Hey Everyone…Let’s put small wineries out of business!

Rep. Chis Ward is a Michigan politician that takes contributions from the Michigan Wine & Beer Wholesalers then writes laws for them. Ward has been the lead legislator when it came to revamping Michigan’s wine shipment laws in the face of that state’s defeat in trying to defend its discriminatory laws with regard to shipping wine to consumers.

Ward finally sat for an interview with someone who knows wines, loves wine and sees through the blatant payoff that is the new wine shipping bill authored by the legislator.

One of the key provisions in the new Michigan bill that has not yet received passage in that state’s Senate, is the prohibition on Michigan wineries from selling their wines directly to retailers and restaurateurs, as they’ve been able to in the past. It means that instead of selling a Chardonnay that retails for $20 to a restaurant for $15, they must sell it to a wholesaler for $10. For Michigan’s mainly small, family wineries, this is a massive financial hit. The kind of hit that puts you out of business.

Why is this change in Michigan’s laws necessary?

The answer is, it’s not….unless you are bent on giving monopoly status to an in-state industry of wine wholesalers who in-turn, give you money for passing such a law.

In her interview with Ward, wine columnist Sandra Silfven asked about this blatant giveaway to the Michigan wine wholesalers:

Q. New York’s recent wine shipping law did not take away the right of wineries to self-distribute. Why take it away here?

A.  I don’t see how we can do this given the U.S. Supreme Court
ruling, which called for equal treatment of in-state and out-of-state
wineries. If there is a way that can be carved out that we won’t allow
Napa Valley wineries to self-distribute here, I will take a look at it.

I do have a lot of sympathy for the wineries in the state. But we have
to make our laws consistent over state boundaries. Did New York allow
out-of-state wineries to self-distribute, too? (Note: The answer is no.
I have subsequently found out that New York wineries are the only ones
that can self-distribute in that state, and it has not been challenged.
– S.S.

Why is it a problem to let out-of-state wineries to "self distribute" their wines to Michigan restaurants and retailers? This is clearly the implication of Ward’s comments. He simply does not explain this. But he does not have to. The idea of wineries distributing their wines themselves, bypassing wholesalers, is the single greatest fear wine wholesalers across the country have. The fear is not necessarily of smaller wineries distributing wine themselves to wine shops and restaurants around the country. Rather their fear is that the BIG BOY wineries with the means to set up such a distribution system will get into the game. And frankly, wholesalers should be afraid of this possibility. (Huge at Huge Johnson’s
World of Wine
covers this issue nicely)

My question is, why should they be protected from this possibility?

The Supreme Court of the United States told us that wineries that are allowed by state law to ship to its wine drinking residents must also live with the idea of out-of-state wineries shipping to their state’s residents. Discrimination was unconstitutional. Many legal types have also suggested that there must be no discrimination at any level of the wine distribution if the implications of the Supreme Court decision is to be followed. So, if Michigan winery can sell and ship to a Michigan restaurant, then an out-of-state winery must be allowed to also. Or, if a Michigan retailer can ship to Michigan consumers, then out of state retailers must be allowed to also.  This analysis of the Supreme Court’s decision has not been tested in any court. Though I would not be surprised if it is at some point.

Still, the issue with regard to Michigan remains: Why must Michigan’s small, family wineries be put out of business to protect the large Michigan wholesalers?

While we know the answer is partly, "because the wholesalers demand this kind of protection and in fact pay for it in the form of contributions to politicians. The other explanation is the apple cart. For years now wholesalers in most states have efficiently interacted with state regulatory agencies to carry out regulations related to taxation. Many believe this is the most efficient way to achieve an well-regulated market. Is it? Or is it just a combination of tradition and well spent campaign contributions?

Knowing what I know about wine wholesalers and particularly about their trade organizations complete disrespect for anyone or anything that can’t help their bottom line, I have to conclude that the new Michigan law is nothing more than payoff to the wholesaler monopoly. There is no good reason why a winery in California could not also interact well with Michigan’s regulators.

Michigan’s Rep. Chris Ward is a shill for the Michigan wine wholesalers. In another part of his interview with Silfven you see his duplicity in the service of this shilling:

Q. Do you feel guilty about accepting money from the Michigan
Beer and Wine Wholesalers Association, who stand to benefit from the
bill you introduced?

A. No, because their original bill (banning shipping for all
wineries) was rewritten to allow unlimited direct shipping to
consumers. They (Michigan Beer and Wine Wholesalers Association)
weren’t’t happy about the changes.

Not happy? The wholesalers are getting a guarantee from the State that they will never have any competition. And they aren’t happy?

The number of things wrong with Michigan’s approach to regulating alcohol, and wine in particular, would take it’s own separate blog to deal with (THERE’S AND IDEA). The power behind the regulating, from the legislature, to the Michigan Liquor Control Commission and hits head Nina Somona, to the wholesalers, all seem to be conspiring to put Michigan wineries out of business.


Posted In: Wine Business


One Response

  1. Jacob - September 26, 2005

    The constitutionality of in-state preferences at various levels of the supply chain is currently being tested in Virginia. The law here has been that in-state wineries may sell directly to restaurants and retailers, while out of state wineries must use a three-tier system including a distributor. In addition, Virginia’s liquor stores have only been allowed to sell Virginia wine if they sell wine at all.
    Brooks v. Danielsen is the case challenging this law. At it’s most recent stage, a District Judge ruled against Virginia, citing the Supreme Court’s recent ruling in Granholm v. Heald. I wrote about the case here.

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