A digression into wine politics with an appeal for help

I don’t generally make political statements in this blog.  OK, so I did call for a boycott of California wine after Proposition 8 passed, and I harangued you about global warming a little bit.  But I’ve tried to keep it about wine, recipes, and general frivolity.

Unfortunately, there’s a bill before the U.S. House of Representatives that threatens my livelihood, so I’m writing about it today.  HR 5034 was pretty much written by the National Beer and Wine Wholesalers Association, an organization representing alcohol distributors.  Now I know everyone acts in his own best interests in Washington whenever possible, but this bill is a reaction to inroads being made at state levels by retailers and wineries who want to sell directly to customers in all states.

As Maryland residents are painfully aware, alcohol sales are controlled exclusively by the states, and some states don’t allow any direct shipment of alcohol to customers from entities outside the state.  This situation is the legacy of the repeal of Prohibition over 75 years ago.  (Our friend Garrett Peck has written a book, The Prohibition Hangover, about what’s happened in those years, which is definitely worth checking out.)   It’s totally exempt from federal intervention that governs the sale of other goods.  And it’s really all about money, of course.  Before Prohibition, most sales of alcohol were made direct to customers from the manufacturers, who owned the bars and taverns.  The states didn’t get much if any revenue, and so when Prohibition was repealed, they wanted to make sure they could tax alcohol as much as possible.  This led to the creation of a chain of sales from importer or manufacturer to distributor to retailer to the customer — and you know that tax gets collected at virtually every point on the transaction, whether it’s income taxes for businesses, a sales tax, an excise tax, or an import tax.

As many of you know, the Supreme Court took up this issue for wineries a few years ago, opening direct shipments from wineries.  The ruling says that if a state government allows wineries within a state to ship wine to customers, then the state can’t prohibit wineries in other states from shipping into the state either.  Of course, states can prohibit all alcohol shipment, and some of them do.  But most want their home wineries to be able to ship wine to customers.  So as states are putting regulations in place to allow out-of-state wineries to ship to their customers while still collecting their sales taxes and fees, retailers are attempting to get similar arrangements.  And this has the distributors worried.

Why?  Many states require that any alcohol from outside the borders be sold by a distributor within that state.  That means that instead of shipping directly to a customer or a retailer in State X, a winery or importer or distributor outside of State X has to sell to a distributor in State X, who sells to a retailer who then sells to the customer.  For large wineries or importers with good national representation and the means to get the word out, this might work OK.  But for small wineries who sell directly to customers on-site and who want to set up wine clubs or sell to people who visited and want more of their wines, it’s tough to spend the money and time to develop that network for a few sales a year.  The Supreme Court has effectively removed some of the barriers for wineries, shutting the distributors out of the loop in the process.  Similar suits are being brought in states on behalf of retailers by consumers, under the same principles upheld by the Supreme Court.  If they were to succeed and states were forced to allow retailers to ship to customers in their states, distributors would be shut out once again.

So that’s the reason for HR 5034, which reaffirms state primacy and places a high barrier to those challenging the status quo in states.  There is some blah blah about it preventing frivolous lawsuits and ensuring that alcohol doesn’t reach people who aren’t of legal age.  Sorry for the language, but this is bullshit.  It’s about distributors who are angry and afraid that their monopolies might not be so impenetrable anymore.  First Vine is required to ship outside DC by a “common carrier” like Fedex and UPS, who must check IDs on delivery — they’re not allowed to deliver alcohol without the signature of someone over 21.  Presumably, these companies, who have been checking IDs for quite some time now, know what they’re doing.   As for the suits being frivolous, well, even if you think that’s a judgment call, why shouldn’t residents of a state be able to purchase what they want, assuming it’s a legal product and they’re of legal age?

If you would like to be able to purchase wine from entities outside your state, then please help defeat this bill.  Free the Grapes has a page set up that will direct you to a site to send your elected representatives a letter expressing your views.   My old enviro boss used to say that one letter to a congressional office raises eyebrows, two cause concern, and three is a crisis.  So if each member of congress gets at least that many letters, maybe we can put a stop to this and begin to have some sort of greater choice in what we buy and drink.

Thanks for your help — I promise my next post won’t be so demanding!

Tom

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This entry was posted in Interstate commerce, Musings/Lectures/Rants, Prohibition, Tom Natan, Wine shipping. Bookmark the permalink.

One Response to A digression into wine politics with an appeal for help

  1. Garrett Peck says:

    I appreciate the mention, Tom. My congressman and two senators from Virginia will definitely be getting a letter from me about this.

    Most of the commentary I’ve read so far thinks there is a slim chance of HR 5034 passing, as the trend is really in the opposite direction toward greater consumer choice. This frightens the wholesalers, who are worried about losing their 30% cut on distribution, which was why they put this bill together. They fear the U.S. is on a slippery slope toward alcohol deregulation and thus want to reestablish state primacy, effectively undoing the results of the Supreme Court decision in Granholm v Heald (2005). They are trying to stuff the genie back into the bottle.

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