The Leeches and Strawmen At The Heart of American Wine

Posted by Tom Wark on Jun 3, 2019

Some folks believe that using a “Straw Man” argument is a sure sign of intellectual and personal weakness. Others believe the use of straw man arguments is a sign of fear—the equivalent of turning your back on a challenger and running as fast as you can.

For the record, a straw man argument is defined as: “an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent’s real argument.”

I want to thank the Wine & Spirit Wholesalers of America for providing what might be the perfect example of a Straw Man Argument:

“Imagine a World Without Wholesalers…Sounds scary to think of a world without the “middle tier” of the three-tiered alcohol industry. Many call it “the glue” of the American beverage alcohol market-based system, and without it, our country would be in a very scary place.”

This is a statement made by the Wine & Spirit Wholesalers of America on the occasion of their annual “Fly-In” to Washington, DC. It’s during this “Fly-In” that the largest, most powerful, multi-million (Billion?) wholesalers meet with lawmakers and make their case for the invaluable services of the alcohol wholesaler.

“Imagine a world without wholesalers”? Has anyone ever done so? Has anyone ever suggested alcohol wholesalers be done away with? I’m not aware of anyone who has ever suggested such a thing. Yet, to America’s alcohol middlemen they believe it is “scary to think of a world without the ‘middle tier'”

No one thinks this scenario is scary because no one has ever considered such a thing. What is considered instead, by thousands of producers and retailers across America who are trapped into using wholesalers is that using wholesalers not be mandated by law.

Still, the wholesalers are willing to describe the absolute mayhem that would ensue in a “world without wholesalers”, as though such a thing was ever suggested:

“Without American wholesalers, incidents of consumers falling ill to tainted and counterfeit products causing blindness and death would permeate news headlines, as seen in many other countries.”

If you are going to make up an entirely fictitious scenario in order to misrepresent the state of the world, you at least ought to come up with some consequences of said scenario that make it at least halfway home to truthful. The fact is that the presence of wholesalers and the wholesale tier does nothing to prevent tainted or counterfeit alcohol from hitting the market. The way I know this is that in both California and Washington State the use of wholesalers is not mandated by law and there is zero problems with tainted or counterfeit wine in those states.

But wait, there’s more to this nightmare scenario. According to the Wine & Spirit Wholesalers of America:

“Without American wholesalers, consumers would be limited in the choices they had at their favorite bars, restaurants, and stores, and markets”

Here’s another little fact I’m guessing won’t be broached in the wholesalers’ talks with DC lawmakers: It is the existence of the state-mandated use of wholesalers that does the most to limit consumer choices. In those states where producers must use a wholesaler to get their products to retailers, wholesalers are not required to represent any brand that wants representation and in fact, thousands of brands can’t get representation by wholesalers, leaving the producers out of the market and consumers without the choice they deserve. Wholesalers are the pre-eminent consumer product blockers.

Wholesalers make an array of completely false statements in their attempt to defend their misrepresentation of the alcohol marketplace. Consider this doozy:

“Without American wholesalers, wine and spirits suppliers and retailers would have to take on the estimated $6.8 billion in direct operating costs annually that come from wholesaler marketing and logistics support—a cost that would be passed onto consumers.”

I have to mention again that no one has ever suggested that America be without wholesalers. But honestly, are we to believe that the costs incurred by wholesalers as they distribute alcohol are not passed on to the consumer now? Who thinks up this drivel and who gives the “OK” that it be put in print for all to see? What do you have to do to get fired at the Wine & Spirit Wholesalers of America?

But keep in mind, these are the kind of statements with which the wholesalers will be lying to lawmakers as they do their “fly in” to the Capitol this week? They’ll be saying that they are under threat from those who want to get rid of wholesalers altogether, that poisonous potions are set to be unleashed upon Americans were it not for the wholesalers standing guard in the middle, that without the wholesalers being mandated by law to be the middleman, consumers would have no choices at all.

Not to put too fine a point on it, but the wholesalers are in Washington, DC this week, looking lawmakers in the face, and lying to them.

If America’s alcohol wholesalers thought they were really the indispensable tier, they wouldn’t have to beg for protection from competition by their use being mandated. The mandated use of middlemen wholesalers that is part of the alcohol law in most states provides consumers absolutely no value at all and retards the American alcohol marketplace.

It turns out that wholesalers won’t just be making their rounds in DC in an effort to prop up their straw man and have lawmaker take their picture with it and asking lawmakers to support their state-mandated leeching off of producers, retailers, and consumers. They are there to ask for things tangible. Among those things is House Resolution 285.

Written somewhere in the bowels of the offices of the Wine & Spirit Wholesalers Association and handed off to Washington State Representative Derek Kilmer for introduction, H. Res 285 carries with it no demonstrable policy changes to the alcohol market in the United States. However, it does convey the sense of the House. Consider what’s in this House Resolution:

“Whereas Congress has consistently recognized and respected the primary authority of States to regulate alcohol in order to promote orderly, safe, and stable markets, efficient tax collection, and temperance, as evidenced by and through passage of the Webb-Kenyon Act, creating an exception to the Commerce Clause (emphasis added) and empowering States to regulate the importation and sale of alcohol beverages within their own borders”

No less than the Supreme Court has noted that this statement is not true. In the 2005 Granholm v Heald Supreme Court decision the Court wrote: “We hold that the laws in both States (Michigan and New York) discriminate against interstate commerce in violation of the Commerce Clause, Art. I, §8, cl. 3, and that the discrimination is neither authorized nor permitted by the Twenty-first Amendment.”

Also stuck in H. Res 285 is this little lie:

“Whereas the State-based system of alcohol regulation and a system of independent distribution have resulted in reducing barriers to market and providing unprecedented choice, variety, and selection for consumers”

First, “a system of independent distribution” isn’t independent if it relies on the state to mandate the use of distributors in order to bring a product to market. Moreover, in the last 30 years, nothing has done more to diminish consumer choice and access to products than the state-mandated distribution tier.

The volley of whereas and whereupons and wherebys in H. Res 285 is followed by the resolution by the House of Representatives that the three-tier system is just awesome and so are wholesalers.

The level of misrepresentations in the wholesalers’ materials they’ll use as they meet with DC lawmakers and in H. Res 285 is so great as to be downright heroic. Yet there it is. If it were not for their bought and paid for protection from competition found in the various state legal mandates that wholesalers must be used by producers and retailers, these guys would actually have to make their case based on reality, not fictitious claims of scary efforts to eliminate wholesalers altogether.

The strawman-building leeches that sit in the middle of the American system of alcohol distribution no longer have any reasonable arguments for their state-protected status. They are wrinkled, archaic examples of America’s best attempt to emulate the old, dismantled and disgraced system of Soviet-style economics. Today they hide behind some of the crudest misrepresentations in politics and the political power granted to them not as a result of good arguments and sound policy positions, but from government handouts and ongoing manipulation of the political process via campaign contributions drawn from a war chest stolen from the rest of the industry and consumers alike.