Stop H.R. 5034—The Anti-Consumer Wine Bill
House Resolution 5034 is by far the most audacious attempt ever by America's beer, wine and spirit wholesalers to takeover complete and total control of the country's alcohol beverage market and, in the process, create circumstances in all fifty states that assure consumers only have access to the slim number of wines to which wholesalers decide consumers ought to have access. But perhaps most sinister is the fact that if H.R. 5034 passes, it will put out of business an entire swath of America's artisan wineries.
First, let's be clear how this will happen. Buried deep in this newly introduced legislation is this language:
"Notwithstanding that the State or territorial law may burden interstate commerce or may be inconsistent with an Act of the Congress, the State law shall be upheld unless the party challenging the State or territorial law establishes by clear and convincing evidence that the law has no effect on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.’’
This language means that any state may pass a law that discriminates against out-of-state wine shippers and that the law cannot be challenged in court and therefore invalidated—just as the 2005 Granholm v. Heald Supreme Court decision invalidated laws in New York and Michigan that discriminated.
The Granholm Court reasoned that because the states' goals of temperance, an orderly market and tax collection could have been achieved without burdening interstate commerce and discriminating against out-of-state interests, those discriminatory wine shipping laws were unconstitutional violations of the Constitution's Commerce Clause.
The language in H.R. 5034 would mean that states would not have to show that there is no other non-discriminatory means of achieving the goals of temperance, an orderly market or tax collection. Rather, in order for a law that discriminates against out of state commerce to be upheld if challenged, the State would only have to show that the law, in some small way, achieves these goals—whether the goals can be achieved by non-discriminatory means or not.
But even more deadly for any court challenge of a discriminatory wine shipping law is the language in H.R. 5034 that says the challenged law must be shown to have no effect on upholding the "state alcoholic beverage distribution system" or have no effect in restricting "access to alcoholic beverages by those under the legal drinking age."
Simply by virtue of passing a law that prohibits out of state wineries or retailers from shipping wine into a state, the state can easily claim they are both protecting their alcoholic beverage distribution system and attempting to keep wine out of the hands of minors.
Ball game over.
After passage of H.R. 5034, there can be no successful challenge on Commerce Clause grounds (the same grounds used to successfully litigate Granholm v. Heald) to a state law that allows its in-state wineries and retailers to ship wine to the state's residents but prohibits out-of-state wineries and retailers from doing so.
So, let me tell you what will happen immediately after passage of H.R. 5034.
The states of Michigan, Texas, Illinois, Massachusetts and likely Maryland will see laws introduced that prohibit the shipment of wine into those states by out-of-state wineries and retailers. These states are those most completely controlled, from the legislature to the regulators, by wholesalers who don't want direct shipping. And you can bet that once these states successfully shut out the sale and shipment of wine by out-of-staters, wholesalers in other states will follow suit with their own discriminatory bills.
The Wine & Spirit Wholesalers of America say they won't get behind this kind of effort:
"Our goal is not to overturn existing state laws. We simply
believe the proper forum for resolving legitimate differences over
these issues is in the state legislatures – not the courts.”
They are lying. And they will be lying to congress if they respond in this manner to any question concerning existing state laws that come up during congressional hearings on this bill.
If the wholesalers have the courage of their convictions, then they will most certainly be attempting to roll back the direct shipping laws they say they oppose. And if H.R. 5034 means anything, it is that the wholesalers most definitely possess the courage to pursue their convictions that direct shipment of wine is bad.
There is no question that the wholesalers are swinging for the fences by trying to pass the most onerous consumer wine law since the passage of the 18th Amendment and the onset of Prohibition. Many wineries and retailers will say, "this will never pass". And it may not.
But keep something in mind. This kind of bill is unlikely to find much significant opposition or support from the citizens of the United States. It's not a sexy bill that affects the majority of Americans. H.R. 5034 is the kind of bill that gets pushed and opposed by insiders and lobbyists without much attention from citizens and the media. Anyone in the wine industry, be they retailers or wineries, who believes that they can sit back and just let the process protect their interests without getting involved is sorely mistaken. Any consumer who relies on direct shipment of wine for their wine club wines or to purchase the huge number of wines they can't find locally and who thinks this bill won't pass simply because it's so retrograde is sorely mistaken.
What's needed to stop this bill are a variety of steps.
1. There needs to be a joint and concerted effort by the likes of Family Winemakers of California, Free The Grapes, The Specialty Wine Retailers Association, The California Wine Institute and every other regional winery organization in America to oppose this bill. There should be a single organizing committee representing these organizations that works to lobby against the bill.
2. There must be a well coordinated effort to educate the media about the effects of this bill if it passes and to see story after story run that simply and precisely calls this bill exactly what it is: A WHOLESALER BAILOUT THAT IS BEING PURSUED BY SPECIAL INTERESTS THAT HAVE PURCHASED CONGRESSIONAL MEMBERS AND THAT, IF SUCCESSFUL, WILL SPELL FAILURE AND BANKRUPTCY FOR NUMEROUS WINERIES ACROSS THE COUNTRY AS WELL AS COMPLETELY STOP CONSUMERS IN NUMEROUS STATES FROM HAVING ACCESS TO THE WINES THEY WANT.
3. There must be the creation of a national wine consumer organization/union that will organize consumer opposition to this bill and create the foundation for the consumer involvement in the process of alcohol regulation across the country.
The only way many wineries can survive or thrive inside today's ineffective alcohol distribution system is through direct shipment of wine to consumers. The only way consumers can access most of the wines that have resulted from the explosion of artisan wineries across the country is via direct shipment of wine. If H.R. 5034 passes, it will mean the end of the direct shipment of wine in numerous states.
And anyone who doesn't believe that should ask themselves this question: Is there any evidence that alcohol wholesalers will use their political muscle to stop the direct shipment of wine?
Here is my letter.
I am writing you about H. R. 5034. As an avid wine drinker, I am very concerned about provisions outlined in this bill. I am a staunch supporter of our Texas wineries but I also like many wines produced in California. My favorite wine is pinot noir, a varietal that is essentially non-existant in Texas since it prefers cooler growing conditions. Many of my favorites are only available from small producers (less than 3000 cases) who are not available in Texas by the choice of distributors, not the choice of the wineries.
Provisions in H. R. 5034 would essentially eliminate my access to those wines. The only way I would be able to bring these wines back to Texas to enjoy would be to travel to California and drive them back to Texas myself since I would not be able to even ship them to my home.
Why? Because distributors want to protect their own business. I like to drink pinot noir priced about $40 a bottle. That bottle’s wholesale cost is roughly $20. The distributor want his $10. That in itself doesn’t bother me. It’s the tactics and justification used that really make me upset by this legislation.
There is no doubt that this resolution is largely written and sponsored by distribution lobbyists. As someone who has worked in Texas helping craft legislation regarding education policy, I understand how this process works and this is clearly written by someone “in the business” rather than by a legislator. The two parts that make it obvious are as follows:
1. There are provisions that all but eliminate legal recourse if this passes. Could this be more obvious? Write a piece of legislation that gives your side what they want and at the same time makes it impossible for the other side to fight back. My eight year old son ( who asked me what I was doing writing you) understood how wrong this was when I substituted Lego, Lego Club and Target for Wine, WInery and distributor. My second grader may be smart, but it is pretty bad when he can see how this legislation is flawed.
2. The tactic of getting the legislation passed under the guise of “minor’s access to alcohol.” Let me phrase it this way – can the sponsors of this bill give you an example of a 17-year old in your congressional district mail-ordering a bottle of $40 California pinot noir so he can get drunk on a Saturday night? Phrased that way, it sounds pretty preposterous doesn’t it. However, that is essentially the basic reason that the bill’s author’s want you to vote for this repressive legislation. I’ll make you a deal. For every documented case of underage purchases of alcohol made though the mail (that were not made by members of distributor’s families) that you can document in your district prior to the day that legislation was filed, I will give you a bottle of that $40 pinot that I will no longer be able to purchase if this legislation passes. I figure at the most, I’ll be out a single bottle. I would guess that there will be more “minor in possession” citations issued around the Texas A&M campus tonight than there are instances of minors mail-ordering alcohol across the entire United States in 2010. It is simply a thinly veiled scare tactic that belongs with unicorns, Bigfoot and the grassy knoll.
I urge you to give this bill a resounding NO vote if it sees a vote. As a conservative, this is exactly the type of unnecessary governmental intrusion and special interest legislation you campaigned against. Please stay true to your philosophy and vote no on this legislation.
Excellent piece in your ongoing series on the assault against consumer free choice and direct shipping.
It’s disappointing to see the apparent low level of interest/response by wine lovers on these issues. They have a choice to either aggressively defend their freedoms or lose them to untoward political influence and corruption in the form of distributor political contributions and subterfuge.
As distasteful and debasing as politics is, this Plato quote is germane: “And the heaviest penalty for declining to rule [participate in politics] is to be ruled by someone inferior to yourself.” (The Republic Chapter III)
Great analysis, Tom.
Monte – Fantastic letter.
EaglesNestWine – Ask your followers to contact their members of Congress. You’ve got a Twitter audience of 35K, leverage your capital. I did yesterday, and got a respectable response. I’ll be mentioning it again tomorrow, when folks are back at the office.
My post on this is “Care Enough to Kill HR 5034” with links to contact your member of Congress.
There is a vast audience of angry citizens out there waiting to cast their irate votes against the individual congressmen and women who manipulate the law for the benefit of lobbyists, not consumers. Why would you not name them in the beginning of your description of HR 5034? Surely they know what they are doing.
Great analysis of the bill. Thanks
so let me offer an acronym:
Consumers of Artisan Producers
an advocacy for a free market without borders in support of the American Artisan producer
Can you post a link to the bill itself? I can’t find it on the House of Representatives website.
Never mind – just found it: http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5034:
So the guy that introduced the bill has no contributions from wholesalers, however
Coble (R-NC) is a co-signer and his #1 contributor is National Beer Wholesalers Assn at $7500
Chaffetz (R-UT) got $5000 from the same group
Quigly, (D-IL) got $6300 from a lawfirm Siegel Moses & Schoenenstadt that specialize in ” legal aspects of the alcoholic beverage and hospitality industries”
Goddamn opensecrets.org makes this too easy
This is not only outrageous, it attempts to trample the consumer in efforts to perpetuate an ugly monopoly enjoyed by wine and beer distributors. There is absolutely nothing in the three-tiered distribution system that has anything to do with the control of drinking in general and underaged drinking in particular. It is only the outward and visible manifestation of greed by disttibutors.
bad news for comsumers, write your congresspeople!
I’m writting my letter today!. Already small wineries have so much red tape to deal with, this would be the end of them. I work for an artisan winery whose livelyhood depends on shipping their wines across the country.
I’m MAD and I’m not going to take it.
Norma Serrano, Wine consultant
I am a small producer of about 500 cases annually of estate-grown, Napa Valley cabernet sauvignon who does not have a tasting room, can’t get a distributor to even answer the phone because I am too small for them, and sells ONLY to those states where we can ship direct-to-consumer and direct-to-trade. This bill would essentially wipe us out completely. But not only that, 70% of the wineries in Napa Valley are considered “boutique” wineries (5,000 cases and under) and a significant portion of them would also be wiped out or severely be impacted financially (on top of an already harrowing past two years!). This bill is an outright power grab by the wholesalers who do not want to see wineries controlling their own destiny (and margins) by selling direct, ultimately bypassing the distributor who barely works for the 50% margin they demand. The winery not only pays the distributor that margin, but also pays for the marketing and selling costs to get the consumer to purchase in the first place. Wineries are looking to get some of their margins back, be able to interact with the consumer directly (data that is not typically provided by the distributor) and be able to control their own destiny, rather than be controlled by a broken three-tier system.
If this bill passes, then we will have one hell of a farewell party with dozens of small wineries in Napa Valley calling it quits! As they go, so goes the passion for artisanal winemaking….
Thanks for the names. These guys threaten representative government.
so let me offer an acronym:
Consumers of Artisan Producers
how can this be “Land of the free” when THEY keep taking out rights away from us
Why are people trying to ruin this beautiful country? Every area is being tied up so big, special-interest have full control. My America is slipping away so rapidly. Don’t think it can’t be done. They’ve taken away the right for herbal consulting in a few states and spreading. Wineries better fight this bill.
For Laura Ackerman,
Please send me an email with your details. I have a freind that deals only in small vineyards. I would be happy to forward you details.
Based in Hong kong but sells to south asia market.
Please check out my websites http://www.classifiedwine.com and http://www.classifiedwineauction.com
I think the message needs to be broadened. While TX and other states may lament the tax they do not collect on a direct shipped bottle of wine, America benefits from the consumption of domestically produced wines over foreign imports. Giving wholesalers a chokehold on the distribution of premium wines is only going to help foreign producers.
One of the grave dangers the industry faces this year is a Congress that’s shown its willingness to do deals in the back room and approve legislation that few, if any of their members have read. You also have a large number of incumbents who are facing unemployment or “retirement” and voting their future pocketbook.
I belong to too many wine clubs and also get frequent fliers from other wineries, all of them small. I’m surprised that I have not heard of this bill’s existence.
As a Californian it’s tempting to think that elimination of the out of state buyers will reduce the price of the wine I buy. It also threatens the survival or our wineries. Adding to the impact is the large number of young professionals and companies leaving the state for a variety of reasons.
A final argument is that with high unemployment, high foreclosure rates, a massive federal deficit and two or three wars underway, Congress should attend to the business at hand not the hand that feeds them.
I’ve created a Facebook Group: “Oppose H.R. 5034 – Federal “Anti Wine-Shipping” Bill” http://www.facebook.com/group.php?gid=122781777753159#!/group.php?gid=122781777753159&v=wall
Hopefully we can get the consumer more involved! I’m so impressed by your efforts, with your permission, I’d like to add your URL and graphic and direct readers your site. I especially like the comments. Thanks for your efforts!
thanks !! very helpful post!Keep working ,great job!
I will never understand the evil thinkers in the world. I’ll just make my own damn wine in my basement, hopeful buying grapes, frozen concentrate or must will not become illegal.
I I consider an SAK more of а tool tһe a knife.