Wine and Testimony

Ann2 Testifying in front of a government body is frustrating, for a number of reasons. The primary source of frustration, however, is the inability to stand up in the midst of of a hearing and shout, "Bullshit!"

It's not so much an inability as it is a matter of decorum and one's desire to see how the hearing ends. I stayed until the end of a hearing last Friday on HB 716, a bill that if made into law would provide Marylanders the opportunity to purchase and have shipped to them wine from wineries and retailers inside or outside of Maryland. In other words, I suppressed my desire to stand and shout, "Bullshit", as opponents of direct shipping—both wine industry members and legislators—went about defiling logic and fact in their rush to keep consumers from accessing the wines they want.

I was in Annapolis, Maryland to testify in favor of HB 716 on behalf of the Specialty Wine Retailers Association. I was joined by local winery owners, farmers, retailers, sommeliers, consumers (Lots of consumers) and members of  Marylanders for Better Beer and Wine Laws.

Testifying in front of a legislative committee is pretty much the same in Annapolis, Maryland as it is in Sacramento, California and Springfield, Illinois and Salem, Oregon and Nashville, Tennessee and Olympia Washington. It is a stilted affair. One signs up to speak on a particular bill being heard that session. One waits for their name to be called. One then advances to a simple, rectangular table with microphones that faces a semicircle of legislators. When it's apparent they are ready for your testimony by staring at you with nearly dead eyes you commence with, "Mr./Madame Chairman and Committee members, thank you for…"

When I reached the rectangular desk with the microphone in Annapolis, however, I noticed that the committee members' eyes were deader than usual. I also noticed one particularly well-aged yet pretty female member of the committee to the left trying, but failing, to disguise her tendency to  nod off. I started with a joke involving my mother, Boone's Farm Strawberry wine and a particular member of the committee. I got a laugh and the older committee member to my left woke up.

In nearly every legislative hearing I've ever been to or testified at, the minds of the committee members, who will eventually vote to pass or not pass the bill on to the full House or Senate, have already been made up on the matter. There is the possibility to change minds. And there is the occasional legislator who hasn't yet made up their mind either due to laziness, disinterest or genuine respect. We testify nonetheless because we know it's important that the various constituencies and stakeholders have their views aired. In the case of the Maryland bill to allow direct to consumer shipping, I was there because it is important for the nation's progressive wine retailers to have their view heard.

I spent three minutes explaining to the members of the Economic Matters Committee of the House of Delegates exactly what out-of-state wine retailers would do if HB 716 became law: pay for a permit, faithfully remit taxes, report to the Comptroller on a monthly basis, submit themselves to the legal jurisdiction of the State of Maryland, and assure that common carriers checked IDs before any wine is delivered.

In those three minutes I made a point of looking each committee member in the eye. However, I don't think the older lady to my left saw me looking at her. My testimony was followed by questions from committee members, the part of the process I like most, but almost never changes minds.

Marylanders for Better Beer and Wine Laws have been driving forward this issue of direct shipping in Maryland. Adam Borden, it's executive director, has been relentless and built the organization into a 25,000 person-strong collection of wine and free-trade lovers. The result was a significant turnout at the hearing. Upwards of 40 individuals signed up to testify with proponents outnumbering opponents of direct shipping by at least 2-1. Everyone eventually went to the podium and did their three minutes. Not everyone got questions, but the committee members did muster the occasional question for a speaker.

The one legislator who decided to try to counter my testimony was a good looking gentleman in his late 30's who, like most legislators, asks questions in order to make a point, not to illicit more information upon which to make a decision. What this tall, young politicians wanted to know of me was how I could claim that there would be enough shipping into the state to generate significant tax revenue, but that these shipments would not take food off the table of local retailers who would be hurt by the competition?

What I'm sure he heard me explain, but didn't care about, was my belief that Marylanders were probably just as smart as wine consumers in other states where they are unlikely to pay substantial shipping charges on wine they could otherwise obtain locally.

In response to his query, I repeated my contention about the intellect and reason of the average wine lover Marylander. He was not satisfied with my response: "I don't' drink wine but I can't believe they'll be buying wine both on-line and at local stores."

This forced me to explain my own proclivity for Austrian Riesling, how I can't find much of it in Sonoma, how I buy it on-line, yet how I often patronize local grocery stores as well as wine stores to procure other wines.

"Well, I think you must like wine more than most people," he replied.

I didn't have a chance to tell him about my recent exploration of spirits and cocktail mixing. It wouldn't have mattered anyway. He successfully communicated his disinterest in understanding the issue and was also successful in communicating to his patrons in the audience who opposed direct shipping that he had done his duty to take their side.

The Annapolis hearing lasted four hours. I sat through it all even though I'd heard it all before.

I learned that allowing direct shipment of wine would be "catastrophic" for the youth of Maryland who would use the sales channel to obtain alcohol then likely go kill themselves or others in a car accident. "BULLSHIT," I didn't yell.

I learned that out-of-state retailers can not be trusted to pay Maryland sales taxes. "BULLSHIT," I didn't yell.

I learned that 1000s of Marylanders would lose their jobs if direct shipping was allowed. "BULLSHIT," I didn't yell, again.

When all the yelling was done not getting started, the hearing ended, the committee chair thanked everyone for their input and announced the bill was unlikely to pass this year. There was no straw vote among committee members. There was no real vote of committee members. There was merely an announcement that the SUB-committee of the Economic Matters Committee of the Maryland House of Delegates would review the bill next.

When that happens there will also be no yelling of "BULLSHIT" at all. Rather, the Alcohol Subcommittee will announce they don't' support the bill and it will die there.

The process by which political influence is purchased and wielded includes campaign contributions, using contributions to gain access to politicians, communicating during that access what you want the recipie
nt of campaign contributions to do, and giving them talking points for doing it without making a complete fool of themselves. The committee hearing is where it really all pays off. This is where wine shipping is killed and where distributors see their return on investment.

The more I attend and testify at these hearings and the more I see the same thing happen the more I start to believe that standing up and yelling "Bullshit" early on may not be a bad idea. It would have the benefit of getting me kicked out of a 4 hour long hearing with a predictable ending and have the benefit of actually being the truth.


25 Responses

  1. Randy - March 8, 2010

    Have you considered having the SWRA issue a press release that actually uses the word “Bullshit” when calling out the Maryland legislature? Perhaps get a quote from Gary V (assuming Wine Library is still a member) with some of the spectacularly blue language he’s infamous for.
    I would think a press release with a headline like that would raise eyebrows. It may cause a backlash, but it’s still an idea worth considering.

  2. zinguy - March 8, 2010

    “what out-of-state wine retailers would do if HB 716 became law: pay for a permit, faithfully remit taxes, report to the Comptroller on a monthly basis, submit themselves to the legal jurisdiction of the State of Maryland”
    Do you know of any major shippers like K & L or Wine Exchange who register in other states and pay wine taxes on goods shipped in? I don’t. It would take a structure similar to ASCAP to administer it over the various states and I don’t think that structure exists yet. Is it time for us to form a partnership and pitch it the next time you testify before a legislative body? Imagine collecting a .0001% handling charge on all the interstate wine shipping in he US. In addition we would already be positioned for the time in the near future when every state demands their share of taxes from all goods sold over the internet and shipped in. Until then, your claim that out of state shipping doesn’t hurt state coffers is a pipe dream.

  3. Thomas Pellechia - March 8, 2010

    Better you than me. I’ve got scars from past yells of BULLSHIT!
    Please, do let me know when you manage to change or make up a politician’s mind at a hearing. The celebration of such an event should be monumental.

  4. Samantha Dugan - March 8, 2010

    I just gotta say, I admire your fight and willingness to endure hours of same old same old to be a voice for something you believe in. Not many are willing to go as far as you have and I for one appreciate your efforts kid.

  5. Tom Johnson - March 8, 2010

    All right, just a second. What are my commentors doing over here? And carrying on the same conversation, too!
    I’m curious about the retailer response. They start their businesses based on a certain regulatory lay-of-the-land, and then something like this changes and it has a potential effect on their investment. The customers they would tend to lose would be those who spend the most per bottle. In a place like Kentucky, where I live and where a variety of inventory and other taxes make wine expensive, it would be well worth it for me to buy the bottle of, say, Vieux Donjon I really want rather than settling for another CDP. That means my local guy is competing against lower prices and (theoretically) infinite inventory.
    I get that direct shipping is a fine thing from the consumer point of view, and I get it’s good as well from the winery point of view. But in the middle are people whose life savings may be wrapped up in a business that started under one set of rules and that could be severely impacted by a revision of those rules.
    How do you square that?

  6. Thomas Pellechia - March 8, 2010

    Now, Tom Johnson, you get at the real issue.
    It’s the rules change and not the so-called facts of taxes and underage drinking that matters.
    Perhaps, the change in rules can guarantee that all wines shipped must be cleared through a local retailer.
    What about wineries who can’t find a distributor and can’t get a retailer in some states because of having no distributor? Don’t they have businesses too?
    Perhaps a rule that mandates distributors must take wine from every producer that wants distribution.
    The problem is that the present rules favor one business entity over another and they also don’t take the consumer into consideration–at all.

  7. Tom Wark - March 8, 2010

    Tom J:
    Do you think the folks that might buy wine from out of state wineries or retailers would buy those wines from out of state and pay the substantial shipping charges if the wines they wanted were available locally? I don’t think so. Why pay so much more.
    It seems to me that local retailers have chosen to forgo the sales that would be made via direct shipment by virtue of simply not offering the wines that buyers need to go out of state to get. Actually, it’s probably the wholesalers that force the retailers to forgo those sales since retailers must buy their wines direct from wholesalers.

  8. Tom Johnson - March 8, 2010

    I seriously think, Tom W, that you should go over to LouJu and check out the discussion there, since I’ve written a couple of manifestos and even I’m getting tired of hearing myself talk.
    That said, you raise a point that has only been obliquely raised over at my place, which has to do with the finite inventory that can be carried by a neighborhood wine store. It is not that the same wines will be bought out-of-state that are bought in-state. It is that the selection of what wines to buy will be so much greater. The result will be a loss of the most profitable customers for local wine stores.
    The wine business, like music, is a perfect venue for the application of long tail theory. Given that there are 50,000 wine labels available in the United States, multiplied by decades of possible vintages, it’s not surprising that not every store carries every wine. The advantage of a web retailer having a theoretically infinite breadth of inventory is considerable, particularly among the portion of the customer base that spends the most per bottle on wine. Given also that the online retailers enjoy considerable tax advantage — I live in Kentucky and it would be close to 20% — it’s far from a level playing field.
    I’m not a defender of the status quo. I live in a state where direct shipment is felony. If I buy wine on visit to a winery, at auction, or direct from the producer, I risk jail time unless I ship it to a neutral state for pick-up. For the fine wines I buy in-state, I pay a ridiculous surcharge because the market is so small and the inventory costs of $70 wine is considerable when turnover is slow. I assure you I understand the downside of restrictive regulations.
    I also understand small wine retailers who’ve tied their life savings into a business under one set of rules, and why they’re objecting to the changing of those rules in mid-stream.

  9. JC Campione - March 8, 2010

    I’m on your side in this battle, Tom. A free market demands satisfaction for the consumer, not the retailer. I support economic exchange between consenting adults.

  10. tom merle - March 8, 2010

    Our forefathers moved quickly to nip state protectionism in the bud. They knew that favoring in state industries would make them happy and fat and ultimately inefficient. And it would screw citizens out of getting the best products.
    In order to end the silliness that was Prohibition, our then federal legislators allowed states to engage in protectionism, contrary to the dicta of interstate commerce. It also allowed special interests to sway votes far beyond the usual patterns.
    If we used the argument that mom and pop retailers or producers would be hurt by “mail order” competition, then all sorts of items would fail to make it to market. Mr. Johnson’s sentimental logic holds across the board, not just for alcohol. In fact the type of goods is irrelevant to his argument. It extends to clothing, books, electronics, the entire range of consumer wares. Where’s the difference? His problem is with the scale of modern business.
    As for small retailers having the rules changed on them, there are too many examples where this is a fact of modern life. There are ways to soften the blow. Also the topic of interstate commerce of wine has been the subject of debate for well over 15 years.
    As for taxes, there is plenty of shipping under the radar because states don’t follow the example of New Hampshire. The state regulator there can track shipments and does crack down. But the bureaucrats are just too lazy to follow his example. Of course, in my view, as long as other commodities aren’t paying sales taxes when ordered via the Internet, neither should wineries and retailers.

  11. Gary - March 9, 2010

    Good post. Thanks for trecking to the “Free” state to testify.

  12. Scott - March 9, 2010

    “Soylent Green is people!!!”
    It would be interesting to know what sort of registration and shipments have been generated in a state where interstate shipping has recently been allowed. Tennessee would be a good example. I live here, and within the last year out-of-state shipments have become legal (from wineries, not retailers, sorry Tom W.)
    I don’t seem to have any trouble finding what I want here, but I’ve talked to friends who have contacted some wineries whose products are unavailable through retail here. The answer seems from my anecdotal evidence at hand that these are wineries who don’t have wine to sell to new markets, who have rebuffed Tennessee distibutors’ efforts to market their wines, and who aren’t the least bit interested in paying the nominal registration fee to ship directly here ($200/year, I think).
    The wines people want but can’t get are just that; wines they can’t get, direct ship or otherwise.
    The persistent flaw in Wark’s argument remains as glaring now as always. To put forth the idea that you favor the benefit to consumers provided by “free markets” but to fail to recognize the powerful incentive to local wholesalers and retailers to stock and sell wines that people actually want to buy is talking out of both sides of one’s face. Maybe the best way to sum up the job description of a PR flack.
    Proof also that TW isn’t looking out for the depressed and inconsolable wine buyer whose rights are being trampled, but for those retailers who can’t seem to do enough business in their own states and who sign his paycheck.
    And Tom, to you personally, don’t get your feathers ruffled overly by this post. You don’t pull any punches when you lay out your arguments, so don’t throw a tantrum when somebody smells your brand of bullshit.

  13. Samantha Dugan - March 9, 2010

    Speaking as a retailer in California I can assure you that we get no fewer than ten calls or emails a day about having the wines we offer shipped to states where sadly we cannot ship. To think or imply that we cannot sell the wines we stock in our own state and to the enlightened states that do allow their residents to buy…you know, the things they want is just silly. The majority of the wines that people wish to purchase from us are those from France, Italy and Germany and as someone that has tried to find a decent bottle of French wine in places like Dallas, Louisville and Maine I can tell you…pickins’ are seriously slim.
    I’ve spoken with retailers in both Dallas and Louisville and hear the same story each time, “We don’t really have a market for those wines”…well if that’s the case why not let that tiny fraction of wine lovers that are looking for more than B&G, Jadot and Latour buy them from out of state retailers? Yeah, I smell bullshit too….

  14. 1WineDude - March 9, 2010

    Scott – why not let the free market decide?
    I have an answer: the state-run monopolies cannot compete in the free market, that’s why.
    I think Tom’s conclusion about it being “bullshit” is an accurate one.

  15. Mark's Wine Clubs - March 9, 2010

    The more and more I see the arguments against direct shipping it simply makes me think that the people that are willing to constantly fight the government are all that much more special. I can only imagine how frustrating it must be to listen to continued half truths and blatant lies in regarding to the debate. It would almost be comical if it didn’t hit so close to home. I’m constantly amazed that in the home of the free, we can’t ship wine into certain states.

  16. Scott - March 9, 2010

    It sounds to me that a free market opportunity exists in Dallas, Maine, and Louisville for an enterprising and interested individual to hang up a shingle to sell the French, Italian, and German wines that aren’t there and that you receive so many phone calls about. As a wholesale entity, I mean. There is no legal hurdle that I’m aware of to prevent that happening to satisfy the demand that is out there. In a free market, I mean, why would such an opportunity go ignored by free market capitalism, whose only goal is to profit from the demand for a currently unavailable product or service?
    Answer, 1WineDude and SSD: The demand is imaginary, or so small as to be ignored by the free market.
    I have been looking for a T-shirt with Pottsie from Happy Days with dreadlocks and dressed in a tu-tu, but cannot find one to buy. Damn these byzantine regulations; that’s who I blame. The government hates Pottsie!

  17. Tom Wark - March 9, 2010

    You seem to be making a couple different arguments: 1. The wines people can’t get at retail and would buy direct don’t participate in direct shipping and 2. My interest in this issue only goes so far as I’m paid to be interested in this issue.
    I think we can agree that while both arguments are somewhat interesting, the latter (which I’ll get to) has nothing to do with the former.
    Most important is your implied contention that the local supply of wine provided by distributors and retailers accounts for the wines that folks want to buy and that anything not in the market is either unwanted or wines that are produced by folks that don’t care to serve the market where they may be wanted.
    There is no question in my mind that the wines that are distributed in a given market, including TN, amount to the VAST majority of wines that will satisfy consumers in those markets. In fact, probably 98%-99% of all demand is satisfied by the wines in the market.
    I guess my question is this: How does this fact in any way suggest that the 1-2% of the market ought to be denied the ability to even search for the wines THEY want?
    This, Scott, is a rhetorical question and I’m pretty sure you got that. And I’m pretty sure you’d argue that these consumers ought not to be barred from being able to search for wines they can’t find in their local stores and have a legal means for bringing them in.
    As for me, when I testify at hearings or talk at conferences on direct shipping around the country (and I’ve been to Nashville to do just this) I do so on behalf of the Specialty Wine Retailers Association. It is a national organization of wine retailers who understand that so much as changed since the three tier system was put in place in the 1930s that now there exists a national market for products where before logistics and shipping restraints made such an national market impossible to serve. They choose to serve this national market, in addition to serving a local market. These members are for the most part VERY successful wine retailers who have developed national brands. They pay me to be executive director of their association. And I DO like the money they pay me.
    However, if you do a little research, even on this blog, you’ll find that I was a loud and obnoxious proponents of consumers and producers and retailers long before I was appointed to the position of executive director in 2007. You’ll find that I railed against government restrictions on the cross border sales of wine and the distributors who have always said that children will be harmed if Scott is able to have a winery or retailer send him a bottle of wine buy common carrier.
    This isn’t a tantrum, Scott. Say something about my mother and I’ll show you a tantrum. These are just the facts.
    Get’em right.

  18. Samantha Dugan - March 9, 2010

    I agree that the demand may not be enough to sustain an importer or broker, (many of which have told me personally how difficult dealing with states like Texas can be) and that is all the more reason to allow the consumer to buy the bottle or two they seek from someone that already has it. If the demand is in your estimation, fictional than what’s the harm in allowing out of state shipments? Why is so much time and money being thrown at an issue that is not or will not harm or put the slightest dink in the pockets of the retailers and wholesalers? If it is not a real issue than I simply cannot see why it is being fought so fiercely.

  19. Thomas Pellechia - March 9, 2010

    “Why is so much time and money being thrown at an issue that is not or will not harm or put the slightest dink in the pockets of the retailers and wholesalers? If it is not a real issue than I simply cannot see why it is being fought so fiercely.”
    Yes, Sam, this is the nut of the disingenuous nature of diversionary arguments like the one Scott puts forward.

  20. Tom Johnson - March 9, 2010

    There’s a lot of this conversation that is predicated on the assumption that wine buying is a zero sum game, as if everyone had an immovable wine budget.
    I, too, would like to see data on states that have legalized direct shipment — states that have allowed wines in grocery stores, too. My guess is that in both cases making better wine more generally available has the effect of increasing spending on wine. More people buy wine, people who buy wine buy more wine, and people who buy wine buy better wine.
    This is, essentially, the Prohibitionist argument against making wine generally available; it seems a valid argument in favor of direct shipping as well.
    Ultimately, direct shipment is inevitable — as inevitable as the once-seemingly-impossible digital sale of music and movies. The retail outlets that will be most effected by the sale of the kinds of wines that will be worth shipping are the same wine stores that are most able to adapt: those that compete not on price but on quality and service.

  21. Thomas Pellechia - March 9, 2010

    Exactly, Tom, especially your final note, which also goes for wine in grocery stores here in New York–another issue blown out of proportion by those afraid of slackening the regulations.

  22. pinotguy - March 10, 2010

    I don’t know what caused you to conclude that wineries or retailers shipping to Maryland wouldn’t comply with the proposed regulations and file reports and pay taxes on wine shipped. My small winery employs someone part-time to make sure that we are in compliance by applying for the proper licenses, filing the correct reports and paying taxes to every state to which we ship wine. It’s a burdensome process, but it’s the norm for the vast majority of wineries. Some states we simply choose not to ship to because the cost of doing business there is too high. Your statement regarding out of state shipping hurting state coffers is simply wrong and misguided. We paid just short of $7,000 to other states last year for licensing fees and sales taxes associated with wines that we shipped.

  23. Richard - March 12, 2010

    It’s really simple to figure out what is going on. When you have a seemingly complex problem such as this, FOLLOW THE MONEY!!! This will lead you straight to the wholesalers whom have a monopolistic control of the market. If direct shipment truly accounts for 2-3% of the market (and I think that is a high estimate) the wholesalers have nothing to worry about. The wholesalers can still exist, because, let’s face it, they have a system in place to get wine to stores, retailers, and restaurants quickly and efficiently. They’re very good at it. The problem comes from when, being a resident of TX, I can’t get a hot wine from WA shipped directly to me. What’s criminal about it is that for certain wines, I’m more than willing to pay the shipping and associated sales tax (I had about two mixed cases from CA shipped to me last year with no problems at all). The fact that there in an arcane law standing in my way is just flat stupid.

  24. Winstrol - October 12, 2010

    Isee you have much experience in participation in hearings

  25. Juliet Johnson - July 26, 2011

    Tom’s perseverance is so inspiring. Who would want to face those boring legislative committee members who strive hard pretending to listen AND considering your point. But the good cause is always worth a try.

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