7 Questions To Ask Wholesalers About H.R. 5034 at Hearings

In a teleconference today with Journalists and industry types, Representative Mike Thompson (D)-CA made clear his absolute opposition to H.R. 5034 and the efforts he is making to defeat it. There is no question that Representative Thompson is the champion of wineries, retailers and consumers on this issue.

Among the items Thompson addressed was the disposition of Speaker Nancy Pelosi and the rest of the House leadership. Representative Thompson noted that Speaker Pelosi and the rest of the House leadership stand opposed to H.R. 5034, likely a testament to Thompson's powers of persuasiveness. In any case, this is good news for those who would be in opposition to H.R. 5034, the alcohol wholesalers bill that would essentially take state shipping laws outside the orbit of the U.S. Constitution's Commerce Clause and allow states to pass discriminatory alcohol laws that had no chance of being challenged in courts.

Representative Thompson was not able to say what the chances were that H.R. 5034 would have a hearing in the Judiciary Committee. He noted that the National Beer Wholesalers Association, the originators of the bill, continued to lobby very hard on Capital Hill and were putting great amounts of pressure on congresspeople.

If there are hearings in the House Judiciary Committee it will be very important that certain issues related to this bill be brought out in the open. This can happen via testimony, but it is much more effective to force wholesalers to answer the questions directly. Toward that end…


1. What specific forms of deregulation have hit the states since Granholm that have been harmful to consumers? To States?

2. Is there any evidence that law enforcement has had a problem with wine getting into the hands of minors via direct shipment?

3. Under the provisions of H.R. 5034, could a state pass a law that allowed its own wineries to ship wine to its residents but discriminated against out-of-state wineries by banning shipments of their wines to residents?

4. There are now over 7000 wineries in the United States. Is it possible for wholesalers in any given state to represent all of them and, if not, how would wineries access that market without direct shipment of wine?

5. Is it true that under H.R. 5034, the only thing a state would have to do to defend a discriminatory ban on direct shipping from out of state wineries or retailers would be to simply state in the law that it is meant to uphold the three tier system?

6. What happens to the winery that once shipped wine directly to consumers in a state, but no longer can under laws made possible by H.R. 5034 and who also can't find a distributor to take them on?

7. I've heard numerous accounts from small wineries who have been told by retailers in another state that they would buy multiple cases of their wine, but that they must go through a wholesaler. But when the wineries asked a wholesaler to represent them and help them get the wine to the retailer, the wholesaler refused. Is there any other recourse that winery might have in order to sell it's goods? What would be the problem with allowing the winery to simply ship the wine directly to the retailer who wants it?

6 Responses

  1. John Kelly - April 28, 2010

    How about a couple more questions? The wholesalers presume an explicit assumption that their monopolistic middleman status “promotes temperance,” “establishes and maintains an orderly alcoholic beverage market” and somehow provides the States and enhanced means to ensure “the collection of alcoholic beverage taxes.” I believe that if challenged to prove any one of these claims they would founder.

  2. Greg - April 29, 2010

    Often forgotten in the debate are the small production imported brands that already have more limited access to consumers through DTC sales. Why put of barriers to commerce if someone wants to order online an obscure wine that their local distributors have no interest in selling.

  3. David - April 29, 2010

    Direct to consumer wine shipping is regulated but not monitored nor managed.
    Factually, many wineries ship direct to consumers throughout the United States today without licenses or permits because they claim they can’t afford the licenses and permits. I don’t buy that argument. They just choose to spend their operating capital elsewhere. I could provide a list as long as my arm of wineries that I know of that choose to ship without licenses or permits. Anyone want that list?
    Paying for all licenses and permits is a necessary expense so wineries can be law abiding and focus on customer service. Unfortunately for those of us that choose to abide by the various State laws and pay for our licenses and permits, paying for these licenses and permits is proving to be a financial competitive disadvantage based on the many that choose to break the laws.
    So, why should we (as an industry) care what laws go into place when so many wineries will choose to break them anyway?
    Any winery that is breaking the law is adding significant traction to the argument of the wholesalers and is working against the law abiding wineries that so desperately need direct to consumer shipping to remain intact, legal, and profitable.
    Maybe we should self-monitor within the industry and reward for whistle blowing. Once the States see that wineries can be law abiding participants and self-monitor within our industry, I think we can stop the wholesalers in their tracks.
    I think we need to aim our guns on the wholesalers and the law breakers in our own industry equally.
    Until then, trust is not on the table… and rightly so.

  4. Randy - April 30, 2010

    37 states we can ship direct with no license needed. There are only 5 states that require us wineries to collect their specific sales taxes and then get that taz to the staes in a timely manner. The other states, wineries need to use a third-party to ship the wine into the non-direct ship to states. Having paid out the nose for this third party shipper, yeah, I’d like you to name names in the small guys who aren’t using the third party shipping company.
    All wineries need to obey. I know a neighbor got popped recently cuz they were not putting the “adult sig required” on the ups and they were shipping direct to no-ship to states. Believe me, they are in a world of hurt right now as UPS will no longer take them on AND they’ve already pissed off Fed Ex. So the rumor goes.
    If we’re going to go DTC in this industry, we gotta respect the current laws, otherwise we’re no better than the dirtbag, greedy corporate wholesalers.

  5. David - May 3, 2010

    David –
    Your facts are not entirely correct so you’re proving my point.
    In 2004 (pre-Granholm v. Heald – the landmark U.S. Supreme Court ruling), only 27 states allowed wineries to ship directly to consumers. Now, 37 states allow such shipments.
    It is interesting to note that whereas 37 states allow direct shipping, only 31 states [soon to be 32 (IA)] require a permit to do so. Most states now recognize that shipping can be safely regulated. The shift is to transition away from “reciprocity” and towards adoption of some form of the Model Direct Shipping Bill as evidenced by the simple fact that 10 additional states have if these shipments were regulated the states would be empowered.
    Since it is under the state’s authority that these bills have passed, it has empowered them to position themselves to benefit from the revenue generated from these sales to their residents in the form of sales or use tax, which is a required by all states that have an actual permit requirement.
    Many people are under the impression that if don’t have nexus within a state, then there is no requirement to collect and remit taxes due, but this simply is not true. In fact, since most states require that you register with their respective Department of Revenue in order to get the license in the first place, the in effect mandate continued adherence to both shipping and reporting laws in order to continue with this privilege.
    If wineries continue to ship illegally without proper licenses and permits, and therefore don’t pay the required state taxes, then those wineries are feeding high quality fuel to the wholesalers position. It is time for the wine industry to self-regulate itself and all should pay appropriate license fees and taxes. This way we build trust and end the wholesalers action in it’s tracks.

  6. David - May 3, 2010

    All wineries should keep current with this page:

Leave a Reply