Cynicism Wins In Oklahoma Wine Question

Oklahomans passed a Constitutional amendment yesterday that should have the opponents of free trade (read: wine distributors) jumping for joy!

The new law allows wineries inside and outside Oklahoma to sell directly to Oklahoma restaurants and retailers without having to get the permission of a distributor and pay enormously overinflated fees for them to carry the box of wine into the stores and restaurants.That's good.

However, wineries only have this privilege if they make 10,000 gallons or less of wine annually. This is the equivalent of around 4,000 cases of wine per year.

But here's the kicker. Those winery deliveries to Oklahoma restaurants and retailers? They may only take place in vehicles owned or leased by the winery. In other words, if you are a CA or TX or WA or OR or IL winery, you are essentially barred from taking advantage of this new law because it is financially impossible to do so.

What we have here is just one more Distributor Protection Act and, I'd venture to suggest, and unconstitutional one at that.

The Ballot Measure, State Question 743, is among the most cynical referendums I've seen this election season. It was put in place for the purpose of protecting the profits of a small group of distributors, but publicized as a pro-winery law. If you have any doubt that the gallonage limit and the requirement that the wine only delivered in vehicles that are owned by the winery, are meant to restrict trade and protect the poweful alcohol wholesalers in Oklahoma, then read this little bit of information attributed to Brad Naifeh, a representative of Central Liquors, an important Oklahoma alcohol distributor, and OK representative Danny Morgan that wrote the proposed (and now passed) constitutional amendment:

"Brad Naifeh of Central Liquor cautioned lawmakers against the bill.
Some large winemakers from other states, such as California's E&J
Gallo, sell wines under hundreds of labels that produce less than 5,000
gallons per year, said Naifeh, and could use the proposed law to flood
the market in Oklahoma without using a wholesaler.

Morgan said the bill requires both in-state and out-of-state
wineries who sell directly to retailers in Oklahoma to transport their
wines in vehicles owned by the winery, and requires such deliveries to
be transferred directly from the winery to the retailer. Such vehicles
must obtain the necessary licensure and permits from the Oklahoma
Alcoholic Beverage Laws Enforcement agency. Morgan questioned if it
would be cost-effective for an out- of-state winery to drive a few
thousand gallons of wine all the way to Oklahoma."

This is a remarkably honest assessment of the measure's actual intent: To limit free trade by creating barriers specifically meant to keep out-of-state wineries from doing business in Oklahoma.

There is also a kill switch written into this amendment. The final part of the amendment reads: "If any part of this measure is found to be unconstitutional, no
winemaker could sell wine directly to retail package stores or
restaurants in Oklahoma."

I'm not cynical by nature, but why do I believe that at this very moment, as I write this, Oklahoma alcohol wholesalers are huddling with their lawyers to figure out which part of the newly passed amendment to the Oklahoma Constitution they want to challenge in court in order to, once again, take complete control of the wine market in Oklahoma by killing self distribution?


11 Responses

  1. Thomas Pellechia - November 5, 2008

    Last Friday, I tried to explain to an Oklahoman who proudly announced that he had voted for this law why he should have asked me first.
    He took offense that I brought the subject up.
    One of the problems with voting is that the electorate isn’t always informed and the wording of the measure being voted on isn’t always informative. Every sleaze ball hack working for a campaign knows that.
    I’m going to to give this voter the link to this blog entry.

  2. Fredric Koeppel - November 5, 2008

    This sounds unconstitutional in so many ways. How can they get away with this?
    (and who knew that Oklahoma has 55 wineries?)

  3. Judd Wallenbrock - November 5, 2008

    States rights v Commerce clause revisited. This continues to amaze me…and allows me to exercise the patience I’ve learned from raising small children…and managing employees.
    I am intrigued though to taste some OK wines…if only there was a ‘legal’ way to make a trade? Guess not.

  4. 1WineDude - November 5, 2008

    OMG… If this is how I handled things in my day job, I’d be fired and it would be impossible for me to get work in any competing company due to the reputation that I would carry in the industry for being a complete idiot.
    I’m finding it difficult to believe the extent to which stupidity has infiltrated the wine distribution system… but then again, at this point I’m not sure why I should be surprised…

  5. Dylan - November 5, 2008

    Simply unbelievable. Were it not for all the articles backing up this post I would have to question if it were a Johnathan Swift satire on Wine Distribution.

  6. Craig - November 6, 2008

    I disagree with both the assessment that the bill will be contested by distributors or that it’s even unconstitutional.
    First, every time state questions about wineries come up, they pass resoundingly. Distributors have to realize that they must give the wineries something or eventually the wineries will find a way to get an open distribution onto the ballot.
    Secondly, just because it’s not cost effective for out of state wineries to distribute in Oklahoma does not mean its unconstitutional. Nothing keeps a Texas or Arkansas wineries from delivering to Oklahoma… in fact, they would have an easier time dropping wines off in Tulsa, then a winery in the panhandle.
    Plus, I think this law was based off one in another state which hasn’t been struck down. Is it perfect? No. But given the political realities, it’s better then nothing.

  7. bs20 - November 7, 2008

    Given the current alcohol-related laws in the state of Oklahoma, it should come as no surprise that a new law would make no common sense.
    That being said, the state question as presented on the ballot was worded so poorly that I really did not know what I was voting for. I consider myself an informed voter, but this one slipped in there without me knowing anything about it. It seemed I would be voting for something that would help small wineries, but even then I wasn’t sure. I’m pretty sure this was most peoples’ reasoning for passing it.

  8. Tom Wark - November 7, 2008

    Those of you who have noted that at least this new amendment to the OK constitution helps OK wineries are correct. It does help them.
    Yet it represents, literally, the very least that OK wholesalers would allow the OK wineries to be helped. What’s ridiculous about that is not that it’s the least that could be done to help them but that it was the wholesalers who control what would be allowed to be done.

  9. Thomas Jones - November 7, 2008

    I agree with Craig. Oklahoma citizens are not voting for these wine reform laws to make the economy ‘more fair’ for Gallo. Big California wineries already dominate the retail and restaurant wine markets in Oklahoma.
    Oklahoma citizens want a sustainable Oklahoma wine industry. When the State legislators failed to act, small wineries in Oklahoma were forced to sign up with centralized liquor distributors that refused to distribute the product…at any price.
    Certainly, the gallonage limit and the requirement that the wine only delivered in vehicles that are owned by the winery is meant to restrict trade and protect the alcohol wholesalers in Oklahoma.
    I think also think the limits are meant to prevent commercial shippers like UPS and FEDEX from becoming allies with local family owned wineries.
    However, it certainly does NOT make the Oklahoma wine market more unfair to California wineries than local wineries. That will never happen, money still talks.
    This new law will allow my family to once again offer our Oklahoma wines to the restaurants and retailers in our own state. That means we will once more have a retail market that goes beyond the foot traffic at our very rural vineyards. That doesn’t sound to me like a huge competitive advantage that will unfairly damage your customers to me, Tom.
    Simple free trade would have been better and maybe in time our leaders will see that, but for now don’t let ‘the perfect be the enemy of the good’. Oklahoma wineries needed this for simple survival.

  10. el jefe - November 10, 2008

    Question: How much of said truck do I have to own or lease? Put another way, if I am a co-owner of the truck rather than sole owner, does that work? If so, anyone want to sell me a $50 interest in a truck going to OK?

  11. kalen bray - November 21, 2008

    This amendment that is in question has a history. i and about 15 other students in a college classroom were setting around discussing the laws pertaining to oklahoma wines and how to avoid the removal of any liscencing when the laws about wholesalers were braught up and a coment was made about how “we” the wine makers of oklahoma were so limited on how much wine we could sale and how our profits were so hindered by the wholesaler that one could barely sustain an income based on wines alone. The class set out to write this amendment under the direction of our professor whom is constantly running things like this through oklahoma legislation. The limits were placed there to “apease” the wholesalers and keep them from boycoting oklahoma wines. as was the part of the winemaker having to own the vehicle in which the wine was shipped. these limits were placed there in order to take one small step towards maybe a future larger step. one does not merely walk up and push over a mighty oak, it is removed one chip at a time

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