Getting Clarity on Wine Laws

A critical ruling handed down in Washington State by U.S. District Court Judge Marsha Pechman is being appealed by the State. This is good. But there’s also another interesting nugget in this development in what is known as the "Costco Case."

First the good.

An article reports: "In its appeal,
the state will argue that the judge erred when she ruled that federal
antitrust laws take precedence over the state’s right to regulate
alcohol. The 21st Amendment, passed in 1933, repealed Prohibition, and
gave states broad authority to regulate liquor. The Washington State
Liquor Act, passed in 1934, was aimed at controlling consumption,
maintaining an orderly market and raising revenue, according to court

Getting clarity on what kind of regulation a state can impose upon its in-state alcohol sales will create  market that is better regulated and allow companies a more stable market once the knowledge of what’s allowed and what is not allowed is cleared up by the courts. Among the regulations that Judge Pecham struck down was the states’ use of minimum mark ups on wine.

But here’s the interesting part:
"The state
will not appeal a December ruling by Pechman. In that ruling, the judge
said laws allowing in-state wineries and breweries to self-distribute
their products (to retailers and restaurateurs), while not allowing out-of-state wineries and breweries
the same privileges are unconstitutional. The Legislature
passed a
measure earlier this year allowing both in-state and out-of-state
producers to self-distribute."

The judge’s ruling pretty much destroyed the state-mandated three tier system. This is not to say that Washington State’s wholesalers are going out of business any time soon. Rather, the ruling simply said a winery in Washington or anywhere else is not FORCED to work through a wholesaler if they want to sell to restaurants and retailers.

It’s taken over 70 years for such a broad and reasonable ruling to be passed down.

To this point, however, Washington State is the only place where out-of-state wineries can sell direct to retailers. Upon hearing news of this ruling wholesalers in other states have used their money and influence to convince legislators that in-state wineries should have their right to sell direct to retailers revoked, rather than give the same privilege to out-of-state wineries.

This turn of events not only cripples growing state wine industries, but is a lesson is depravity that results from our campaign finance laws that results in legislators being sold to the highest bidder.

3 Responses

  1. Zinman - May 13, 2006

    You say in your post “Washington State is the only place where out-of-state wineries can not sell direct to retailers”.
    I think you meant to say “can sell direct to retailers.
    As yet there don’t seem to be any wineries taking advantage of this new legislation to sell to retailers in Washington but Costco has had several offers from companies that want to act as finders to locate producers who are willing to sell direct.
    There is no shortage of producers who would do it, but Costco has very specific ideas about what it wants to carry (accolades from Spectator or Advocate above 90 points) and, it turns out the people who want to sell to Costco aren’t selling what Costco wants.
    Costco can already buy from Washington state wineries directly if the winery is willing to hire a trucker to deliver individual invoices to stores who require appointments at the receiving dock. Not surprisingly there aren’t many takers.
    On another topic.
    According to Zinqisition, Glazer’s is being sold to Southern Wine. There wasn’t a lot of detail in the post but if true this transaction exposes the facet of the business that the distributor haters refuse to acknowledge; the real culprits in the attempt to reduce consumer choice are the huge distillers, who want to change the American system to reflect a European style network where the distiller either owns or controls the distribution and retail channels precisely to limit consumer choices to as few products as possible.
    Glazer’s is the second largest distributor in the US. There is no good reason for them to sell except that Diageo has decided that it is their best interests to have Southern Wine and Sprits as there distributor nationally, so Diageo must have told Glazer’s “sell to Southern or we’ll help southern open in Texas and then we’ll move to them and you’ll get nothing”.
    What a corrupt system. Almost makes one feel sorry for distributors.
    Your point about the sale of our legislative system to the highest bidder is absolutely correct.
    I hope that our kids are tougher and smarter than we are.

  2. WIneBoy! - May 15, 2006

    New Mexico does allow out of state Wineries to sell direct to consumer in the state of New Mexico at wine competitions and tastings. New Mexico laws are very similar in that in state wineries can sell direct to retailers and anxiously awaitng the outcome of future lawsuits?

  3. Paul Mabray - May 15, 2006

    if you are looking to sell direct to retailers give us a ping at we are leading that revolution along side Costco

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