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Direct-Shipping Battle Heats Up in Michigan

New legislation that would ban shipments and tighten distribution laws has consumers entering the fray

Eric Arnold

Posted: Friday, June 24, 2005

Corks began popping when the U.S. Supreme Court ruled last month that states either had to allow wine shipments from both in- and out-of-state producers or ban all shipments entirely. It looked like a victory for those in favor of direct shipping, but in Michigan, the fourth-largest grapegrowing state, legislators are leaning the other way.

Though Michigan residents have been able to receive direct shipments from local wineries for 31 years, a new bill that would ban the practice--and wineries' ability to self-distribute in the state--is working its way through the legislature, causing panic among the state's wineries and outrage from much of the wine-loving public.

Senate Bill 600 and House Bill 4959, introduced simultaneously, are supported by the state's liquor wholesalers, which have well-funded lobbying efforts. The House bill, sponsored by Rep. Chris Ward (R), had 60 cosigners--of 110 House members--when it was introduced (the Senate version was sponsored by Robert Emerson (D), but only had 18 cosigners). Though a vote on the House version of the bill hasn’t been scheduled, one may occur in the next week. But in order for the law to change, the Senate would have to vote on its measure before the summer recess begins less than a week from now, which isn’t likely.

Michigan newspapers have written scathing editorials about the legislation and its supporters, and a group of wine enthusiasts called Wine Consumers Across Michigan (WineCAM) has quickly come together to oppose the bill.

"Many of us knew each other or of each other from tastings or events," said Joel Goldberg, one of WineCAM's founders. "We kind of gelled when we heard that there was going to be a bill that would ban everything. We want to bring this to the media's attention and the public's attention to let them know what rights are being taken away from consumers and what damage is going to be hoisted upon Michigan's wine industry if the distributor-backed bill passes."

WineCAM argues that if the regulations are changed, small wineries that don't produce enough volume to attract the interest of wholesalers would have no way to sell their products. WineCAM member and attorney Mike Brenton, who is also the president of the Greater Lansing Vintners Club, explained that the bills set forth new definitions of wineries and retailers. "The bill indicates that a winemaker cannot be a retailer and that a retailer cannot be a winemaker," he said. "So what that means, if you carry it out to its logical conclusion, is that if a winery wants to sell wines in its own tasting room, it would first need to sell the wines to a distributor, who would then sell them back to the winery so the box could move from the back room to the front room. The tasting room is a retailer, and the retailer cannot buy directly from the winery."

Overall, the bill could result in substantial losses for Michigan wineries small and large. "I've calculated this out. We're a midsize operation, and my immediate losses would be 12 percent to 13 percent of my business," said Doug Welsch, owner of Fenn Valley winery. He works with a distributor, but it doesn't sell all of Fenn Valley's products. "I could probably survive, but I'd have to lay people off," Welsch added. "It's just going to mean a lot of difficult times because we built a business using direct shipping and self-distribution. [We] developed businesses on the rules as they were, and then to have them suddenly pulled out, it's going to be catastrophic."

Supporters of the shipping ban argue that it is the only way to prevent minors from having easy access to alcohol. After the Supreme Court ruling, Michigan Liquor Control Commission chairwoman Nida Samona said that she would push for more restrictions on alcohol sales so they “would have to be done on a face-to-face basis, not through the Internet, phone or mail order. That's the best way to ensure that minors do not have access to alcohol." Ward has also been outspoken on the issue in the Michigan media, but his opponents claim this is a scare tactic since there’s never been a documented case in Michigan of a minor receiving a direct shipment of wine outside of a government-arranged sting operation, and that Ward is serving the interests of certain campaign donors. WineCAM said that its research into public records found that Ward received nearly $12,000 from the political action committee of the Michigan Beer & Wine Wholesalers Association, and that, in total, wholesalers spent $400,000 on legislative contributions in Michigan in 2004.

Meanwhile, on June 22, state Sen. Michelle McManus (R) and Rep. Howard Walker (R) introduced simultaneous packages of four bills that would allow direct shipping from in-state and out-of-state wineries, as well as maintain the self-distribution rights under which Michigan wineries currently operate. The legislation is based on the model direct-shipping bill, versions of which have already passed or are under consideration in several other states. Each of McManus’ and Walker’s bills have between four and 10 cosigners.

"My hope is that we can educate those members who signed the direct ban that allowing some sort of limited direct shipping will allow small businesses to flourish in the state of Michigan," McManus said. "I think a direct ban is so burdensome that it would greatly restrict wineries from doing business, and could ultimately put them out of business."

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