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Illinois Wine Direct-Shipping Bill Passes to Cheers—and Jeers

New bill allows wineries to ship directly to Illinois residents, but leaves out-of-state retailers out in the cold—and threatening legal action

H. Lee Murphy
Posted: August 10, 2007

Wine lovers in Illinois have bittersweet feelings after the passage of House Bill 429 through both chambers of the state legislature this week. The bill, which awaits the signature of Gov. Rod Blagojevich, will allow direct shipments to consumers from in- and out-of-state wineries alike—but will end direct-to-consumer shipments from out-of-state retailers to Illinois residents. Consumers have been permitted to order and receive wine shipments from out-of-state retailers since 1992.

"The bottom line is that residents of the state will have less access to wine than they have had until now. This bill is blatantly anti-consumer and anti-constitutional," said Tom Wark, executive director of the Specialty Wine Retailers Association in Sacramento, Calif.

Previously, Illinois had so-called reciprocal shipping laws, meaning that consumers could receive wine shipments from other states' wineries so long as those states accepted shipments from Illinois wineries. In 2005, the Supreme Court ruled that states must treat in- and out-of-state wineries equally, and while the ruling did not directly affect Illinois, the court's wording indicated that reciprocal laws could be discriminatory as well since they don't allow shipments from all states. The new law in Illinois brings the state into compliance with the Supreme Court decision, and grants authority to wineries to ship up to 12 cases of wine annually to customers in Illinois—but it does not grant equal rights to Illinois and out-of-state retailers.

Wark said that his organization would challenge the inequity of the law in court. "We may sue before the law takes effect, or we may wait and file afterward," he said. The group has already filed a lawsuit in Texas against a similar ban enacted more than a year ago, with arguments in that case expected to commence on Sept. 21 in federal court in Dallas.

Corbin Houchins, a Seattle-based attorney who has a national practice in alcoholic-beverage issues, believes the retailers' association "may be able to make a case for unjust discrimination," he explained. "The state will have to prove that this retail ban is justified."

Even Illinois-based retailers were quick to criticize the new bill, despite the fact that they stand to benefit from decreased competition. "It amazes me that you can buy a gun or even a bride over the Internet, but you can't buy a bottle of wine in many states," said Brian Rosen, president and CEO of retailer Sam's Wines & Spirits. Sam's clocks some $10 million of its $70 million in annual sales over the Internet, with much of that volume registered outside the state. "If retail shipments can be banned here, then maybe they'll be banned tomorrow in California. We may wake up one day to find we can ship wine legally to Moline, Ill., and no place else."

Sam's is a member of the SWRA and is contributing to legal funds challenging shipping bans.

Emanuel "Manny" Berk, the owner and president of the Rare Wine Co. in Sonoma, Calif., counts Illinois among his four most important customer states. But it looks like he'll have to write it off altogether, as he has no plans to set up a retail storefront in Illinois. "That's not practical," he said. If he were to do so, Rare Wine would then have to ship wines through wholesalers in Illinois, who would add their usual 20 to 25 percent margin, making Rare Wine's prices too high.

Julie Hamos, a state representative from the affluent Chicago suburb of Evanston, said that she received numerous calls from wine collectors in her district urging her to oppose the retail-shipping ban. She did so, she said, but was drowned out by representatives of the wholesale lobby. The bill had support from a wide range of special interests, including the California Wine Institute, which represents California wineries, as well as the Associated Beer Distributors of Illinois. Since 2000, according to campaign contribution reports, Illinois distributors of alcohol have donated $5.4 million to Illinois politicians. No other state in the country has recorded liquor-related donations surpassing that total in the same time.

Hamos said that she proposed an amendment to the bill that would have allowed retailers beyond the state's borders to apply for local licenses. "I was even willing to go along with a limit on the number of out-of-state licenses we'd issue, but nobody was listening to me," she said. "It seems to me so archaic to create protectionist legislation like this in a world where people do their shopping on the Internet and through catalogs. This makes no sense at all."

If Gov. Blagojevich signs the bill (he has indicated that he will), the new law will take effect in July 2008.

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