Key Issues For the Wine Industry in 2011
Few industries labor under a more complex and multi-layered set of regulations as does the wine industry. This is the case because Americans have endorsed and accept the idea that alcohol ought to be taxed in greater amounts than other commercial products and because Americans accept the idea that the inherent danger of alcohol is such as to justified enhanced regulation by the state…So be it.
2011 is shaping up to be a year of robust activity in the realm of alcohol regulatory changes and legal machinations. This post examines a few of the specific and general alcohol regulatory and legal issues that should see debate across the country in 2011.
WINERY DIRECT SHIPPING:
Look for Maryland, New Jersey, and New Mexico to accommodate its consumers and the national wine market place by altering its laws concerning the direct shipment of wine to consumers.
New Mexico, which has attempted to switch from being a "reciprocal state" to a "permit state" the past three years, is likely to see the transition happen in 2011. Look for New Mexico to pass a law that allows consumers to purchase wine directly from out-of-state wineries. However, it is equally likely that New Mexico will ban consumers from having imported wines, out-of-vintage wines, wines from "wine clubs" or auction wines shipped to them.
New Jersey, which has banned consumers from having wine directly shipped to them will likely pass a law this years that allows New Jerseyans to have wine shipped to them from wineries. This change was in the works even prior to the recent decision in Freeman v. Corzine that determined New Jersey law that allows in-state wineries to operate up to six remote tasting rooms while prohibiting out of state wineries from operating any tasting rooms, let alone direct shipping, is unconstitutional. New Jersey wineries who fear the recent decision might lead to having their own tasting room privileges revoked, will push hard for a direct shipping law in that state as a a way of rectifying the constitutional problems by giving out of state wineries access to the market place. However, it is likely that New Jersey will continue to ban its citizens from having imported wines, out-of-vintage wine, wines from wine clubs and auction wines shipped to them.
Maryland wine lovers will finally be given the right to have wine shipped directly to them. After many years of working toward this right and after the Maryland Comptroller's recent report endorsing direct shipping, 2011 appears to be the year Marylanders overcome the opposition of local wholesalers and retailers and will be able to have wine shipped to them from out-of-state wineries. However, due to the Comptroller Report's unfounded suggestion that allowing out-of-state retailers to ship into Maryland will hurt local businesses, it appears that Marylanders will be banned in the new law from having imported wines, out-of-vintage wines, "wine club" shipments and auction wines shipped directly to them.
RETAILER DIRECT SHIPPING:
A bill allowing Washington State residents to have wine shipped to them from out-of-state wine retailers is likely to be considered in Olympia this year. Similar bills have failed twice due to opposition by Washington State wholesalers and the Washington Wine Institute (the primary winery association in the state). Despite the fact that the Washington State prevention community and the head of the Washington ABC, as well as consumers, have noted their support for retailer shipping, there is yet no telling if this bill will pass. It's entirely possible that the Washington Wine Institute will again work hard to prevent consumers in that state from buying wines from out of state retailers.
FEDERAL LEGISLATION PROTECTING WHOLESALER PROFITS AND POWER
Last year's battle in Congress over H.R. 5034 was a preview to what is coming in 2011. Look for this legislation to be re-introduced this year with a new primary sponsor. Look too for it to be introduced into the Senate, where it failed to gain a Primary Sponsor in 2010.
It is unlikely the the 2011 version of the "Wholesaler Protection Act" will be much different than the revised 2010 version. HR 5034 will remain a blatant power grab by American alcohol wholesalers. HR 5034 employs Congress to change the rules in the middle of the game. After Federal courts have continually reiterated the fundamental concept that states may regulate wine sales without discriminating against interstate commerce, wholesalers are attempting to use Congress to change the rules so that states can legally discriminate against interstate commerce and thereby give wholesalers unprecedented control over local markets and local consumers. Look for wine producers, spirit producers, beer producers, importers, retailers and consumers to all stand up and opposed this kind of anit-American, anti-Free Trade law that spits in the face of America's founders that hoped to put in place a Constitution that finally ended inter-state trade wars of the type that state alcohol wholesalers base their business models upon.
Both Virginia and Pennsylvania have made noise about getting out of the alcohol business, selling off their state-run retail and wholesaling arms and letting private industry have a whack at the alcohol selling business in those states. Don't expect the Virginia proposal to go too far. However, in Pennsylvania the new Governor and the Speaker of the Pennsylvania House both support privatization. This has been tried before in PA, to no effect. However, this may be the year. Expect a battle royale in PA over Privatization.
ANOTHER SUPREME COURT WINE CASE?
The Supreme Court has been asked to hear the case of Wine Country Gift Baskets v. Steen. This case originating out of the 5th Circuit Court of Appeals and before that the state of Texas, asserts that out-of-state wine retailers, unlike wineries, may be discriminated against by a state; that a state may allow its in-state wineries to ship wine directly to its residents, but ban out-of-state retailers from doing the same. The state of Texas and wholesalers argue that discrimination against out-of-state retailers in interstate commerce is inherent in the three tier system, thereby lifting the three tier system to a quasi constitutional status that actually overrides the demands of the Commerce Clause that only the federal government can regulate inter-state commerce. There is no telling if the Supreme Court will take this case. However, If the Court announces it will hear the case, expect the entire wine industry to move quickly to make its voice and views heard as a great deal is at stake, not the least of which is the groundbreaking Granholm v. Heald ruling.