the monies that necessary to bring out the very simple changes both retailers and consumers want.

So if you are looking for a way to both contribute to Specialty Wine Retailers Association as well as please your palate, WineMonger’s “Sting Op 007″ case of wine is perfect.

In the end we are reminded that it is somewhat sad that in the 21st century it takes innovative and constant fundraising to simply achieve a goal that seems decidedly ancient in nature: the right for consumers and merchants to carry out a simple transaction.

Posted in SWRA Issues | No Comments »

Wholesalers Spend $50 Million on Political Influence

SWRA has released a report that for the first time documents the astounding amounts of money spent by America’s alcohol wholesalers on political campaigns at the state level.

That figure is $50 Million between 2000 and 2006. This is more than all the campaign contributions spent by wineries, retailers, beer producers, restaurants and spirit producers—combined.

These campaign contributions buy access. They buying the kind of access that lead to states like CA, TX and IL to pass laws prohibiting their citizens from purchasing wine from out-of-state retailers.

You can download the 15-page report HERE.

The report itself took 6 months to compile. Using Followthemoney.org, we painstakingly sifted through thousands of reports on campaign contributions. There is a high likelihood that the $50 Million identified is actually an under-reporting.

The first media coverage of the report was issued today by Rich Cartiere’s Wine Market Report. It can be viewed and downloaded HERE.

While it was expected the wholesale lobby would try to dismiss the report and the huge amount of campaign contributions it documents, it was unexpected to hear them explain that it is the wholesalers who are completely responsible for the success of the wine industry in America. From Wine Market Report:

“The Wine and Spirits Wholesalers of America, a decades-old national trade association, dismissed the report as ‘creative arithmetic’ from a nemesis it accused of trying to undermine wholesalers’ success in ‘creating the most vibrant, diverse and consumer-friendly marketplace in the world’ for beverage alcohol.”

Retailers across the country as well as the thousands of wineries will, I’m sure, be surprised to learn that their efforts pale next to those of the wholesales.

We believe this report should find its way into the hands of every single state legislator in America. Please feel free to download it and forward it to your own state representative and your local media. They are sure to find something of local interest inside it.

Posted in SWRA Issues | 2 Comments »

New Jersery Wine Shipping Coming?

“The more we restrict trade, the less quality of services you get and the higher the price to the consumer, and it damages the economy.”
State Senator Raymond Lesniak, NJ

The good Senator is correct. However it will be important to see just how correct he intends to be. New Jersey is on a path to consider legislation that would allow New Jersey residents to purchase and have shipped to them wine from out-of-state. This would mean overturning the ban on New Jersey wineries from shipping their wine direct.

The real question i whether or not the Senator, the New Jersey wineries and the out-of-state wineries, all of whom will support opening up New Jersey to wine shipments will be willing to settle for average service for consumers and keeping prices high by prohibiting out of state retailers from shipping into New Jersey when the introduce legislation in 2008.

The only justification for writing legislation that allows out-of-state wineries to ship to NJ but not out-of-state wine merchants is a desire to protect NJ wine distributors from competition, a justification that finds no support in logic, fairness or good public policy.

Between 2000 and 2006 New Jersey distributors have given over $600,000 to New Jersey political campaigns. They’ve done this with the intent to influence state politicians to keep in place the purely protectionist measures that keep them enormously profitable while keeping New Jersey consumers paying higher prices for wine and have much less access to the products they want.

In order to prevent the State from passing legislation that only allows out-of-state wineries to ship into New Jersey and preventing New Jersey citizens from purchasing also from out-of-state retailers it will take both NJ wineries and retailers to stand up for their fellow citizens and it will take out of state retailers and wineries to make the case that fairness and good sound economic policy demands that New Jersey citizens should have access to all wines that are available, not just those from wineries choosing to ship wine and those that New Jersey distributors will allow them to buy.

Posted in Shipping Legislation | 3 Comments »

THE WINE RETAILERS SYMPOSIUM

If you are a wine retailer with any connection to the direct-to-consumer market SWRA’s upcoming “Wine Retailing 2008: Change & Opportunity” on February 27, 2008 is a must attend event.

The first event of its kind to focus on issue specific to retailers selling direct will focus on issues such as compliance, differences between brick & mortar and online buyers, the politics and legal landscape of retailer-to-consumer direct sales and more.

The event will take place at Kendall-Jackson Vineyard Estates’ Wine Center in Santa Rosa, California in Sonoma County.

Space is EXTREMELY limited! SIGN UP NOW BY CLICKING HERE

Posted in Events, SWRA Issues | No Comments »

Anti-Wine Shipping Proponents Forget About Parents

The very small number, but powerful, groups that want to shut down consumers ability to purchase wine direct from retailers and wineries is making a strong push  around the issue of “Face To Face” transactions being the only safe way of allowing direct to consumer shipping. They suggest that all wine purchased either by phone or Internet should be picked up at a retailer. This, they say, is the only way to assure that wine will not get into the hands of minors.

It also assures that consumers will lose the very convenience that direct shipment provides and will therefore reduce the amount of wine that is purchased from out-of-state sources…the ultimate goal of the anti-direct shipping forces.

But what they are not telling you is that forcing someone to pick up an item at a brick and mortar store, rather than have it shipped directly to one’s home, will likely increase the amount of alcohol that gets into the hands of minors.

Minors are far and away more likely to obtain alcohol from Brick and Mortar retailers than from deliveries to their home.  We know this because it happens every day. Meanwhile, minors rarely if ever obtain alcohol via direct shipment. The reason is, minors have an obstacle far greater to overcome if they were to order wine for home delivery than if they ordered it and picked it up at a retail outlet: Their parents.

First, the minor would have to show the delivery person an ID. It’s very unlikely that a minor has an ID that says they are 21. But more importantly, the minor must be at home when their parents are not, in order to get the purchase past the best blood hounds in the minor-watching business: Again…Parents.

This is why those looking to shut down direct-to-consumer sales and shipment of wine find themselves addressing a problem that does not exist.

But of course there are other safeguards in place besides the probing eyes of a parent:

“Mike Palmeri, owner of Marketview Liquor in Rochester, N.Y., said that his company pays extra to UPS to get them to check IDs when delivering alcohol.

“They are required to act as our agent,” Palmeri said. “The person who receives the goods must be over 21 and show proof of age.” He said that UPS will place a phone call to the recipient the day before the package is to be delivered to ask that an adult be at home to receive the package. “

Posted in SWRA Issues | 1 Comment »

Consumer Choice in Wine: “Bad Public Policy”

“The misconception is that it was ever about money for wholesalers. It never was. The reason [we] don’t like [direct shipping] is that it’s a bad public policy.”
Craig Wolf, Wine & Spirit Wholesalers Association.

Of course it’s not about money. It is just a coincidence that every pro-consumer wine shipping policy proposed is opposed by American wine wholesalers and every pro-consumer wine shipping policy proposed would also take money out of the pockets of the wine wholesalers because they would allow sales of wine to go around the state-supported wine wholesaler monopoly.

The above quote comes from a very good story about retailer-to-consumer shipping that appeared yesterday at the Wine Spectator.com website. Written by Eric Arnold, the article explains what is at stake for consumers, retailers and wholesalers in the battle to allow consumers to access the wines they want, rather than only the wines the wholesalers believe consumers should be allowed to drink.

The article brings the reader up to date on the various lawsuits in place around the country that address the protectionist, unconstitutional laws that wholesalers appear willing to spend as much as is need to keep in place.

With regard to the three-tier system that wine wholesalers believe is built for their protection, Wolf has this to say:

“When the three-tier system is unquestionably legitimate, when it comes to wholesalers and retailers, you can treat them [wineries and retailers] differently.”

Now while Specialty Wine Retailers Associations disputes this view of the 3-tier system, we also have to ask, why would you want to treat retailers different than wineries when it comes to wine shipping? Is there a fundamental difference for the consumer whether they receive a box of wine from a winery or a retailer? Of course not. Is there a fundamental difference in the nature of the transaction? No. Both are simple retail transactions. And yet, wine wholesalers have literally spent millions of dollars involving themselves in lawsuits specifically to prevent consumers from being able to access the wines they want. Why? Because wine wholesalers are really, really, really concerned with good public policy?

It’s pretty clear that America’s wine wholesalers will fight to the bitter end to prevent consumers from being able to buy wine that doesn’t first go through the wholesaler’s hands. They’ll spend millions of dollars to prevent this from happening where ever they have to. CONSUMERS MUST BE AWARE OF THESE EFFORTS. CONSUMERS MUST CONTACT THEIR REPRESENTATIVES. CONSUMERS MUST WRITE LETTERS TO THE EDITOR. CONSUMERS MUST STAY INFORMED.

This blog and the SWRA website is one way to stay informed. Even better, sign up for the Specialty Wine Retailers Newsletter, “The Bottom Line”. It’s free and comes straight to your email box. Click Here to Subscribe.

And…if you want to truly help the effort to that will allow you to access the wines you want, donate to Specialty Wine Retailers HERE. You can easily donate as little as $5 to $1000 to help the cause using your credit card or paypal account.

Posted in Three Tier System, Media, SWRA Issues | 4 Comments »

Oregon Gets Retailer Wine Shipping Right— Permits Available

This year’s one important legislative victory for consumers and retailers on the issue of direct shipment of wine came in the great state of Oregon where that state transformed itself from a reciprocity state to a “permit” state. The upshot of this change is that out-of-state retailers may apply for and obtain a direct shippers permit and begin shipping on January 1, 2008.

Oregon recently posted its applications for a direct shippers permit that all retailers looking to ship to consumers in that state will need to file with the Oregon Liquor Control Commission.

CLICK HERE TO DOWNLOAD THE OREGON DIRECT SHIPPERS PERMIT APPLICATION .

Among the rules the the new permit system puts in place are 1) only 2 cases per month may be shipped from any one retailer to a single customer, 2) language must be placed on the outside of the shipping box indicating that alcohol is inside, 3) Direct Shipper Statements must be filed with the Privilege Tax Department by the 20th of each month for shipments sent the previous month and 4) annual remittance of a $50 permit fee.

As in every other state where the issue of direct shipment of wine came before legislators, Oregon saw wholesalers attempt to exclude out-of-state retailers from shipping into the state. They claimed that the state would be inundated with retailers shipping into Oregon and implied that retailers could not be trusted to follow the law. With the help of the Wine Institute and the Oregon Winegrowers Association this protectionist effort was defeated and the new law was passed that allowed Oregonians to purchase wine from wineries and retailers anywhere in the country.

This victory is nothing to sneeze at. Consider the description of the beer and wine wholesaler lobby offered up last year by the Oregonian newspaper:

“In the past four years alone, the distributors have spent $1.2 million wining and dining legislators, paying their way to fancy Maui resorts and contributing to the campaigns of those willing to do their bidding. Years and years of such spending has paid off, enabling the group’s lobbyist to write much of the law governing beer distribution, and blocking every attempt to raise beer and wine taxes to pay for prevention and treatment of alcoholism.”

Focus on the Oregon wholesalers resulted after it was discovered that the Oregon Beer & Wine Distributors Association paid for Oregon legislators to travel to Hawaii, but the trip was not reported by the Lawmakers. This led to a series of articles on the scandal and the control Oregon distributors have on alcohol law in that state.

In the end the new Permit for out-of-state shippers is a model of how laws can be written that take into account consumer demand, the need to prevent alcohol from getting into the hands of minors and assuring the state is able to collect taxes on wines sold and shipped to residents.

SWRA recommends that all out-of-state retailers take advantage of this new law, download the application and obtain the permit to ship into Oregon.

Posted in SWRA Issues | No Comments »

Who Owns The Three Tier System

Who owns the 3-tier system of wine distribution?

That’s right: “Owns it”.  While a government-created and regulated system, the 3-tier system of wine distribution, whereby the producer sells to the distributor who then sells to retailers and restaurants, might just in fact be owned by one of the tiers. At least that’s the implication based on the way distributors talk about the three tier system.

At a 2005 legislative conference of the National Association of Beer and Wine Wholesalers Association, a discussion ensued of the Costco Lawsuit that presented anti-trust and commerce clause challenges to various aspects of Washington State’s system of regulating wine. Observe how Phil Wayt, executive director of the Washington Beer and Wine Wholesalers Association, discusses the impact of a lawsuit brought by Costco. Observe the language he used:

“On the anti-trust side, these include our post and hold system; our ban on quantity discounts, our cash law, our tied house restrictions, our ban on central warehousing, and our uniform pricing requirement. On the commerce clause side, these include our ban on interstate shipping direct to retailers.”

 Our, Our, Our, Our, Our, Our, Our.

That’s a lot of ownership.

How does one tier in the three-tier system come to believe they own the regulations? It is important to understand that ownership and title to something almost always arises after the owner purchases or inherits the object that is owned.

Posted in SWRA Issues | 1 Comment »

Wine Retailers Should Send the Right Message

While most wine retailers that offer their stock on line explain what states they will ship to, few of them explain why they won’t ship to certain states. And if they explain, it is usually cursory note that shipping wine is prohibited by law in X.

It would do the consumer good to understand more about the restrictions that prohibit them from purchasing and having shipped to them wine from outside the state. To that end, following are some options for retailers who want to give customers in states they can’t ship to a better understanding of their predicament. Retailers have SWRA’s permission to use any of these explanations with or without attribution to SWRA

The “Competition and Commerce” Message
Because you live in a state that prefers to stifle competition and commerce rather than encourage it, we are unable to ship you wine. You should contact your local state representative and ask if they are willing to encourage commerce and competition by authoring a bill that allows you to receive shipments from out-of-state retailers.

The “Enormous Influence” Message
Due to enormous influence by certain economic interests in your state, laws have been passed that protect those interests by prohibiting you from receiving wine from from us. We are sorry for this inconvenience. We suggest you contact your state representative and ask if your interests deserve protection also.

The “Unconstitutional Legislation” Message
Unfortunately yours is one of the growing number of states that has chosen to pass unconstitutional legislation only allowing in-state retailers to ship wine to you, while specifically making it against the law for out-of-state retailers to ship wine to you. As as result, we are prohibited from transacting business with you. We suggest you contact a good constitutional law advocate.

The “Campaign Contributions” Message
Because of enormous campaign contributions to state politicians by alcohol wholesalers, laws have been passed that protect wholesalers from competing in a free market. That means your interests as an adult consumer have been disregarded and we may not ship you wine. We suggest you contact your state representative or come up with about $500,000 in campaign contributions in order to get the attention of your legislature.

The “Millions of Children Will Drink” Message
We regret to inform you that we can not ship wine to you because it is believed if we do that thousands, perhaps millions, of children will get their hands on alcohol This is not an indication of the danger you in particular pose toward children, but rather an indication politicians will believe the most amazing things.

Most of these five messages are inter-changable for any state that prohibits out-of-state retailers from shipping in.

Posted in Shipping Legislation, Legal Issues | 4 Comments »

What’s the Justification for Anti-Free Market Wine Laws?

In the course of doing research on how alcohol-related laws are constructed and passed in America I came across a document that I hadn’t read in some time. It was an article written and published by the Washington State Bar Association entitled, “Time to Untie the House? Revisiting the Historical Justifications of Washington’s Three-Tier System Challenged by Costco v. Washington State Liquor Control Board”.

The crux of the articles investigation can be summed up in this quotation from it:

“While it is true that no other legal and widely consumed product has had the checkered history of beverage alcohol (such as the “great experiment” of Prohibition), whether this “difference” of liquor is sufficient to justify the continued anti-free-market structure of the industry is a valid question.”

Indeed it is a valid question.

Certainly there are some very valid and convincing reasons to retail a number of regulations that are sewed into the three tier system and into the common alcohol regulations we see across the country.  But what’s crucial to understand is that by removing some of the three-tier related restrictions that lead to an “anti-free market structure”, we are not altogether dismantling the three tier system.

It stands to reason that if the political and social and economic circumstances have changed since the three tier system was instituted back in the 1930s, then perhaps it is time to rethink the efficacy of a system that is built to address a time and situation that no longer exists.

From the article:

“The beer, wine, and spirits industry has changed substantially since the three-tier laws were enacted. While there were once few producers and many wholesalers, the opposite is true now, at least in wine and beer. In 1950 there were 5,000 alcohol wholesalers nationwide, today there are only 170 with the result that in some regions retailers are served by as few as two wholesalers. Conversely the numbers of breweries has grown from 401 to 1,522 while the number of wineries has quadrupled”

The result of this kind of monumental change is that wholesalers are in every way incapable of offering the full scope of products available. Unless it is the goal of the states to actively prevent consumers from accessing the entire scope of legal products, then either the wholesalers need to be commissioned in a different way so that they are capable of offering retailers the entire scope of products available or wholesalers need to get out of the way of consumers.

This article, penned by Erik Price in June 2004, is still a very good primer on how to understand the 3 tiers system and how to investigate its utility 70 years after the system was created.

The entire article can be found here

Posted in Three Tier System | No Comments »