HR 5034 Kills Consumer Access to Specialty Wine Retailers

Wineretailer It is a fact that the greatest deterrent to consumer access to wines today are the 37 states that prohibit Retailer To Consumer shipping of wine
. What's going unnoticed in the debate over H.R. 5034, the bill now in Congress, is that, if passed, this bill would allow states to ban retailer to consumer shipping—without any justification whatsoever.

Retailer (not winery) to consumer shipping is the avenue through which consumer have potentially the greatest access to the explosion of domestic and imported artisan wines that have hit the American marketplace over the past 20 years. When wineries are sold out of their small lot wines, a retailer, somewhere, has it. Or an auction house (which is a retailer) is selling it on line.

The new artisan imported wines from South America, Africa, Australia and Europe can't be bought directly from the winery and shipped. One must look to retailers. And having access to services like Snooth and Wine-Searcher means you can find them. But draconian shipping laws aimed at protecting in-state wholesalers and provincial wine retailers have been passed that prohibit shipping from retailers.

H.R. 5034 will make this situation even worse and in a way that even wineries can't fathom. H.R. 5034 notes that states can only discriminate against out of state PRODUCERS if they offer "justification". Granted, the bill provides for such justifications to be announced by the mere simple and swift legislative pen that, once put into the law, is impossible to challenge.

However, H.R. 5034 doesn't even protect discrimination against retailer shipping by noting that laws must "justify" their discrimination. Under H.R. 5034 discrimination against out-of-state retailers is allowed without justification.

As executive director of the Specialty Wine Retailers Association, I've been involved in trying to open more states for retailer to consumer shipping. Through litigation, education and legislation, some battles have been won. However, since 2005 Granholm Supreme Court decision, consumers and retailers have seen their access to the market via internet sales reduced drastically, while wineries have seen their access to the market opened up. This has retarded the growth of the American wine marketplace, lessened consumer access to wine, and prevented states from increasing tax revenue.

The problems with opening more states for retailer to consumer shipping rest primarily on the fact that retailers don't possess the same level of sympathy that small, artisan farmer/wineries do. In addition, the wine industry has rallied around winery to consumer shipping and and left a small group of on-line retailers to fend for themselves with little or no support. Consumers, too, have been convinced that their access to wine depends primarily on access to wineries via the Internet. This just isn't true and isn't talked about much by consumers or producers.

As a result wine consumers in places like Texas, Illinois, New York, New Jersey, Washington State and other important wine consuming markets have been lulled into a false sense of wine accessibility by the passage of laws that seem like victories (wineries are allowed to ship there), but in fact have resulted in consumers having their access to the true American wine marketplace diminished by retailers being left out of the deal when direct shipping legislation is passed.

Retailers will certainly continue to fight for their ability to serve American wine consumers via direct sales. This will continue whether or not consumers understand this battle effects them and whether or not wineries realize that their greatest hope for even further increases in sales comes by having retailers being given access to the direct to consumer market.

But it should be no surprise that retailers are at the forefront of defending consumer rights and winery rights by working to fend off H.R. 5034 and trying to rally consumer opposition. If H.R. 5034 passes many states will rescind winery to consumer shipping rights. However. Retail to consumer shipping will likely fade away for some time altogether as wholesalers even in states where this form of commerce is legal will introduce laws that prohibit out of state retailers from shipping, without having to offer even the most half-hearted justification for their wholesaler protection bills.

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11 Responses

  1. Robert Dwyer - June 2, 2010

    Well said Tom. As a wine consumer, I thank you for continuing to fight for retailer shipping. If I could choose only retailer shipment -or- winery shipment I’d choose retailer shipment for the reasons you’ve laid out here.
    It would be nice if retailer shipment into states freed up concurrently with winery shipments but that doesn’t seem to be the case. Do you think there’s more the model direct shipping legislation recommended by bodies like the Wine Institute could do (in terms of specific wording) to pull through retailer direct shipment along with winery direct shipment?

  2. Tom Wark - June 2, 2010

    While I am indeed personally passionate about this issue of direct shipping and market access and free trade, it needs to be noted that where retail to consumer shipping is concerned, it is really the members of the Specialty Wine Retailers Association that are working this issue, paying my salary and trying to change the laws for both retailers and consumers.

  3. Martin - June 2, 2010

    Thank you for continuing the information flow. There will undoubtedly be many opinions forthcoming, however an uneducated opinion is the most dangerous and you’re helping make certain people are informed, bravo.
    This proposed legislation continues to cause pause for those most distant to wine commerce and horrify those closest. The numerous wrinkles within the legislation are not surprising. They will unlikely serve as points of concession for the passage of something. I’m continually astounded at greed’s limits. Please continue posting as the backers of this legislation have not removed our right to vote.
    Martin Cody
    Cellar Angels

  4. Scott - June 2, 2010

    Is it any coincidence that bloggers/reviewers/lobbyists were recently required to mention on their blog and/or political lobby sites whether samples were purchased or recieved for free? Sites like this very one you’re visitng right now are designed to confuse you and obfuscate the fact that they are a propagandist tool for an industry organization.
    Tom Wark does not always hide the fact that he is a paid shill for the people who want to usurp the laws of your home state and their autonomy to regulate such business, but by occasionally writing about his life or other wine-related marginalia, he tries to make you believe he’s just a wine lover, just like you.
    I don’t know how many people read this blog who are forming their opinions on direct shipment. I do know that this site is designed to make you think somebody just like you, who just loves wine, is fighting for you. The fact of the matter is much more seemly. A paid web lobbyist is selling his snake oil as consumer rights protection.
    Read another site if you’re interested in wine and not industry infighting

  5. Phil - June 3, 2010

    @Scott…just a bit of advice, the standard talking points and political strategies don’t work too well on well-informed people, only the clueless. You’d be better off trying to explain the evils of direct shipping than trying to deflect the issue into character assassination. Anyone who might have been inclined to hear your side of the argument is not going to listen to you at this point, no matter how many dirty words you string together and throw at Tom, although I will say (and usually I hate the grammar police, but in this case you deserve it) I totally agree with you that the fact of the matter is much more seemly than your comment. Your comment is, of course, unseemly, and doesn’t reflect well on what many people will assume is your industry.

  6. WP - June 4, 2010

    My question is this…If this bill passes, how many states will actively pursue repealling their direct shipping laws? It seems to me that in times that require fiscal prudence, eliminating a source of both sales and excise taxes would not be the most prudent move.

  7. Scott - June 5, 2010

    Thanks for correcting me on my admittedly backward usage of that particular word. You’re right, I completely deserved it.
    I didn’t intend to employ any standard talking points or political strategies. In fact, I meant to suggest (and I think I was pretty clear about this) that a lot less politics would be welcome on “wine” blogs. As far as the “dirty words” you mentioned, I think it’s worth noting that I didn’t use a single one. And while I’m at it, I’d like to mention that “character assassination” can hardly be brought up when everything in my post is a fact. I know Tom doesn’t like the post, but even he didn’t dispute the truth of my point.

  8. Tom Wark - June 5, 2010

    Silence should not be construed as concent.
    And for the record, you’d missed the mark…almost completely.

  9. Jen - June 10, 2010

    To all,
    I have a blog, I don’t get samples. I work and live in PA and we get samples at the import company I work for, but that is usually widely known in the wholesale business, you need samples. HOWEVER, this law if passed, is not a good thing for the states unlike PA that have a “free market”. Pennsylvania is suffering, while there are great wines in PA it is strictly run by Bureaucrats and people that wouldn’t know a Pinot Noir clone’s characteristics if it bit them in the ass. This law could possibly turn the retail wine market in de-regulated states onto it’s head and that’s not a good thing. I wish they’d concede to keep things the way they are and create more free markets in the U.S. for wine!! I’ll talk more about this on my blog and here’s my shameless promotion .
    Great writing! Cheers!

  10. Detours 2.0 alternative - June 20, 2010

    Wow!! That’s pretty lot of Liquors out there!! Cool!!
    Hmm I think its a wine..Right?

  11. Nik Patel - September 3, 2010

    To all,
    I love the discussion and had one question. Are there estimates as to how much sales tax revenue individual states may lose by opening up online sales? Is this the primary reason states want to hinder this? I would assume that the states need to figure out ways to harmonize taxes so that if you buy something on a dot com you pay the same tax as if you bought
    It you buy it at your local retailer.

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