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National Fight Over Retailer Wine-Shipping Resurfaces in Nebraska

Are new measures to restrict online wine sales a sign of more struggles to come?

Posted: Feb 21, 2013 11:20am ET

By Robert Taylor

Updated Feb. 25

After years of legal struggles culminating in a 2005 Supreme Court decision, wine lovers in 39 states, plus the District of Columbia, can buy directly from out-of-state wineries. The trend seems to be to continue removing restrictions: Massachusetts and Pennsylvania are considering bills to become the 40th and 41st states to permit wineries to ship directly to their residents.

But for U.S. retailers, the trend has gone in the opposite direction. Only 14 states currently permit their residents to order wine from out-of-state retailers, down from 18 states in 2005. Now, Nebraska is considering a bill that would hamper retailer shipping, which has been legal there since 1992, and require retailers to have their list of brand offerings pre-approved by the state’s liquor control commission.

Nebraska State Senator Russ Karpisek introduced Legislative Bill 230 in January, which would have limited direct shipping to "manufacturers" (wineries) only. Nebraska's original law—among the earliest measures addressing direct shipping—permitted “persons” licensed to sell alcohol to obtain a shipping license, wording chosen long before online wine retailers became a force in the market.

The bill received a hearing in the Nebraska General Affairs Committee, which Karpisek chairs, on Jan. 28, with more opposition than he had anticipated. Among those who testified against the bill, Wine.com general counsel Bill Tomaszewski said that the Internet retailer had sold—and paid Nebraska taxes on—about $320,000 worth of wine to Nebraskans in 2012. Another opposing statement was submitted by Tom Wark, executive director of the Specialty Wine Retailers Association (SWRA), an organization founded in 2006 to lobby for retailer shipping rights.

LB230 was suggested by the Nebraska Liquor Control Commission (NLCC) "because we're having so many more Internet places pop up—we've got alcohol coming in from a lot of different places that we might not even really be sure of," Karpisek told Wine Spectator after the hearing. "We don't really want to limit what people can do—their choices—[but] we do want to make sure that we know what's going on out there, that we're regulating it, and that things are working the way they should."

In response to the feedback, Karpisek distributed a revised version of LB230, Amendment 249, on Feb. 13. That version permitted out-of-state retailers to apply for a $500 Nebraska shipping license, but required that their application list all the brands they planned to offer and that they inform all Nebraska wholesalers who carry those brands. Tomaszewski said that provision, the first of its kind he has seen, looked "like a classic knee-jerk reaction to protect wholesalers in the state."

However, more changes quickly followed suit; another amendment to the bill, AM306, was unveiled late on Feb. 20. It removes the wholesaler approval stipulation but still requires retailers to submit a list of all brands they wish to sell to Nebraskans. Another hearing on the bill is scheduled for this Monday, Feb. 25, and early reaction has been mixed.

“This is absurd,” Wark wrote via e-mail after reviewing AM306. “The retailer's inventory changes constantly, and in six months after the original application is submitted with a list of thousands of brands, the retailers will have a new inventory that isn't registered. Those new products will be illegal to ship in to the state … if [the provision] stays in, SWRA will oppose the bill as being a de facto ban on retailer shipping into the state.”

Tomaszewski, however, is willing to accept the newest revision—although he had originally planned to oppose AM249 at the hearing. “I don't have a problem with that,” he wrote via e-mail. “[AM306] only states brands, not labels … I will go to support the bill on Monday.”

NLCC executive director Hobie Rupe, who has been assisting the General Affairs Committee with drafting the bill and its amendments, told me this morning that the brand list submission requirement is not set in stone, and will be revisited at Monday's hearing.

Since the U.S. Supreme Court ruled that the Constitution's Commerce Clause prohibits states from discriminating between in- and out-of-state wineries, why aren't out-of-state retailers afforded the same protection?

In January 2008, a federal district judge ruled that the 2005 Granholm v. Heald decision did indeed apply to retailers, when California's Wine Country Gift Baskets and Florida's Siesta Village Market jointly challenged Texas' law allowing in-state retailers to ship to residents but forbidding out-of-state retailers to do so. That ruling was vacated in January 2010 by the Court of Appeals for the Fifth Circuit. The plaintiffs appealed the Fifth Circuit decision, but the Supreme Court ultimately declined to hear the case.

"The only thing that is going to definitively determine the relationship of retailers to the Commerce Clause and to the 21st Amendment is going to be a Supreme Court decision," said Wark. "And in order for that to happen, there needs to be another lawsuit brought … [which] is in no way out of the question."

A followup blog takes a broader look at out-of-state retailer direct-to-consumer shipping trends in the United States.

Update: At the Feb. 25 Nebraska General Affairs Committee hearing on LB230, a new amendment to the bill (AM355) was introduced, removing the stipulation that retailers submit a list of brands they wish to sell along with their shipping license application. "I was very pleased the way this has so far turned out," Specialty Wine Retailers Association executive director Tom Wark wrote via e-mail following the hearing. "Nebraskans will still be able to buy wine from out-of-state retailers, and retailers will still be able to ship into the state without the burdens of listing brands and getting wholesaler approval to ship brands into the state ... At this point, I don't anticipate any problems."

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