Who Supports the Stake In The Heart of Wine Stores—HR 5034?

Posted by Tom Wark on Sep 16, 2010

With the re-writing of H.R. 5034 (Download New HR 5034 Language), America's wine wholesalers and not a few congresspeople have concluded that it would be in the best interests of the United States to grant the states the ability to prohibit their consumers from purchasing wine from wine stores across the country. What I'm wondering, today, is why encouraging states to limit their citizens' access to wines is a good thing or even a necessary thing.

The idea behind the new H.R. 5034 is a simple one: A consumer's retail transaction with a winery should be encouraged and protected by the Constitution's Commerce Clause, while the exact same transaction with a wine retailer should not be encouraged or protected by the Constitution's Commerce Clause.

Is there a difference?

Isn't a consumer receiving a shipment of wine from an in-state winery, an out-of-state winery or an in-state wine store the exact same thing as a consumer receiving a shipment of wine from an out-of-state wine store? This is, of course, a rhetorical question. So, if we all agree that buying from an out of state wine retailer is an identical transaction to buying from an out-of-state winery, why the different treatment under the new H.R. 5034 and under the current law of many states (only 13 states allow the shipment of wine from out of state wine stores)? Aren't wineries acting exactly like retailers where the transaction is concerned?

The implications of making wine stores the only industry outside of insurance companies that are exempt from the protection of the Constitution's Commerce Clause protection that prohibits discrimination of interstate commerce by states is enormous.

1. It will lead to fewer states allowing retailer to consumer wine shipping.

2. It will lead to some of the states that currently allow retailer to consumer shipping to outlaw it.

3. Domestic producers that rely on retailers to sell their wine will see less of their wines sold.

4. Sales of imported wines, that can't be shipped directly from the importer and that rely on retailers to move their wines will see their sales hampered.

5. Wine retailers across the country, particularly multi-state retailers, will find themselves in a position of being legally subjected to laws that discriminate against them without any recourse to the courts.

6. Consumers will have vastly reduced access to wine.

7. Retailers and wineries hoping to change the laws to allow them to do business directly with one another will find that such changes are practically impossible.

8. Retailers in every state will find they are now completely at the mercy of the in-state wholesalers that control their access to inventory.

9. The enormous power that wholesalers wield over alcohol laws and alcohol distribution at the state level will be exponentially increased.

HR 5034 is a direct attack on Internet Commerce by the very middlemen who, as a result of significant changes in our economy, logistics capabilities and technology, seek to demand a place within a transaction where they are not needed. It is protectionism, pure and simple. H.R. 5034 drives a stake in the heart of wine retailers who have sought to address legitimate consumer demand through a well regulated market in direct to consumer transactions.

The question for the alcohol industry, be it retailers, wineries, beer producers, spirit producers, and importers is if they want to participate in the destruction of this growing marketplace, if they want to be a part of throwing retailers under the bus for the sake of wholesaler protection, if they want to hurt their own business prospects by tying the hands of the retailers that move their goods?

Wine retailers are and have been the primary point of education for consumers during the explosion of interest in wine over the past 30 years. Retailers have been the primary point of connection between producers (domestic and foreign) and consumers, particularly where the introduction of new wines and brands is concerned. Retailers, particularly the progressive and specialty retailers, have been huge supporters of wineries' ability to ship direct, knowing this channel for sales eventually helps them too by enticing consumers to reach for new and innovative brands that are not mass marketed…the kind of brands that often show up on retailers' shelves as well as winery websites and in their tasting rooms. 

The question is: Who wants to be involved in the full frontal attack on wine retailing that the new H.R. 5034 represents? Any support for the new H.R. 5034 is just this.

I've had the pleasure of working as executive director of the Specialty Wine Retailers Association for a number of years and continue to act in that capacity. In that time and in the entire 20 years I've worked in the wine business I've not seen an effort more destructive and more harmful to the wine industry than the potential passage of H.R. 5034.