Negotiating With The Truth in Illinois Wine Shipping Battle
The Illinois legislature held a committee meeting today on the issue of direct shipping. Following the meeting I had a chance to speak with the lobbyist for the wineries, Mr. David Strickland.
According to Strickland, it was his view that the overriding message from the committee members was "find a compromise". Apparently both the Wholesalers’ and the Wineries’ bills were approved and passed through the committee to the floor of the House.
In communicating with the committee, the wholesalers characterized direct shipping, according to Strickland, as "The end of civilized society". However, though they claimed direct shipping to consumers was a threat to minors they apparently offered no evidence that it occurs on even an insignificant level.
Wineries on the other hand made the case that direct shipping to consumers was an essential means by which Illinois wineries were able to make a go of it and if it were prohibited it could be a severe or even fatal blow to many of Illinois’ 63 wineries.
Perhaps the most interesting comment by Strickland came when I asked him if the Wholesalers’ main concern was with direct sales by wineries to retailers and restaurants, a privilege they currently have under Illinois law. Strickland, who has listened to the wholesalers in both committee hearings as well as in private meetings with them, suggested that the main concern for wholesalers was the possibility that allowing direct sale of wine to consumers would open up the direct sale of beer and spirits to consumers, something that is currently illegal under Illinois law.
Let me be clear about this: I don’t believe for a second that the wholesalers’ main concern is either the direct shipping of wine to consumers or the direct shipping of beer and spirits to consumers. The main concern of any wholesaler with head on his shoulders is the direct sale from wineries to retailers and restaurateurs.
There is no way any Illinois winery is going to agree to a prohibition on their right to sell directly to retailers and restaurants. Simply, too much of their business is built on this sales channel. However, I believe in order to keep this avenue for sale in place, both the wineries and wholesalers will have to agree to craft a compromise bill that is unconstitutional. Let me explain.
Recently a Federal Judge in WA State ruled that a state may not allow its own wineries to sell direct to retailers while prohibiting out of state retailers from doing the same. She based her ruling on the Supreme Court decision last May that said a state may not discriminate against out of state wineries by prohibiting them from selling direct to consumers while allowing in-state wineries to do this. It is, the judge said, a matter of keeping the commercial playing field level for everyone. Currently in Illinois, the playing field favors in-state wineries.
If this ruling in WA State stands, it means that all states must treat their own and out of state wineries the same when it comes to wineries selling direct to retailers: either they all can do it, or none of them can do it.
I can predict with some confidence that in Illinois the wineries and wholesalers will agree to keep what is essentially an unconstitutional provision of Illinois beverage law in place. The question is whether or not the wholesalers will also try to put a Michigan-style poison pill in the bill.
In Michigan this same scenario played out. Wineries and wholesalers agreed to craft a law that allowed Michigan wineries to sell direct to retailers, but prohibited out of state wineries from doing the same. However, inside this law is a provision that says if any part of the law is deemed unconstitutional, then the privilege Michigan wineries enjoy in selling their wines direct to retailers will be revoked.
It’s pretty nasty, cynical language, but a very good indication of how important the wholesalers believe this issue of direct sales to restaurants and retailers is.
The wholesalers and wineries in Illinois begin their negotiations tomorrow. It’s anticipated that it will be a good two weeks before anything comes out of the negotiations. If a compromise cannot be crafted by the two parties then both the wineries’ and the wholesaler’ bills will go forward and be voted on.
This is the point at which the media starts to quiet down…while there is no news. Recently there have been a spat of articles in Illinois and Missouri that described the battle between wholesalers and wineries and which also pointed to the wholesalers’ muscle that comes via huge campaign contributions. Those articles will stop as the parties negotiate. Yet, there is no more important time for the wineries to keep up their media campaign. Now is when the ground work has to be laid by telling the story of wholesaler greed, the story of small farmers, the story of obscenely large campaign contributions and the story of the expansion of the Illinois wine industry. Negotiations take place in the context of what is possible. It becomes more and more difficult for one party in the negotiations to take a hard line when they know that the public is being persuaded they are wrong. And in this case, the wholesalers are wrong. It only takes pressure from the media, the people and the wineries to make that clear.