Ignorance, Bias, Hipocrisy, Self Service—Wine Wholesaler Style

Craig wolf It's so rare that opponents of regulated consumer access to wine are so willing to demonstrate their ignorance, bias, hypocrisy and self serving intentions. Yet, thanks to Paul Mabray's VinTank interview with Wine & Spirit Wholesalers Association President Craig Wolf we get more than a glimpse into these commonplace foibles.

In the interest of clearing up fallacies, setting the record straight, correcting historical inaccuracies, and giving my readers a glimpse into the sometimes bizarre conclusions and positions of wine wholesalers who oppose regulated consumer access to wine, I offer a very short response to some specific statements of Mr. Wolf.

1. "The 21st amendment gave states the authority to create alcohol policy, largely unfettered, by the courts"
The 21st Amendment did no such thing. In fact, the 21st Amendment makes no mention of courts of any kind. The 21st Amendment repealed national Prohibition and gave the state the right remain dry or go wet under their own set of laws. However, nothing in the 21st Amendment comes close to suggesting that state alcohol laws are exempt from judicial oversight or may violate the U.S. Constitution.

2. "The problem with litigation is…it creates uncertainty. You don’t know how a judge is gonna come out with alcohol policy."
Actually, litigation creates certainty. After a judge rules and after all appeals have been played out, one generally has absolute certainty on what's legal or Constitutional and what's not. The fact that you don't know how a judge is going to come out with alcohol laws only means you aren't clairvoyant.

3. "At the state legislative level…the representatives of the people of the states make the decisions, not an elected judge making a decision for alcohol policy for an entire state."
Judges don't make any policy. They tell states what kinds of policies are unconstitutional when there is a dispute. Once a judge makes this declaration its up to the state legislature to fashion laws that comply with the U.S. Constitution. This happened after the Granholm Supreme Court decision that ruled state-based discrimination in wine shipping laws was unconstitutional. It was the state legislatures that then corrected their laws. In fact, it was wholesalers who, after the Supreme Court decision, went to the state legislatures to argue that no shipping should be allowed, but rather all wineries should be at the mercy of wholesalers to introduce their wines to market.

4. "The 21st amendment wasn’t enacted in a vacuum. It was enacted because of the problems states had enforcing their laws pre-Prohibition"
No. The 21st Amendment was enacted because Americans tired of Prohibition and because repealing it would have a significant positive impact on the then depressionary economy. The fact is, the 21st Amendment simply allowed states to operate exactly as they were operating just prior to Prohibition's onset.

5. "[HR 5034] should be passed because we want to basically make GRANHOLM the high level watermark for this type of policy [Direct Shipping]. And let states make their decisions based upon GRANHOLM but no further."
Everyone understands that Wholesalers want THEIR IDEA OF WHAT GRANHOLM MEANS the basis upon which state direct shipping laws are judged. The problem is that the Wholesalers idea of what Granholm means IS WRITTEN INTO HR 5034. If passed is would allow laws that descriminate against winery direct shipping in effect and it would allow states to discriminate against wine merchant direct shipping in any way they want—essentially stripping wine merchants of their commerce clause protections against descrimination. No Congress and no Founders ever imagined such a thing every coming into being.

6. "we don’t believe that the [Supreme Court] decision [Granholm v. Heald] at all created any type of authority for retailers to go outside the system."
In other words, the Wholesalers believe that some un-noticed, un-written, magical disappearing set of words that exist no where in the Constitution, in the Granholm decision, in its 21st Amendment or in any Congressional act tells us that PRODUCERS can't be descriminated against, but WINE MERCHANTS may be descriminated against? HUH?

7. "The bill [HR 5034] has been characterized as the monopoly protection act, and you know, we take offense with that. We certainly disagree on policy on the issue, but to somehow imply that wholesalers are monopolizing the market…is absurd."
Incorrect. Actually HR 5034 is commonly referred to as the "Wholesaler PROTECTION Act".

8. "So what happens is, when you open the door [to regulated direct shipment of wine], you create a shadow market – a black market, if you will – of product that cannot be traced or monitored."
Only if you want to. It's easy to stop. New Hampshire, for example, has a policy where once they see an unlicensed winery or retailer shipping into the state, they tell the common carriers about it and the common carriers are fined if they deliver another package from this source. There are simple fixes to these issues. But addressing the issue with common sense doesn't seem to be the goal of Wholesalers. The goal is to keep as much wine and profits flowing through wholesalers as possible, despite the burden that restrictive system places on wineries, consumers, retailers and regulators.

9. "What’s going to happen is…some kid at college is going to order a bottle of Everclear, they’re gonna put it in their punch, kid’s gonna get drunk, go out and kill somebody. And then, the regulators are gonna look and this and go, ‘where was the industry on this issue?"
This scenario is far more likely to occur with a minor getting their liquor from a brick and mortar store. Why are the Wholesalers not calling for the Brick and Mortar sales channel to be completely shut down? (That's a rhetorical question).

10. "And the fact is that UPS and FedEx usually can’t distinguish, you know when the boxes come through, who is shipping and who is not."
This must be news to UPS and FedEx. Can it really be that the drivers don't see they are at a wine or liquor store or winery or wharehouse with cases and cases and cases of alcohol? This statement is either a result of ignorance or duplicity. But it's most definitely insulting to FedEx and UPS.

11. "If you’re a state like Delaware for instance, and you allow direct shipping from out of state, how are you going to possibly regulate 50 states’ worth of wineries and retailers? You can’t do it?"
Yet somehow their neighbor, New Hampshire, has found a way to do it just fine. Is Mr. Wolf intentionally insultng Delawarans.

14 Responses

  1. James McCann - January 13, 2011

    A couple of observations:
    1. Mr. Wolf is not ignorant, he is an advocate for the wholesalers who are trying to protect themselves from a perceived threat, same as every other industry when faced with change.
    2. The retailers have exposed themselves to the label of “hypocrites” by consistently ignoring current state laws to “brown box” shipments into even the felony states.
    For the record, (again) I hope we see some major opening up of wine laws, but much of this pontificating is not productive, as for years the retailers have been living in a glass house.

  2. Tom Wark - January 13, 2011

    That’s not what Mr. Wolf says. He says, among other things, that direct shipping is just too dangerous: Kid’s will die. Then regulators will come calling on the alcohol distribution system. Interestingly, no accounts of any kids dying from alcohol obtained via direct shipping….just alcohol obtained via brick and mortar stores. Think we’ll hear Mr. Wolf call for the closing of the Brick and Mortar store sales channel?

  3. James McCann - January 14, 2011

    I know that he didn’t call the retailers hypocrites, they are his customers, after all. My point is that both sides are engaged in a lobbying effort to gain their desired result. I don’t think that either side is ignorant, they just need to stick to the script.
    My point about the retailers is that they continue to ask for a path to “legality” while at the same time flaunting existing law. If I was a state legislator faced with a vote on opening up to out of state retailers, I might question whether the retailers are sincerely interested in paying local taxes and following regulations.

  4. Tony - January 14, 2011

    Well, to Tom’s point, we are all happy to do it in New Hampshire, so why would we not do it elsewhere? If you don’t see this as a blatant attempt for monopoly control by the wholesalers, you’re just not looking very hard.

  5. Bill McIver - January 14, 2011

    Good work, Tom! Too bad the wine retail industry didn’t get behind the direct shipping fight back in the 1990s. Their financial contributions to CFT lawsuits and publicity projects and local clout would have made a big difference when the movement began. However, I guess that’s understandable since many of the wineries supporting direct shipping were so hifaluting they sold direct to consumers, upscale restaurants and to a few, if any, retailers. The wine industry’s biggest problem remains, it seems to me, because its bi and trifurcated. A house divided among itself cannot stand.

  6. James McCann - January 14, 2011

    We all know what the wholesalers are trying to accomplish, that is not the point. Calling them ignorant and hypocritical makes great theater, but the reality is they are trying to protect their business from what they perceive as a threat. Did you see how New York retailers reacted to the idea of increased competition?
    NH may be a success story in all this, but for years the retailers have been shipping illegally, and that does not endear them to states that they are trying to penetrate.

  7. imobiliarias alegrete - January 16, 2011

    My point about the retailers is that they continue to ask for a path to “legality” while at the same time flaunting existing law..

  8. Tom Wark - January 16, 2011

    States don’t deny their residents access to out of state retailers because some retailer ship where they shouldn’t. They deny consumers access to out of state retailers because their campaign contributors ask them to.
    The really interesting thing is that this position isn’t in the best interests of the states’ coffers nor of its consumers. Millions of dollars in tax revenue would roll into state coffers were retailers legally allowed to ship. In addition, consumers would finally have access to the true American wine market.

  9. James McCann - January 20, 2011

    I know this is a very late response, but I finally got around to running the numbers on increased tax revenue. First, we need to assume that the wine buyer is going to buy more wine overall, not just from a different source, otherwise the whole argument falls apart immediately. I’ll leave that for another debate… will the internet wine buyer actually consume more because he can buy from out of state retailers?
    Assuming he will:
    1. Using $30/bottle, $360/case – and assuming the states all collect both excise and sales tax… (for this model, I am using 6% sales tax and $2.00 excise per case)
    2. $360 X .06 = $21.60 + $2.00 excise = $23.60 per case
    3. Not sure what you mean by millions, but let’s use 5 million as a starting point. $5,000,000 divided by $23.60 = 211,864 additional cases of $30 wine that will be sold by opening interstate wine shipping to retailers. That seems like an awfully big number. Remember, if they buy a case out of state instead of in-state, that case doesn’t count.
    4. Divide the 5 million between 50 states, and the revenues are not very impressive.

  10. Tom Wark - January 20, 2011

    I know of individual retailers that have sold more than $1 million out of state.

  11. James McCann - January 20, 2011

    Of course, we all do. But if they are currently paying all of the taxes due on those shipments, they need to create NEW business in order to create tax revenue growth. (Not just steal business from an in-state retailer)

  12. Tom Wark - January 20, 2011

    Only in the wine industry could it be considered “theft” when a consumer in one state wants to purchase a product from another state.

  13. James McCann - January 20, 2011

    Come on Tom, you know that is not what I mean… I am trying to figure out how states are going to reap a windfall from taxes, which is a central part of your argument.

  14. Earn Money From Home - February 9, 2011

    you’ve got great elements there and I do like how you encourage the readers to take the time to think.

Leave a Reply