New All Out Attack On Wine Merchants Launched With H.R. 5034
A new version of H.R. 5034, the bill alcohol wholesalers are using to try to protect their monopoly on alcohol distribution, has been re-written by wholesalers and dutifully introduced by its sponsor, Rep. Bill Delahunt.
The new version of H.R. 5034 is a direct attack on America's wine stores and wine merchants. If this version of H.R. 5034 is passed it will allow states to legally discriminate against out-of-state wine merchants in numerable ways. It must be opposed.
The new language (
Download New HR 5034 language) in the new version of H.R. 5034 reads this way:
"State or territorial regulations may not intentionally or facially discriminate against out-of-state or out-of-territory producers of alcoholic beverages in favor of in-state or in-territory producers unless the State or territory can demonstrate that the challenged law advances a legitimate local purpose that cannot be adequately served by reasonable non-discriminatory alternatives."
What's critical in this language is that it says only out-of-state PRODUCERS may not face intentional or facial discrimination. In other words, the new version of H.R. 5034 specifically allows states to discriminate in any way they want against out-of-state WINE STORES or WINE MERCHANTS.
Rep. Delahunt, in his letter to the Chairman of the House judiciary committee explaining his changes to the text of H.R. 5034, says that this kind of discrimination was always congressional intent:
"the revised language reaffirms longstanding congressional intent that states do indeed have the primary authority to regulate alcohol within their borders so long as those regulations are not facially or intentionally discriminatory to an out-of-state manufacturer."
Let's be clear: NEITHER REPRESENTATIVE DELAHUNT NOR ANYONE ELSE CAN FIND ANY EVIDENCE TO EVEN SUGGEST IT WAS THE INTENT OF CONGRESS TO ONLY PROTECT MANUFACTURERS OF ALCOHOL AND NOT VENDORS OR MERCHANTS OF ALCOHOL FROM STATE DISCRIMINATION.
No where in the debates over the 21st Amendment, the Wilson Act nor the Webb-Kenyon Act was there even a hint that only out-of-state manufacturers of wine and other forms of alcohol were the only entities to be protected from discrimination by states.
The consequences of H.R. 5034 passing in this form are severe:
1. States will be empowered to discriminate against out of state wine stores by prohibiting them from shipping wine to consumers, while allowing their in-state stores to do so. This will severely reduce the wines consumers have access to, particularly imported wines and collectible wine.
2. It would entirely remove wine stores from protection by the Commerce Clause. Entirely!
3. If states were to allow out-of-state wine stores to ship to consumers in their state, they could impose huge fees and taxes on only those out-of-state wine stores.
4. States could prohibit non-resident wine stores from setting up more than one store in their state while allowing in-state wine stores to set up many stores.
Essentially, under this new version of H.R. 5034, states are empowered to discriminate against inter-state commerce by out-of-state wine stores in any manner they want because it removes retailers from protection under the Commerce Clause of the United States.
There is no conceivable rationale for treating wine stores in this way and every consumer, every winery and every retailer in America should oppose what can only be called AN ALL OUT ATTACK ON AMERICAN WINE MERCHANTS.
Gads! What next?
Prohibition can’t be far behind here!
Tom you have neatly hit on the weakness of Granholm – where the Supreme Court ruled only in favor of producers, not retailers. The revision to 5034 specifically takes advantage of this narrowness of Granholm.
There has only been a supposition – and I believe a reasonable one – by retailers that Granholm opened the door for them as well. But sadly I think it is going to take another Supreme Court fight before retailers will specifically be guaranteed Commerce Clause protection.
John:
I believe Granholm does nothing to preclude Retailers, restaurants or distributors or Importers from the protection of the commerce clause. And given the opportunity I see no way the Supreme Court would agree that these entities are without commerce clause protection.
Tom,
At what point do you think the language was re-written as an affront to the guy that spearheaded the 5034 consumer backlash? The Executive Director of the Specialty Wine Retailers Association?
Smells like hardball politics, let’s make a concession, but punch the oppositions champion in the stomach while we’re doing it …
I see your point, Jeff. But it’s nothing like like.
It’s a matter of wholesalers getting away with what they think they can get away with.
The notion that Granholm says only producers get Commerce Clause coverage is ludicrous. But this is what’s being sold to Congress.
For years, wine lovers and the wine industry have gone out of the its way to stand up for the ability of wineries to sell direct. I’ve always been among those folks.
But it’s time that wine stores get the same outpouring of support from wine lovers and the wine industry.
If H.R. 5034 passes in its new form, states will be able to create laws that discriminate against out of state wine stores. This will mean SEVERELY reduced access to imported wines and collectible wines and it will mean that domestic wineries will see far less wine sold by their wine wine store partners.
Time to stand up for wine merchants.
“The notion that Granholm says only producers get Commerce Clause coverage is ludicrous.’
I don’t think so, Tom. I agree with John that the narrowness of Granholm will haunt retailers. After Granholm became law, some of us cautioned that its narrowness leaves too many doors open and so, one of the open doors now invites entry.
I’ll say it again and again, probably until I die, without a clear Supreme Court decision that says wine (and alcohol in general) commerce is not any different under the Commerce Clause than any other product, fights like this will live on…and right now, this court’s majority believes that alcohol should be treated differently than any other legal product, including guns.
Thomas:
No one denies that alcohol can be treated differently than most other products due to the 21st amendment.
But I defy anyone to show me where any court or any Act of Congress says that retailers, restaurants, or hotels that serve alcohol were removed from commerce clause protection.
Any thing anywhere that suggests this I would like to see.
Cheers,
Tom…
Tom – I believe all businesses deserve Commerce Clause protection. But it took a legal fight all the way to the Supreme Court to force the States to accept that it is so for alcohol producers, ergo probably the same for alcohol retailers. Granholm will serve as one of the guiding precedents in this fight.
Let me propose an alternative scenario – I have been contacted by the Treasurers of two States (WA & TX) where I have held a direct shipper license. They were attempting to collect franchise taxes, claiming that we had a business nexus in their States. I asked each specifically if my DS license gave me that exposure – they both said it was not (though of course that is where they got my contact information) but they assumed that I was coming to their States to promote our brand. I assured them that I was not, and that the onus was on them to prove it if I was, and that if flying into Seattle or Austin to promote our brand established a business nexus they could rest assured I never would do so (bye bye tourism $) – in other words I refused to pay their extortion.
But for argument’s sake let’s suppose a State passes a law that says holding a DS permit DOES actually establish a business nexus. Does it not follow that I am then a retailer in that State? Could that argument be twisted to compel me to land my direct shipments through a local wholesaler? Would it surprise you to discover that wholesalers might be trying to work this angle?
Even though the wording “retailer/wine merchant/” was not included in Granholm, but “producer” was, I would think a case could be made because producers are also “retailers”, so that to split hairs to separate those things would require the supreme court to scratch their head and clarify themselves. Unless the wording says, “a producer acting only as a producer and not in any other capacity”, which i don’t think is the wording.
Greg:
I and many others agree with you 100% concerning wineries acting as retailers.
It highlights the fact that much of the jurisprudence and lobbying on this issue has been driven by politics and a misunderstanding of how alcohol distribution works.
Tom,
What’s the proposed (or ballpark) timeline on hearings on this revised bill?
Also, can anyone offer specific interpretation on import impact?
Whatever. This is a clear attempt to take producers out of the opposition. Divide and conquer. Recognize that this change actually WEAKENS the position of the proponents. They want to “reduce litigation”? Then why exclude the producers?
If they succeed in this, they will just come for the producers next. We all need to stand firm!!
Tom, thanks for the information and passionate opinions. I completely agree, this bill needs to stop.
“But I defy anyone to show me where any court or any Act of Congress says that retailers, restaurants, or hotels that serve alcohol were removed from commerce clause protection.”
Tom,
You are of course correct, but that isn’t at all what Justice Kennedy meant in his explanation of Granholm when he called alcohol separate and different. What he, and the Supremes for decades mean is that because of alcohol’s separate category, the justices are willing to overlook or to allow certain treatment in the regulation of the product by the states–not all treatment, but certain ones, which is the exact attitude that invites endless lawsuits plus attempts at add-on legislation.
You are fighting not only the three tier system, but also the attitude of the Supreme Court.
One more thing, Tom.
As you know, the Granholm decision did not say that restricting direct delivery access to out-of-state producers is unconstitutional. The decision said that restricting that access to out-of-state producers while allowing access to in-state producers is unconstitutional, and that the states must choose either to restrict access or to allow it–to all producers.
That’s a little different from what the Commerce Clause seeks for all commercial products. I may be wrong, but I doubt states can restrict access at all to other products.
Maybe we should just ban alcohol altogether and make it illegal.
Oh, wait…
I am not clear on where it is possible for Congress to control what the Supreme Court gets to decide. Isn’t that the court’s prerogative? I’ve always assumed that the court is the final arbiter of what is constitutional. Is that not the case?
Larry:
The Granholm decision turned largely on the view by five justices that the dormant commerce clause was not overridden by the rights of the states to regulate alcohol in any way they want due to the 21st Amendment. Granholm basically haromonized these two parts of the Constitution.
However, While congress is granted the power to regulate interstate commerce, Congress can forgo that power and give to the states the right to regulate interestate commerce any way they desire, including discriminating against out of state businesses.
That’s what HR 5034 does. It gives the states the ability to discriminate against out of state retailers in ways that are not unconstitutional.
This is greed pure and simple….this phrase in the Congressman’s submital letter made me belly laugh…then cry…
“protect societal interests in guarding against underage drinking, and will limit access to alcohol by preserving the states’ right to require face to face identification checks, etc. The language will continue to promote temperance and orderly markets.”
thanks for your share
This is greed pure and simple….
If they succeed in this, they will just come for the producers next. We all need to stand firm!!
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