The Case For Screwing Wine Lovers

Fourteen years ago one thing was clear to everyone concerned after the Supreme Court rendered its decision in Granholm v Heald: States that allowed their own wineries to ship wine direct to consumers but prohibited out-of-state wineries from doing the same had to erase that discriminatory treatment. There was little talk or concern then as to whether or not states needed to address discrimination in retailer DTC shipments.

In June 2019 when the Supreme Court issued its decision in Tennessee Wine v Thomas, we got a clear statement concerning how the older Granholm decision impacts retailers:

“Granholm never said that its reading of history or its Commerce Clause analysis was limited to discrimination against products or producers. On the contrary, the Court stated that the Clause prohibits state discrimination against all ‘out-of-state economic interests’ and noted that the direct-shipment laws in question ‘contradict[ed]” dormant Commerce Clause principles because they “deprive[d] citizens of their right to have access to the markets of other States on equal terms.’ “

Put simply, the same non-discrimination principles that forced states 14 years ago to reaccess and change their discriminatory winery DTC shipping laws must also now force states to reckon with their discriminatory retailer DTC shipping laws.

How this happens over the next several years will largely depend on who lawmakers in various states believe are their most important constituents. Should the changes in retailer DTC shipping laws address the concerns of wholesalers and retailers who fear competition from out-of-state sources? Or should lawmakers look to the interests of consumers? Depending on who’s interests are taken most seriously will determine how the discriminatory retailer DTC laws are changed to come into compliance with the Tennessee Wine decision and the U.S. Constitution.

States that currently discriminate against out-of-state wine retailers via protectionist anti-retailer shipping laws have two choices; the same two choices that similarly situated states had when they addressed their winery shipping laws after the Granholm decision. 1) eliminate the discriminatory treatment of out-of-state retailers by barring their own in-state retailers from shipping to local residents. 2) Allow out-of-state retailers to ship to residents in the state just as in-state retailers may currently do. In the vernacular, states may “level up” or “level down”.

Whether a state decides to level up or level down in their effort to bring their laws into compliance with the Granholm and Tennessee Wine Supreme Court decisions will depend entirely on whose interests lawmakers believe are most important. Are millions of consumers’ interests more important or are the interests of a tiny number of wholesalers and retailers who believe consumers should be restricted in the wines they may access in order to be protected from competition more important?

Here is a serious rhetorical question. In a state where consumers are able open their door, greet a FedEx driver, sign for and receive a box of wine shipped from an out-of-state winery, an in-state winery and an in-state retailer, what concern for safety or health of the community justifies barring that consumer at the door from signing for a package of wine from an out-of-state retailer?

Even before Tennessee Wine confirmed that the principle of non-discrimination in commerce applies to retailers as well as wineries, no group or lawmaker or regulator or member of the industry was able to create any justification for discriminating against out-of-state wine retailers other than on protectionist grounds. They simply thought it important to restrict consumer choice in order to protect local wholesalers and retailers from competition.

There are considerable problems with a state choosing to protect local retailers and wholesaler interests by leveling down their retailer shipping laws in response to the Granholm/Tennessee Wine principles.

First and most important, by prohibiting consumers from receiving wine shipments from both in-state and out-of-state retailers, the choice of wines available to consumers is severely restricted. Even those consumers living in a metropolitan area with numerous wine sellers would have access to a very tiny minority of wines that are available nationally. On average, a state’s entire contingent of wholesalers generally makes available no more than 25% – 30% of the wines that are available nationally. Finally, the political/economic ethics of so severely restricting a consumer’s choice for the sake of protecting a very small group from having to compete is highly questionable.

Second, by leveling down and barring wine shipments from both in-state and out-of-state wine retailers, a state is forgoing millions of dollars in tax revenue that would otherwise be remitted by out-of-state retailers on their shipments into the state. Again, from a moral and ethical perspective, it is hard to justify denying considerable tax revenue that could be used for education, infrastructure and other uses simply to protect a very small group of local retailers and wholesalers from competition.

Third, why should all of a state’s retailers be barred from engaging in the most significant retail innovation in decades: the internet marketplace. Not all retailers are so concerned with being protected from competition that they are willing to give up their right to ship wine to in-state residents. In states like California, New York, Missouri, Illinois and others there are a significant number of wine retailers that do a robust business selling wine online and delivering it in-state. Their business models should not be restricted and destroyed so that other retailers who may not want to go that route can protect themselves from real competition.

Finally, a robust interstate retailer shipping channel is good for both producers and wholesalers. In a world where retailers can meet consumer demand, more wine is depleted from retailer inventories, more wine is depleted from wholesaler inventories and more wine is needed from producers to re-stock those inventories. It is a fallacy that retailer shipping harms local retailers for the simple reason that consumers are efficient. If they can buy locally the wines they want they will do so rather than pay the often expensive shipping costs and have to wait for delivery. Only when they cannot obtain what they want locally will they turn to-out-of-state sources. Retailer-to-consumer interstate wine shipments are good for producers and wholesalers.

In the coming months and years there will be states whose lawmakers successfully fix their now unconstitutional laws by successfully stifling the the desires and interests of consumers, reducing state tax revenues, restricting their own retailers marketing and sales options and altering supply and demand all in order to save a small number of special interests from having to compete on a level playing field.

The degree to which this unfortunate outcome is allowed to occur will depend entirely on the degree of sunshine that can be shone on the process; the degree to which the local media is willing to report on the how campaign contribution recipients ignore their real constituents, and the degree to which consumers and wine drinkers get involved in the process.

From a rhetorical and practical perspective, those who believe that free trade in wine ought to be the reigning paradigm can take heart that there is not a single practical reason why wine consumers ought to be barred from receiving wine shipments from out-of-state retailers. This may seem beside the point where the coming politcal battles are concerned, but in fact, having the legal, rhetorical, ethical and moral high ground in any effort is very important.


30 Responses

  1. Peter Ricci - August 20, 2019

    Need to have ALL of your readers contact the largest distributors in the country and ask them why are they not working in favor of consumers across the country. Ask them to post on their website today they they support consumers and ask ALL states to open boarders for shipping across state lines.

    Southern Glazer’s Wine & Spirits
    Headquarters: Miami, FL
    States served: 36
    Offices: 126
    U.S Wineries represented: 1,178
    Chairman: Harvey Chaplin
    Executive Vice Chairman: Bennett Glazer
    CEO: Wayne Chaplin
    President: Sheldon Stein
    +1-305-625-4171

    Republic National Distributing Co. (RNDC)
    Headquarters: Grand Prairie, Texas
    States served: 21
    Offices: 42
    U.S Wineries represented: 751
    President & CEO: Tom Cole
    EVP & COO: Robert Hendrickson
    1-972-595-6100

    Breakthru Beverage Group
    Headquarters: New York, NY, and Cicero, III.
    States served: 15
    Offices: 37
    U.S Wineries represented: 691
    Co-chairman: Charles Merinoff and W.Rockwell
    President & CEO: Greg Baird
    +1-212-699-7000

    Johnson Brothers Liquor Co.
    Headquarters: St. Paul, Minn.
    States served: 22
    Offices: 30
    U.S Wineries represented: 135
    CEO: Michael Johnson
    COO: Todd Johnson
    (651) 649-5800

    Martignetti Cos.
    Headquarters: Taunton, Mass.
    States served: 22
    Offices: 3
    U.S Wineries represented: 235
    Chairman: Jim Carmine Martignetti
    781-348-8000

    Empire Merchants
    Headquarters: Brooklyn, NY
    States served: 3
    Offices: 6
    U.S Wineries represented: 124
    President & CEO: John Devin
    COO: Tony Magliocco
    (877) 779-4631

    The Winebow Group
    Headquarters: Glen Allen, Va.
    States served: 20
    Offices: 20
    U.S Wineries represented: 81
    President & CEO: David Townsend
    Executive Vice President and CFO: Dean Ferrell
    (800) 365-9463

    Create a little chaos at their corporate headquarters. They are use to the WSWA, their national wholesale organization to deflect the pressure.

    Wine & Spirits Wholesalers of America
    805 15th St NW #1120
    Washington, DC 20005
    Email Info@wswa.org
    Phone 202.371.9792

  2. Bill St. Croix - August 20, 2019

    Great analysis of the two ‘real’ options the states have. As you noted, this will show where the law makers loyalties really sit. Here in Kentucky, they keep ‘pretending’ to make changes, but really only lip service and more restrictions on what hoops you have to jump through to get anything shipped in. And then shippers are so afraid of a mis-step that they just won’t even go there. Trying to figure out a plan to email all the senators and reps here to bring this to their attention. Your article should almost be the letter they all receive as it covers the bases very well.

  3. VVP - August 20, 2019

    Indeed? Your analysis misses the very important part of the SC opinion.

    “…the Court repeatedly invalidated, on dormant Commerce Clause grounds, a variety of state and local efforts to license those engaged in interstate business.”

    How do you expect the States to license those engaged in interstate business after SC opinion was delivered?

    And again, there is no such thing as retailer DtC shipping.

    DtC shipping is exactly the shipping that is outside of retail environment.

  4. VVP - August 20, 2019

    Bill St. Croix

    Do you know the only reason why liquor stores do not ship to KY?

    Because UPS and FedEx collusion don’t let them. Nothing else is the reason.

  5. VVP - August 20, 2019

    Peter Ricci

    Wholesalers of any size, including Southern Glazer’s Wine & Spirits have absolutely nothing against retailer shipping.

    The problem is that Tom Wark’s wine retailers in fact aren’t retailers.

  6. Bill St. Croix - August 21, 2019

    VVP – Seriously? State your evidence that UPS and FexEx are colluding to not ship to Kentucky.

    Reasoning I have heard is that there are still dry/moist Zip codes/counties and they don’t want to have to manage to that level. The state requirement that a person visit a winery and place the order there to have shipped into the state, no way to prove that happened. At no point has Kentucky said it is OK for a retailer to ship wine into Kentucky. Even last years shipping law changes they made did not address retailers, only wineries.

  7. Peter Ricci - August 21, 2019

    VVP

    If all of the big distributors are for shipping across state lines then WSWA should have a big banner on their website supporting it. Having key people in all of the State Capitols supporting the legislative changes. The WSWA Board of Directors is loaded with the big boys. Most of the distributors I mentioned have someone on their board.

  8. Tom Wark - August 21, 2019

    Peter,

    You are a world class Sh*t Disturber. Well done!

  9. Tom Wark - August 21, 2019

    VVP wrote:

    “The problem is that Tom Wark’s wine retailers in fact aren’t retailers.”

    :::::::sigh:::::: You’re right VVP. They are bakers and brick layers. Good God, sir. Straighten up.

  10. VVP - August 21, 2019

    Bill St. Croix

    More than seriously! We have collected enough written evidences from top lawyers in both common carriers showing that they look at each other in their policies. We will disclose them when time comes. However, they have absolutely no right to manage at any level. Their the only permissible activity to manage is to move boxes from one place to another and safely deliver them to recipients. We already filed several complaints against both common carriers where a State explicitly licenses shipments of alcoholic beverages to out-of-State consumers, but FedEx and UPS refuse to provide service.

    For your “still dry Zip codes” read before Prohibition Supreme Court ruling in Adams Express Co. v. Commonwealth of Kentucky and then read and reread the recent Tennessee Wine Supreme Court decision. So many answers are there. ” …it infers too much from the existence of laws that were never tested in this Court.” All they need just to be tested if Supreme Court decision isn’t enough for them.

    Finally, at no point has Kentucky to say either it is OK or it is not OK for an out-of-its jurisdiction retailer to ship alcohol to an adult in Kentucky. Why? Because Kentucky was not granted any power to regulate that activity. Such transaction is still one of interstate commerce and within the exclusive jurisdiction of Congress.

  11. VVP - August 21, 2019

    Peter Ricci

    WSWA does have a “big banner” on their website supporting few giant wholesalers. Nothing else. While WSWA’s purpose is to protect their sponsors from competing with direct shippers and non-WSWA members, however, there is absolutely nothing against traditional retailers.

    There are over 3000 distributors of mom & pop size in this country. They all say big YES to their retailers interstate shipping. They are not WSWA members, so WSWA doesn’t want to hear their voices.

  12. VVP - August 21, 2019

    No, Tom. Most of them are wholesale distributors of wine, and you know it.

  13. Bill St. Croix - August 21, 2019

    VVP:

    Glad you can quote legal cases and untested law that someone just needs to test. That does ME no good when wanting to get wine shipped from a retailer or winery, directly to my home.

    Here are some exerpts from articles that can be Googled that show the reality:

    1) And what does it mean for Kentucky residents? According to the bill, residents can now ship bottles home WHEN VISITING wineries and distillers in other states, and it totally opens the doors to online retail WITHIN the state. (Note: I added the emphasis on the WITHIN and WHEN VISITING).

    2) The wine industry now can ship to and from 44 states — not Kentucky (yet) — thanks to tireless efforts by winemakers and organizations like Free the Grapes. (Note: I did not add emphasis around not Kentucky (yet) the author did, but it makes my point).

    3) Going forward, in-state and out-of-state wineries will be permitted to ship wine to Kentucky residents if:

    They are properly licensed by the Kentucky ABC. Notably, HB 400 will apply to wineries of all sizes; the previous 100,000 gallon limit appears to be going away.
    They ship no more than 4 cases of wine at a time, when the purchase was made by the Kentucky resident when on-site at the winery’s premises.
    They ship no more than 1 case per month to a Kentucky resident who is a member of a subscription program or club set up by the winery, as long as the enrollment in and payment for the club or subscription was arranged while the Kentucky resident was physically present at the winery.
    Only licensed common carriers or transporters fulfill the delivery, and the package is in a box clearly indicating that it contains alcohol, and an adult’s signature is collected at the time of delivery.
    The shipment does not go a territory where such sales are not otherwise permitted.

    Note: There’s a lot to all the IF statements…like having to be on-site, physically present, at a winery to subscribe to a wine club

    4a) For Quota Retail Package Licensees:
    Interestingly, HB 400 also includes provisions that will permit package retail stores to make DtC shipments. Under the terms set out in HB 400, licensed package retailers may ship both wine and spirits to Kentucky residents if:

    They are licensed by the Kentucky ABC, and at least 80% of their sales are made to Kentucky residents. This restriction appears to prohibit any out-of-state retailer from fulfilling DtC orders into Kentucky.

    (Note: That danged “IF” word again. If 80% of their sales are made to Kentucky residents…)

    4b) The issue of retailers entering the DtC market has been particularly contentious recently, so it is rather notable that Kentucky is entering the fray. Since only local, Kentucky-based retailers can get the necessary license to make DtC shipments, the state could be setting itself up for legal challenges, as such a restriction butts against the Interstate Commerce Clause doctrine as applied in the 2005 Granholm decision.

    (Note: This is exactly what was just ruled on by SCOTUS, so I have some hope that Kentucky will ‘do the right thing.’ Actually I think they will have no choice given the Bourbon market they would CRUSH if they eliminate the ability to ship within the state via retailers and out of state to consumers by distilleries.)

    5) For Transporters:
    One of the driving reasons that Kentucky has historically been effectively closed for DtC sales, despite the prior allowance for Small Farm Wineries, has been the risk of felony charges that carriers faced if they shipped any package containing alcohol to a region designated as “dry” (no alcohol sales permitted) or “moist” (alcohol sales restricted, but not entirely banned). A felony penalty can be a very serious consequence, which no carrier (such as FedEx or UPS) had ever been willing to risk.

    HB 400 does still clearly state that deliveries of any alcoholic product to any territory in the state that prohibits such sales is absolutely prohibited. However, HB 400 also provides that properly licensed common carriers and transporters and their employees may not be held liable for a delivery to a prohibited territory when fulfilling a consigned order.

    (Note: Makes my point again, so whatever ‘collusion’ delusion you have and the ‘evidences’ (note: that the word evidence is both singular and plural) are worthless. I actually find it almost laughable that UPS and FedEx would deliberately not ship something that would make them money, unless their is risk…like a felony, as noted above.))

  14. Tom Wark - August 21, 2019

    VVP wrote:

    “No, Tom. Most of them are wholesale distributors of wine, and you know it.”

    VVP, you got me. It may be time to confess that not only are all the members of NAWR wholesalers, but they also were involved in faking the moon landing.

  15. VVP - August 21, 2019

    Bill St. Croix

    We don’t have any reason to convince anyone who can see a mote in somebody’s eye, but can’t see a timber beam in his own. In general we disdain grammarphiles.

    Read the Adams Express v. Kentucky. We don’t believe that Prohibition and its repeal have changed or anyhow affected that Supreme Court ruling. But if it did, then go and test it, you know the grammar.

  16. V.F. - August 21, 2019

    Unfortunately, I have to confirm that it is FedEx and UPS who by their own initiative block all alcohol shipping to Kentucky and other 35 States. I have the official letter from Illinois Small Business Administtation saying that Illinois cannot regulate FedEx’s and UPS’s business, because States do not regulate their business. U.S. DOT also provided with a letter that their primarily concern is the safety on the highways. They don’t care what is hauled. Does Kentucky have more autority than Illinois and U.S.DOT, Mr. St. Croix and Mr. Wark?

  17. VVP - August 22, 2019

    Tom Wark, you got yourself. We clearly see how you are flying not being involved in faking the moon landing.

    What license you are asking for retailers from foreign jurisdictions?

  18. Tom Wark - August 22, 2019

    VVP,

    I don’t eat Word Salad.

  19. VVP - August 22, 2019

    Tom Wark,

    Is it because you can’t digest it, or because you smoke it?

  20. Big C - August 22, 2019

    Hey thou, wine lunatic, what about other liquors consumers?

  21. Bill St. Croix - August 22, 2019

    VVP:

    You really want me to comment on a 1909 ruling (Adams Express v. Kentucky)?

    I know it states, “However obnoxious and hurtful, in the judgment of many, liquor may be, it is a recognized article of commerce, Leisy v. Hardin, 135 U. S. 100, and a state law denying the right to send it from one state to another is in conflict with the commerce clause of the Constitution of the United States. Vance v. Vandercook Co., No. 1, 170 U. S. 438.”

    But the fact is new laws (legal/enforceable or not/yet to be tested) have been passed. That is the whole point of circling back to this most recent ruling, which is in alignment with what you have cited. So are you merely saying that someone (me?) should test a 1909 finding to get wine shipped? Hardly makes sense, with this most recent ruling.

    The ruling you point to also predates UPS and FedEx so not sure the relevance of the point you might have been trying to make on your claims of collusion to prevent shipping.

  22. Bill St. Croix - August 22, 2019

    V.F. – Certainly you don’t pretend to believe what you claim. Wine is shipped into 44 states today. Honestly, I cannot tell what point you are trying to make. What is the date on this ‘letter’ you have? How about sharing that letter?

  23. VVP - August 22, 2019

    Bill St. Croix

    You have the wrong source. ADAMS EXPRESS COMPANY v. COMMONWEALTH OF KENTUCKY argued May 10, 11, 1915.- Decided June 14, 1915 under recently (1913) enacted Webb-Kenyon Act which is active law commonly known now as the Section 2 of Amendment XXI, which, as proved by two most recent Supreme Court decisions does not override the Commerce Clause.

  24. VVP - August 22, 2019

    Bill St. Croix

    What puts Adams Express, UPS and FedEx in one line is that all three of them are common carriers. Under common law they must serve anyone who seeks for their service. It is totally not they may create and maintain any barriers in their policies.

  25. VVP - August 22, 2019

    “It is not within the competency of government to invade the privacy of a citizen’s life and to regulate his conduct in matters in which he alone is concerned, or to prohibit him any liberty the exercise of which will not directly injure society.”

    Tom, Bill, and all others, put this phrase in the nice frame and display it to the government any time it invades to your privacy when you want an out-of-state liquor.

    You don’t need to pay Tanfords and Hinmans for that!

  26. V.F. - August 22, 2019

    Bill St. Croix St. Croix,

    If you didn’t get my point, you won’t get point of others either. All I said is FedEx and UPS are unregulated. They do whatever their fifth leg wants to do. There is nowhere to complain about them, and my State altogether with federal government just confirmed that in writing.

    All VVP’s statements here are also true. Tom Wark is either so confused with liquor laws, or just doesn’t understand them. He is influenced by dumb lawyers, but they don’t know these laws too.

  27. V.F. - August 22, 2019

    There is a thing in jurisprudence called jurisdiction. Under its terms a power of authority is extended to the territorial body that created it. If an autority is granted by a State, then this autority has power only inside of that State.

    When Tom Wark says that a State prohibits something to out-of-Sate retailer, I presume that he doesn’t know limits of that State authority. When a lawyer says the same, I understand that this lawyer is playing against the rule he learned in law school, or he didn’t learn and got his diploma by default, because his papa and grandpapa were lawyers. I will stop this conversation immediately and tell lawyer to go deceive somwhere else.

    If Kentucky autorities invade in your private life and dictate you where to shop for your booze, then file complaint to the Court. Kentucky laws are inapplicable to ME here in Illinois. I don’t give a crap what they say. Only FedEx and UPS is my barrier. Absolutelly nothing else may deny, limit or restrict my ability to sell liquor in Illinois and transfer, deliver or ship it to a purchaser.

  28. Bill St. Croix - August 23, 2019

    V.F.:

    I have wine delivered to Illinois from a winery direct, every year. Not from a retailer, but from a winery, with no issues.

    We may be mostly in agreement. I too believe that there should be no barriers to shipping me wine, from a winery or retailer or a friend, into Kentucky. However, the State (Commonwealth) has decided to enact laws (which may or may not be legal) that until tested, will remain in place. Given the latest ruling, I seriously doubt that Kentucky can skirt this any longer. They almost 100% won’t prevent distilleries from shipping direct to consumers. So that seems to open that door.

    More interesting will be states like Utah; yes, I lived there for a while too, They allow High West, a whiskey manufacturer, to ship out of state through a distributor, as I can get that here in Kentucky. Yet they prevent direct shipping into the state and within the state. I wonder if they will still be able to prevent shipments even with this new ruling? I don’t believe High West ships direct, either. Only out through a distributor.

  29. Bill St. Croix - August 23, 2019

    BTW, I still don’t believe that FedEx and UPS are actively agreeing with one another to not make money on shipping into states from retailers.

  30. VVP - August 23, 2019

    Bill St. Croix, sorry we forgot to provide a link for Adams Express. Here it is, read and enjoy this very solid opinion.

    http://cdn.loc.gov/service/ll/usrep/usrep238/usrep238190/usrep238190.pdf


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