It’s not 1933 Anymore…is it?

For anyone who has not been following the attempt in Illinois to re-write the wine distribution laws in that state so that distributors are granted even more power than the state already grants them, a new development has occurred.

A new association of wineries calling themselves The Illinois Winemakers Alliance has formed in part to oppose Illinois House Bill 429.

HB 429 does a variety of things:

1. Allows out-of-state wineries to ship to Illinoisans
2. Allows in-state wineries to ship to Illinoisans
3. Allows wineries making up to 25,000 gallons of wine to distribute 5,000 gallons annually to retailers and restaurants
4. Prohibits wineries making over 25,000 gallons of wine to distribute directly to retailers and restaurants
5. Prohibits Illinoisans from purchasing wine from out-of-state retailers..
6. Allows Illinoisans to have wine shipped to them from in-state retailers

The reasons consumers are against this bill should be obvious. They are being stripped of a long held right to buy from out of state wineries. But when you couple this with the fact that in-state retailers may still ship to Illinoisans you can see the unconstitutional implications of the proposed legislation. To quote from the Granholm v. Heald Supreme Court decision:

"States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses….If a State chooses to allow direct shipment of wine, it must do so on evenhanded terms…”

However, the new Illinois Winemakers Alliance, while opposing this anti-consumer provision of HB 429, is also opposing the bill because it strips some Illinois wineries from selling directly to retailers and restaurants, even in the small amount that the bill allows smaller wineries to sell. These wineries that make more than 25,000 gallons annually and that would no longer be able to sell direct to retailers and restaurants, would be put at the mercy of Illinois wholesalers—who are the only ones who could sell these wines to the trade but are under no obligation to distribute these wines. Put simply, Illinois wineries making over 25,000 gallons of wine would be at the mercy of Illinois wholesalers to get their wines in restaurants and on store shelves. What if no wholesalers want to distribute these wineries’ wines?

You can see why the new Illinois Winemakers Alliance, that represents wineries producing nearly half the wine made in the state, are against HB 429. And you can see why wholesalers just LOVE this legislation.

Currently HB 429 is sitting in the Senate Rules Committee awaiting action. It has passed the house and would likely pass the Senate if it ever gets out of the Rules Committee.

HB 429 represents the kind of regressive direct shipping and wine legislation that has popped up all over the country since the Granholm Supreme Court decision. What’s most interesting is that NO consumers are asking that this kind of legislation be passed. And no wineries are asking that their ability to sell directly to retailers and restaurateurs be diminished. As always it’s the wholesaless that are demanding this legislation.

With regard to the anti-consumer legislation proposing that wine lovers no longer be allowed to buy wine from out of state retailers, it seems counter-intuitive that wholesalers should have anything at all to say about this. Wholesalers don’t interact with consumers. They don’t sell to consumers and they don’t buy from consumers. They don’t talk to consumers and they certainly don’t listen to consumers. Why are they always the one’s proposing legislation that affects consumers?

When was the last time you saw wholesalers actually do something beneficial for consumers?

They talk a big game about providing lots of choice by distributing so many wines in so many states. Yet, there’s no way they can rival the number of wines that are made available to consumers via direct means. Furthermore, they spend millions of dollars opposing consumer access to wines through campaign contributions, writing anti-consumer legislation and opposing reasonable direct shipping legislation.

There is one theme that runs through all the actions of wholesalers whether they are opposing direct shipping to consumer or the ability of wineries to sell direct to restaurants and retailers: Their actions are all meant to reduce the power of their competition.

It’s as though they know something very fundamental about themselves and their business model and the market place. It’s as though they know that forced to compete in a level market they’d lose that competition. Luckily, they’ve had the states on their side since 1933 when prohibition ended and most states mandated that producers of wine sell to wholesalers who would then sell to retailers and restaurants. In essence, the states have been protecting wholesalers from themselves for nearly three quarters of a century.

It’s not 1933 it?

Tom Wark is the executive director of the Specialty Wine Retailers Association

9 Responses

  1. David Topper - July 21, 2007

    Tom – I’ve always admired how you took some of your posts to the edge but I feel you’ve gone over the edge with this one. Let’s get things back into perspective. We’re talking about wine here. The current inconvenience brought upon wine consumers and wineries by these crazy laws is a far cry from the loss of life of millions of innocent people throughout the world. Personally I don’t see any parallels. – David

  2. Terry Hughes - July 21, 2007

    Where’s Al Capone when you need him?

  3. Mark Storer - July 22, 2007

    The Illinois bill seems odd to me in that provisions 1 and 5 seems to contradict each other. HB 429 provision 1, “1. Allows out-of-state wineries to ship to Illinoisans” and then provision 5, “Prohibits Illinoisans from purchasing wine from out-of-state retailers.” What am I missing here?

  4. Mark Storer - July 22, 2007

    OK–I get it—out of state retailers versus out of state wineries. But isn’t a winery in some ways a retailer? Or is that parsing words…?

  5. Tom Wark - July 22, 2007

    Very astute! While wineries and retailers usually have a different license, when they each engage the consumer they both engage the consumer in exactly the same way: it is a retail transaction.
    This bit of obviousness has yet to get a full hearing in the arena of litigation. I hope at some point the discrimination that often exists at the state level will be looked at from a transactional basis, rather than from the basis of the entities involved.

  6. Mark Storer - July 22, 2007

    Agreed. The serious flaw in the language, the syntax, if you will–create a flaw that basically doesn’t allow the consumer any freedom. And that’s the shame of it.

  7. Dan Cochran - July 24, 2007

    In a perfect world, legislation would be written to benefit consumers above all else. We want freedom of choice, but the legislatures continue to pander to the lobbyists. This is why so many people hate and distrust the government and don’t bother to vote – EVERYBODY seems to be crooked!

  8. Bob Myers - August 3, 2007

    Tom: I think it is imperative to use the entire quote from Granhom rather than use what you feel is key.
    “States have broad power to regulate liquor under §2 of the Twenty-first Amendment. This power, however, does not allow States to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers. If a State chooses to allow direct shipment of wine, it must do so on evenhanded terms. Without demonstrating the need for discrimination, New York and Michigan have enacted regulations that disadvantage out-of-state wine producers. Under our Commerce Clause jurisprudence, these regulations cannot stand.”
    I fail to see the word “retailer” in the summary. I however, do see it applies to wine producers but like you I’m not an attorney nor do I sit on the U.S. Supreme Court bench. I hope to see you on Monday.
    Bob Myers
    Vice President of Government Relations
    Associated Beer Distributors of Illinois

  9. Caress Bench - August 17, 2007

    Caress Bench

    Estella Forder Czech Republic, Prague, Couple on park bench

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