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.

PRIVATIZATION:
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.

 

 

 

 

 


7 Responses

  1. Alan Baker - January 3, 2011

    Hey Tom. I’m curious what this statement means. “imported wines, out-of-vintage wine, wines from wine clubs and auction wines shipped to them.”
    Would this mean that as a winery we could not sell library wines as part of a special offer? And also not be allowed to let residents of those states join our wine club, even if that club ships only current vintage wines?
    Not that these things typically make sense but how do you police that? Sounds like a set up to then challenge the whole idea of DTC when someone ships a two-year old chard to a guy in Jersey.
    Alan B, Cartograph Winery

  2. Tom Wark - January 3, 2011

    Alan,
    These are wines most commonly sold by retailers, not wineries. Neither Maryland, New Jersey nor New Mexico are likely to pass laws that allow their citizens to order wines from out of state wine stores…just wineries.
    As a result, the vast majority of imported wines (read: French, Germman, Austrian, Italian, Spanish, etc), out of vintage wines (Read: your past vintages that are sold out from you but can still be found at a retailer online), wine clubs (read: Wall Street Journal, Wine-of-the-month clubs), and auction wines (read: Most collectible wines that are sold at auction houses such as Winebid, Christies, Acker, etc) will not be legally available to residents of these states.
    Tom…

  3. Tom - January 4, 2011

    There may be more hope in MD for retailers than you describe. The MD direct shipping bill that will be reintroduced does allow for retailers to ship to MD residents. From what I have heard, the bill’s sponsors don’t buy the Comptroller/AG lack of reasoning against allowing retailers to ship, so it may actually happen in 2011.

  4. James McCann - January 4, 2011

    PA is certainly a state to watch as Corbett has privatization near the very top of his agenda. He’ll be moving quickly, as consumer sentiment is currently running in his favor. Look for the unions and temperance groups to mount a very spirited defense.

  5. Chris Albonetti - February 3, 2011

    I’d like to add Tennessee’s attempts to mirror VA and NC, this year, as well.
    Link to article…
    http://www.businesstn.com/content/201101/tennessee%E2%80%99s-other-wine-bill

  6. Dave S Smith - September 2, 2011

    With the new Maryland Law changes I’m an Independent Wine Consultants for WineShopAtHome (http://www.wineshopathome.com/DaveSSmith) we are looking for clubs, people, host and consultants that is why I’m reaching out to you. Would like to have time via a phone or in person to find out more about your club and how we can host a wine tasting for you in the future.
    Thanks
    Dave S Smith
    Davessmith1@verizon.nt
    Cell: 443-536-2588
    About Us
    WineShop At Home is the premier direct seller of handcrafted, artisan wines. The company is a bonded California winery headquartered in the famed Napa Valley and is the only direct seller to offer exclusive wine brands available nowhere else. Our Independent Wine Consultants throughout the country, present in-home Wine Tastings, where guests can taste our wines and learn about, experience and buy wines directly from the Winery. WineShop At Home epitomizes a whole new generation of direct selling — offering an exceptional consumer experience, an unparalleled and exciting business opportunity for both women and men, and unequalled quality, service, and style.
    Our Vision
    At WineShop At Home our vision is to provide the best wine lifestyle experience in the world. We envision a world where the enjoyment, education and purchasing of wine is a pursuit and pleasure available to everyone. We aspire to be recognized as offering the most innovative consumer wine tasting and buying experience and a wine career opportunity second to none. In addition, we foster the education, enjoyment and healthy consumption of wine and food.

  7. The Arguments Against Allowing Retailers to Ship Interstate : BevSites :: Ecommerce for wine stores - January 31, 2013

    […] But retailers have access to only 13 states; they have been losing ground and will likely be excluded from shipping to the 3 states wineries expect to gain this […]


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