The Wineries’ Betrayal of Consumers

betrayBack in the day, from around the year 2,000 to 2010, wineries across the country understood perfectly that, given the chance, the wholesale tier would screw them, attempt to make their lives more difficult, attempt to push wineries into using only wholesalers to distribute their wines, work to stop any of their efforts to normalize direct to consumer shipping, and even accuse wineries of attempting to sell wine to minors.

Back in the day, the California Wine Institute, Free the Grapes (funded by wineries), The Coalition for Free Trade (Funded by Wineries, and winery associations across the country battled to put an end to discriminatory laws that they all claimed harmed consumers by preventing them from legally accessing and buying the wines they wanted.

Not so much today. In fact, today when wineries see wholesalers pushing anti-consumer laws, they tend to turn a blind eye or even support the effort.

Michigan is a perfect example.

As the Wine Spectator recently reported, Michigan passed a new law that allows Michigan wine retailers to ship wine directly to consumers, while banning those same consumers from purchasing wine from out-of-state retailers. The impact of this law is simple.

1) Michigan consumers may not have any imported wines shipped them from out-of-state since only wine retailers in the U.S. sell imported wines.

2) The vast majority of older vintage American wines may no longer be shipped to Michigan consumers since it is almost entirely American retailers that sell these wines.

3) It normalizes economic discrimination.

4) It harms American wineries’ best customers: Retailers

As this Michigan law was working it through the state’s legislature there was no opposition to its discriminatory nature voiced by the California Wine Institute, Free the Grapes or Michigan wineries. There was no testimony offered in opposition to the discrimination against retailers by the California Wine Institute, Free the Grapes or the Michigan Winery Association.

In the Wine Spectator article, Nancy Light, vice president of communications for the California Wine Institute said this: “Wine Institute did not support the bill’s limitation on retailer shipping.”

Nor did they oppose the “limitations” in the bill. At least they did not oppose them publicly. And without public opposition, there is no opposition. They were happy to see the bill pass with its anti-consumer, anti-retailer provisions. In fact, to again quote Ms. Light: “We are pleased with the inclusion of ‘fix-it’ language on [direct-to-consumer] labeling and invoicing issues that were problematic for wineries and that we had been negotiating separately with [Michigan Liquor Control Committee] staff.”

So much for the Wine Institute’s concern for consumers. But glad those invoicing issues are dealt with.

Meanwhile there is Free the Grapes. A search of the Free the Grapes website finds no information on the new Michigan law that restricts consumer access to wine. There were no alerts to the press about the law. No media advisories. All this inaction despite this missive on the Free the Grapes website:

“Free the Grapes! is a national grassroots coalition of wine lovers, wineries and retailers who seek to remove restrictions in states that still prohibit consumers from purchasing wines directly from wineries and retailers.”

The Michigan Wine Producers Association, which represents Michigan wineries, had this to say about the bill restricting consumers access to wine via their president Mike Beck:

“We support every legal aspect for people to have access to wine.”

Unfortunately, they didn’t support the effort to kill this bill nor to amend it when it might have been changed to allow consumers to have wine shipped to them from out-of-state retailers along with in-state retailers. Beck added:

“If everybody plays by the rules, then we see no downside.”

Unfortunately, the new law provides two sets of rules, but Beck and his organization had nothing to say about that.

The enabling of restrictions on consumer access to wine and the embrace of the wholesalers constant attempts to restrict consumer access to wine by wineries, their representatives, the California Wine Institute, Free the Grapes, and the Michigan Wine Producers Association doesn’t necessarily amount to a “war on retailers”. However, it most certainly amounts to a tight embrace on restrictions on consumer access to wine and the wholesalers ongoing effort to restrict consumer access to wine.

The law in Michigan will almost certainly be challenged in court. If all goes well, that coming lawsuit or another will find its way to the Supreme Court where we will learn if the Constitution protects retailers from discrimination just as it protects wineries from discrimination.

It will be fascinating to discover at that time if wineries, the Wine Institute and Free the Grapes decide the best course of action is to urge the Supreme Court to adopt the position that retailers can be constitutionally discriminated against. At this point, that’s where the wineries are heading with both their actions and inaction.

So much for their claims that they support consumer access to wine.


13 Responses

  1. Mike Wanless - January 12, 2017

    As i read it, it can’t be constitutional? At least for interstate commerce restrictions??

  2. Joel Goldberg - January 13, 2017

    Tom, some of us in Michigan had conversations about the bill. Aside from the fact that this was a done deal in our bought-and-paid-for legislature, the common opinion was that there’s no way the in-state / out-of-state distinction could withstand court challenge. Personally, I see that as the easiest route to getting it thrown out.

    There is, however, no excuse for the industry not to at least weigh in on this. Smaller out-of-state wineries are the most likely to be hurt if the legislation does stand, and especially if it spreads to other states.

  3. Tom Wark - January 13, 2017

    Joel,

    How are you.

    Yet….There must be an excuse right? Could it be apathy on the part of Free the Grapes, the Wine Institute and the Michigan wineries association. I don’t think so.

  4. Tony Westfall - January 13, 2017

    Thanks for fighting the good fight. this is why we give our money to you. Can’t wait for our cease and desist letter so that we can challenge this in court. I actually look at this as a blessing as this is the stupidest law they could have passed for its absolutely blatant disregard for the commerce clause. Embarrassed to say i grew up in Michigan!

  5. Airwine - January 13, 2017

    Where you stand depends on where you sit. The WI is an organization of “wineries”.
    GASP. !!!
    Now Free the Grapes…perhaps another matter.

  6. Joel Goldberg - January 13, 2017

    I’m well, thanks, Tom.

    Tony, as someone on your email list, I’m hoping that your cease-and-desist doesn’t happen on my order.

    To be fair to Michigan’s wineries, they had no horse in this race. They can already direct-ship, and might marginally benefit from the new in-state retailer shipping. Out-of-state retailers won’t be shipping Michigan wines to Michigan residents. Why poke the bear?

  7. Dwight Albers - January 13, 2017

    Similarly, Texas has a law that prohibits out of state retailers from direct shipping to Texas consumers. But wait…..follow the money……An out of state retailer can ship to a third party Texas distributor (who of course adds a hefty markup, whether it’s a bottle or a whole case…) who in turn ships it to the consumer. So it’s not really about protecting in-state retailers or wineries. It’s about some powerful lobby managing to legally extort funds from Texans in order to get the wines we want, and may likely be otherwise unable to obtain locally.

  8. Tom Wark - January 13, 2017

    Tony,
    Oddly, this exact same law was already in place in Michigan years ago and already ruled unconstitutional by a federal court. Lawmakers, the Michigan Liquor Control Commission and the Governor all know this and all know that an identical law suit is HIGHLY likely.

    • Joel Goldberg - January 13, 2017

      The previous Michigan law — that was invalidated on interstate commerce grounds by the Granholm decision — pertained only to licensed wineries shipping DTC. The new one is about retailers. To me, that’s a distinction without a difference, but I’m not a constitutional lawyer. Since everyone sees the legal challenge coming, I’m sure they had some strategy planned before starting on this.

  9. Tom Wark - January 13, 2017

    Dwight,

    Thanks for the comment. I’m pretty sure that TX wholesalers may not purchase wine from out of state retailers. However, the sentiment of your comment is correct. TX wholesalers (as well as some retailers) were and are the driving force behind preventing consumers in TX from purchasing the wines they wan from out of state sources.

  10. Tom Wark - January 13, 2017

    Joel,

    Wineries are either in favor of free trade and consumer access to wine or they are not. It’s that simple. In the case of the Michigan Winery Association, they clearly are not fully committed to ether.

  11. Bob Rossi - January 14, 2017

    I don’ see how this law can survive under the reasoning in Grandholm. The fact that here it’s retailers rather than wineries shouldn’t make a difference.


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