Under Cover of Darkness

Posted by Tom Wark on Oct 3, 2007

Yesterday a law went into effect in the state of Ohio that is not only begging to be overturned but is exactly as Jim Gorden describes it:

"To me it just sounds like pure political muscle. People in the wine
business in Ohio have restricted the free market, have limited Ohio
consumers’ access to wonderful wines from out of state, and have, as I
see it, legislated themselves more profits."

The new law only allows wineries making less than 60,000 cases per year to ship into Ohio. This kind of nonsensical cap is being challenged in other states. But there is a basic principle in place that helps determine if this kind of restriction is actually constitutional: The state needs to show that it is necessary to promote temperance, an orderly market or collection of taxes.

It turns out that this question is very neatly answered:

"At the time, we knew we were banning the sales
beyond that gallon limit anywhere in the state of Ohio, but
for me it was an economic-development issue dealing with the
overall interest of promoting Ohio wineries."

Whoops! This from an Ohio legislator Tim Grendell who supported the law. Grendell goes on to admit that his concern was "that the national
wineries and national wholesalers could flood the market and
cause severe harm to the Ohio winery industry."

What we have here is evidence that the law was passed not to support temperance, an orderly market or tax collection. Rather, Mr. Grendell describes a law based purely on protectionism.  Keep in mind, that’s how the law is justified. If this were really the case you might even be able to sympathize since the goal of supporting an Ohio wine industry that is growing is a good thing.

But that’s not the real reason. This law was supported strongly by the Ohio alcohol wholesalers who since 2000 have given more than $1.8 million in campaign contributions to Ohio legislators.

Bottom line is that this really ugly new regulation was put in place as a wholesaler protection act. Again, to quote Jim Gordan: 

"My guess is that the Ohio distributors realized that they couldn’t
keep all of their old monopoly, so they decided to keep as much of it
as they could. By setting the bar at 63,000 cases, probably all of
Ohio’s own wineries are OK to ship direct, because they’re mostly
medium sized or small. That made it easier for the legislators with
Ohio wineries in their districts to support it.

Since distributors carry mostly the products of large wineries it
made sense to them, I assume, to focus on protecting their sales of the
biggest brands they carry"

But what is really nasty about this legislation is how it got passed. No hearings. No public discussion. The changes to Ohio law were slipped into the state’s Budget bill at the last moment and nothing about it was said.

What follows is perhaps the most interesting commentary on unethical behavior I think I’ve read all year. A story in the Cleveland Plains Dealer discussing the process by which this legislation was slipped in without debate and under the cover of darkness, describes the attitude of one Jeff Jacobson, a Dayton area Republican largely responsible for doing the sneaking:

"Despite the lack of public debate, Jacobson said he felt
the matter was thoroughly hashed out behind closed doors"

Isn’t that precious!!

Jacobson is further quoted as saying, "It would be impossible
for every issue in every budget bill to be one that people
spend hours and hours talking in a public meeting
about."

Fair enough…but how about at least one minute or a half hour or maybe just one hour discussing a change in the law that will strip consumers of their rights, result in unconstitutional lawmaking, and appear to be largely payoff to wholesalers who pay by millions?