How HR 5034 and The End of Direct Shipping Is Being Sold

Posted by Tom Wark on Jun 3, 2010

The beer and wine wholesalers supporting H.R. 5034, a bill now in the House of Representatives that, if passed, would pave the way for direct shipping rights to be taken away and give wholesalers free reign to push through any number of discriminatory state laws that favor their business, have been relatively quiet in the news media about their attempt to take control of the alcohol distribution and sales industry via federal legislation. However, careful searches on the Internet do uncover a few statements concerning H.R. 5034 from wholesaler and their supporters.

Below is a compilation of statements by supporters of H.R. 5034, along with commentary.

"Easy and cheap access to alcohol is certainly not the answer—we know
this from the many social ills that deregulation has brought on in the
United Kingdom."
Craig Wolf, Wine & Spirit Wholesalers of America
Wine Spectator, April 16, 2010
This comment was made by Wolf in advance of H.R. 5034 being introduced and offered as justification for Federal legislation. What Wolf does not say is that there is no similarity between the U.S. three tier system and that of the UK. Furthermore, the very expert that the wholesalers trotted out in front of Congress to make this case herself said that the U.S. system of alcohol regulation could not be compared to that of the UK. Wolf here is simply trying to scare legislators protecting wholesalers from competition. He is also trying to suggest that there is deregulation happening in the U.S. alcohol system. There is none.

“The CARE Act [H.R. 5034] is narrowly designed to do just that—to allow states to
effectively address what the attorneys general call ‘the growing threat
facing our states from unprecedented legal challenges that seek to
eliminate our ability to regulate alcohol."
Craig Wolf, Wine & Spirit Wholesalers of America
WSWA Press Release, April 27, 2010
Wholesalers have made great hay out of a letter by a number of U.S. AGs that asked the feds to look at protecting state alcohol laws. However, it's noteworthy that neither Wolf nor a single AG in any state can point to a single instance of anyone behind any lawsuit that seeks to "eliminate our ability to regulate alcohol". If he or anyone else could to this, he would. Furthermore, nothing is unprecedented about citizens and business suing states that discriminate against out-of-state commerce. It has been occurring for decades.

"The CARE Act does not overturn state laws allowing the direct shipment of wine by wineries or retailers."
Craig Wolf, Wine & Spirit Wholesalers of America
WSWA Press Release, April 27, 2010
This is the most deceptive of the claims that wholesalers have been making, particularly when speaking to congressional representatives. No, H.R. 5034 does not do this. However, H.R. 5034 most certainly give states the ability to replace current direct shipping privileges with discriminatory bans on out-of-state shippers that could not be challenged in court. For making this claim, Wolf and other should be ashamed of themselves.

"The CARE Act does take the guesswork away from the courts and
places policy-making decisions where they should be: in state
legislatures."
Craig Wolf, Wine & Spirit Wholesalers of America
WSWA Press Release, April 27, 2010
Courts don't engage in "guesswork". They engage in the interpretation of laws and in rendering judgments. The U.S. Supreme Court did not make a "guess" when they ruled that states may not usurp the Federal Governments responsibility for regulating interstate trade with bans on interstate shipping. Furthermore, alcohol policy making is and always has been in state legislatures. The only time that legislation is considered in courts is when citizens and business believe they are being unconstitutionally discriminated against by state laws. Does Craig really believe that there should be no opportunity to ask courts to decide if a law discriminates?

“America’s regulated three-tier system is, hands down, the best
beverage alcohol distribution system in the world. 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 of America
Washington Post, May 5, 2010
It may have been the "hands down, best beverage alcohol distribution system in the world" in 1950, but not in 2010. In fact, this system is now entirely incapable of serving the retail, restaurant and consumer sector of the markets. Only a small fraction of the wines in the American marketplace are actually available in any given state via the three tier system. Finally, I wonder how Wolf would demonstrate that state authority to regulate alcohol has been destroyed by direct shipping when states have easily erected numerous laws that regulate this form of distribution?

"There is a lot of fear out there and it’s unwarranted.”
Craig Wolf, Wine & Spirit Wholesalers of America
Danville News, June 1, 2010
Tell that to the 1000s of small wineries, craft brewers, progressive retailers and distillers that know once state alcohol legislation is removed from the orbit of judicial review, wholesalers will, as they always have and always do, use their enormous power to game the state alcohol laws in their favor and in ways that damage and often kill small producers and progressive retailers.

“It’s not going to end shipping of wine or alcohol. To
the folks that say this is going to end direct shipping, that’s
flat-out wrong.”
Paul Pisano, General Counsel, National Beer Wholesalers Association
Naples News, April 27, 2010
This sounds desperate, doesn't it. It sounds like a little boy whining to his mommy that he didn't eat the cookie. Besides it being this, it is also a disingenuous attempt to hide the fact that upon being passed, H.R. 5034 will lead to immediate introduction of legislation in a number of states that will rescind or highly restrict the direct shipment of artisan products.

"The legislation would clarify the commerce clause and take the federal judge out of making alcohol laws….The only people who should be concerned about this legislation are the people who had planned to go to federal court and sue."
Paul Pisano, General Counsel, National Beer Wholesalers Association
Naples News, April 27, 2010
This is a remarkable declaration. It essentially declares that state alcohol regulations and laws should be completely without judicial oversight if H.R. 5034 passes. It's also interesting that Mr. Pisano thinks the Commerce Clause needs clarification. However, he is correct that anyone currently suffering as a result of discriminatory state wine laws that serve to protect distributors and who are now or are preparing to challenged those laws do need to be concerned.

“We do support this bill. The issue is to allow states to control
alcohol distribution. There has been a gradual loss of states’
rights to control alcohol distribution."
Paul Pisano, General Counsel, National Beer Wholesalers Association
Napa Valley Register, May 4, 2010
Incorrect. Rather, there as been a gradual loss of state's ability to enact protectionist legislation the violates the Commerce Clause, harms consumers and protects wholesalers.

“This country is about 50 different state
laws. The last time there was a one-size-fits-all federal ruling that
was the 18th Amendment. That was Prohibition. That was bad.”
Paul Pisano, General Counsel, National Beer Wholesalers Association
Just-Drinks, May 20, 210
Does anybody really believe that H.R. 5034 is really just the Wholesalers standing up for Federalism? I hope not. On the other hand, I wonder how Mr. Pisano feels about another "one-size-fits-all" federal ruling called the 21st Amendment, that gave the right to regulate alcohol to the states? Was that "bad" too?

“State legislatures are supposed to be making these calls. Our concern is unelected federal judges making
alcohol policy instead of state legislatures."
Paul Pisano, General Counsel, National Beer Wholesalers Association
New York Times, May 4, 2010
Oddly, we did not hear any outcry from Mr. Pisano or the wine wholesalers when it was a WHOLESALER that dragged a state into federal court claiming THEY were discriminated against when Southern Wine & Spirits was not allowed to get a wholesalers license in Texas because they were not residence for the previous 12 months. Where was there concern about "unelected federal judges making alcohol policy" then? That's called hypocrisy.

“That is simply not true. It [H.R. 5034] does not undo what the Granholm decision did in 2005.”
Nida Samona, Chairwoman, Michigan Liquor Control Commission
Crain's Detroit Business, May 5, 2010
Oddly, that's exactly what H.R. 5034 does. In fact, it's a near perfect description of H.R. 5034's impact.

“There is a lot of confusion out there. Frankly, the wine
industry likes that. Confusion gives us less ability to regulate.”
Nida Samona, Chairwoman, Michigan Liquor Control Commission
Crain's Detroit Business, May 5, 2010
The only thing that gives Nida Samona any inability to regulate is her own action. She cannot point to any problems that have existed in her state of Michigan since it was slapped around by the Supreme Court in the Granholm case and the state opened direct shipment to wineries. They've collected tax revenue and wineries have complied with the regulations put in place. Ms. Samona should be ashamed of herself for disparaging the wine industry in her own state and disparaging the wine industry's in other states.

"The
bill [H.R. 5034] reasserts state primacy over alcohol sales. Michigan's
regulations are very reasonable and a good balance between
promoting competition and regulating alcohol effectively."
Mike Lashbrook, President, Michigan Beer &I Wine Wholesalers Association
The Detroit News, May 15, 2010
"Reasonable"? Mr. Lashbrook was the one who pushed for legislation and got it passed that says the following: retailers anywhere in the country may deliver wine to Michigan residents…as long as they use trucks owned by the retailer. Reasonable?

"The new bill would not restrict direct shipping.
In fact, it could protect it by making it harder for people to sue to
end direct shipping."
Craig Wolf, Wine & Spirit Wholesalers of America
Lynchburg News Advance, June 1, 2010
When was the last time anyone sued to end direct shipping? It has not happened because everyone except wholesalers LOVE direct shipping when the laws that govern it are equitably applied. Direct Shipping laws don't need protection from lawsuits. But if H.R. 5034 passes, these laws will need protection from Craig Wolf and his compatriot wholesalers in the states that he knows will introduced and get passed bans on direct shipment.

"The last thing we or anybody else wants to do is have an industry that's battling each other."
Craig Wolf, Wine & Spirit Wholesalers of America
San Francisco Chronicle, May 30, 2010
It's a little late, Craig. The fact is, by supporting H.R. 5034 and threatening the businesses of countless wine, beer and spirit producers you have made the kind of enemies that simply don't forget. 

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These statements by supporters of H.R. 5034 are exactly what are being told to representatives in Washington. It's why you see representatives saying nearly exactly the same thing when they respond to constituents who have written to ask them to oppose H.R. 5034.

If you are going to take any action to oppose H.R. 5034, it's important to know what is being said to support the bill.

To learn more about H.R. 5034 to to the STOP HR 5034 Website.
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