The Big Sell Out

We are in for years of wine-shipping and wine sales related litigation. Years!

Maryland wineries and wine distributors have apparently agreed on a compromise that will allow that state’s wineries to continue to sell direct to restaurants and retailers and bypassing wholesalers and distributors altogether. The compromise was necessary when the state’s comptroller ruled last June that allowing Maryland wineries to do this violated the commerce clause of the U.S. Constitution because out of state wineries did not have the same privileges.

The compromise is such that only wineries producing less than 27,500 gallons of wine per years, whether in or out of state, will be allowed to bypass wholesalers and sell directly to retailers and restaurants.

This is the equivalent of approximately 11,500 cases of wine produced annually. Setting aside the fact that this kind of limit amounts to nothing more than a "wholesaler protection act", what the limit does is prevent medium and large wineries from going around the wholesalers. Even if the winery of, say, 100,000 cases produces only 200 cases of a particularly rare and coveted wine, the retailers in Maryland are not allowed to purchase it directly from the winery.

This kind of a volume limit is being codified in numerous states across the country as wholesalers try to use their campaign contribution-purchased power to protect themselves as states reevaluate their wine laws in the wake of last year’s Granholm v Heald Supreme Court Decision making the uneven playing field in wine distribution unconstitutional. The same kind of restrictions are being added to new laws that speak to direct sales from wineries to consumers.

This kind of volume limit will be challenged in court.   This is guaranteed. If it is found to be unconstitutional I have to wonder what wineries who sold out their out-of-state brethren will do. We know what the wholesalers will do. They will demand that all direct sales to retailers and restaurateurs by wineries be outlawed. Their purchased politicians will be inclined to go along with this. The wineries will either have to band together across state lines and fight this battle or give up an avenue of sales that in many cases makes or breaks their livelihood. Will they?

One Response

  1. Laura - October 21, 2011

    We have a small family run award winning winery near Niagara Falls on 100 acres.
    Would consider selling it quietly if the price were right. Any suggestions of who to approach.

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