Wine Wholesalers Push For Deregulation With H.R. 5034
As the three tier system's traditional structures failed to address a growing consumer demand for fine and artisan wines, one of the most important points wineries and retailers regularly made is that they would willingly accept significantly increased levels of state regulation. Wineries and retailers who sought to expand their markets and get wines to collections of enthusiastic consumers across the country that wholesalers chose not to serve knew that significantly increased regulatory oversight by states would be necessary to assure the developing direct sales market benefited the state and met community standards for safeguarding minors.
Given this, it should be no surprise that since the Granholm v. Heald Supreme Court Decision that served to overturn the "reciprocity wine shipping agreements" between states and open up direct shipping in many states, there has been a significant increase in the amount of wine and alcohol regulations across the country.
What is surprising is the effort now under way by alcohol wholesalers to tear down a remarkably successful regulatory system that has been put in place and worked well for years.
H.R. 5034, the bill crafted by the National Beer Wholesalers Association and enthusiastically supported by the Wine and Spirit Wholesalers Association, would lead to the demolishing of a regulatory framework that assures state taxes are collected, minors don't obtain alcohol and that producers and retailers produce a paper trail for every bottle of wine the moves through the national marketplace via direct shipment.
What's notable about the significant amounts of new regulation that came into being post-Granholm is that the wineries and retailers actively lobbied for it and still do. The Model Direct Shippers Bill, sample legislation designed by wineries and retailers, has been promoted by shippers in nearly every state they've worked to obtain shipping rights. This legislation calls on all taxes to be paid to the state, a licensing fee, regular reporting to the state, requirements that adult signatures be obtained before delivery of any wine, and that all shippers submit themselves to the legal and regulatory jurisdiction of the state.
To get an idea of the amount of new regulations that have been put in place since Granholm, consider the changes noted at the Wine Institute's long-standing wine shipping website.
The Internet Archive page of the Wine Institute's direct shipping page for January 1, 2004 (a year and a half before the Granholm Supreme Court decision) shows that only 10 states had a permit/regulatory structure in place for direct shipment of wine. Today, 35 states have in place a permit/regulatory structure for direct shipping. In fact, in order to manage the three fold increase in alcohol regulations across the country that wine shippers have asked for and obtained, an entirely new compliance industry has grown up around the direct shipping market.
Here's the punchline:
"It is important that states retain their constitutional power to
regulate the distribution of beverage alcohol and are able to fend off
litigation, which serves to destabilize or destroy that authority."
Craig Wolf, Wine & Spirit Wholesalers Association, applauding H.R. 5034
"The CARE Act aims to clarify congressional intent that states have
primary authority to regulate alcohol; prevent the additional erosion of
state-based alcohol regulation through the expansion of the Granholm v. Heald decision."
Craig Purser, President, National Beer Wholesalers Association,
As states respond to the successful passage of H.R. 5034 by banning direct shipping of wine (and as this is the goal of the legislation it most certainly will happen) we will see a tearing down of state based alcohol regulatory structures. This will be followed by a wild west freeforall as consumers go to all lengths to continue to get the wine they once were able to purchase, but will be denied after the passage of laws banning direct shipment.
That the alcohol wholesalers who are pushing and supporting H.R. 5034 are deceiving congress, regulators, the media and consumers when they say there has been deregulation since the Granholm decision is pretty shameful. But there's something worse.
Alcohol Wholesalers are pursuing conditions that will ultimately turn consumers into felons and force state alcohol regulators to fight a battle they cannot win and that will cost the state and state-based alcohol regulatory agencies hundreds of thousands of dollars they can't afford to waste on protecting wholesalers from competition.