Turning Wine Fantasy Into Wine Reality

winefantasyThe wine industry and wine consumers should take careful note of the fact that in a Wine Spectator article about the sharp increase in winery to consumer shipments in 2016, writers Lexi Williams and Ben O’Donnell also spent considerable space outlining the various ways by which states are attempting to cut off consumers from shipments from out-of-state wine stores and retailers.

Of particular interest in this story was the claim made by the state of Illinois (which is being sued due to its discriminatory policies on retailer shipments) as to why the discrimination against out-of-state retailer shipping is necessary:

“it would destroy, for all intents and purposes, the three-tier system of alcohol regulation that Illinois uses for the legitimate purposes of promoting temperance, generating tax revenue and ensuring the orderly distribution of alcohol.”

How could shipments from out-of-state wine retailers destroy a “three tier system” in Illinois that already allows out-of-state wineries to ship direct to consumers as well as allowing Illinois retailers and restaurants to buy directly from out-of-state wineries?

And add to this the fact that prior to 2008, Illinois law allowed out-of-state retailers to ship direct to Illinois consumers.

The fact is, there is no “three-tier system” in place in Illinois. There is only a collection of laws that come together to form the states alcohol beverage code. Anything resembling a three tier system of the tradition sort is gone and done for.

And it’s important that Illinois’ other claims in that statement above also be address.

Shipments from out-of-state retailers would negatively impact the state’s attempt to promote temperance: Illinois already allows out-of-state wineries to sell and ship wine direction to consumers. If that doesn’t harm the state’s ability to promote temperance, shipments from retailers also won’t.

Shipments from out-of-state retailers will harm the state’s ability to collect tax revenue: Absurd. If out-of-state retailers were allow to obtain shipping permits in the same manner as wineries, more tax revenue would be remitted to the state by these retailers.

Shipments from out-of-state retailers would harm the state’s ability to create an “orderly market” for alcohol sales: Again, out-of-state wineries may already ship directly to both consumers and retailers. How shipments from out-of-state retailers would create disorder is unclear.

Illinois is defending its unconstitutional ban on out-of-state retailer shipments because it is required to. However, in doing so it is doing the heavy lifting for a group of middlemen wholesalers who are merely engaging in using the state for the purposes of rent seeking and setting up protections from having to compete on a level playing field. But in addition, they are preventing the state from collecting important tax revenue as well as screwing consumers who are forbidden under the law from accessing wines that wholesalers can’t and won’t bring into the market place.

With any luck, this lawsuit, or one of those now filed also in Michigan or Missouri, will end up at the Supreme Court. And if that happens wholesalers and the states and courts will finally be told that the same protections that extend to wineries against state interference in interstate sales also apply to wineries. And that’s when the American wine market will move from its fantasy state to a state of reality.

3 Responses

  1. David Vergari - February 1, 2017

    “…for the legitimate purposes of promoting temperance.” My head just exploded. Words cannot express…

  2. Amit Nischal - February 2, 2017

    Great article ! Enjoyed reading every word.

  3. Stan Duncan - February 2, 2017

    Hey Tom, do you have any information or numbers about how well wholesalers do in California? Since there, wineries and retailers can sell direct to consumers without using a wholesaler, and consumers can buy wine from any winery or retailer in the country. So the California wholesalers must be really suffering, right? 😉

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