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New Michigan Law Takes on Retailer Direct Shipping

A bill signed by Gov. Snyder eases in-state retailer shipping, but prohibits out-of-state, setting up a potential court battle
Photo by: iStock
A new law allows Michigan retailers to use FedEx to deliver wine to customers, but bans out-of-state retailers from doing the same.

Ben O'Donnell
Posted: January 12, 2017

In the war over wine direct shipping, Michigan is picking another fight. On Jan. 9, Gov. Rick Snyder signed a new measure into law that amends the state’s Liquor Control Code to make it easier for wineries and in-state retailers to ship to Michigan consumers. But the law also prohibits out-of-state retailers from shipping to Michigan consumers. The fight over the law has divided factions of the wine industry, with wholesalers supporting it, national retailers calling it unconstitutional and wineries supporting some provisions and opposing others.

Michigan has been an especially contentious battleground in the direct-shipping legal wars. The state was one of the parties in 2005’s Granholm v. Heald Supreme Court decision, which found that laws on winery direct-to-consumer shipping that discriminated between in-state and out-of-state wineries were unconstitutional.

In 2008 the state was before a federal district court as lawyers Robert Epstein and James Alexander Tanford successfully argued in the Siesta Village Market, LLC et al v. Granholm et al case that Granholm (which they also argued) should apply to out-of-state retailers as well as wineries, on the grounds that a retailer ban was also discriminatory and thus violated the Constitution’s dormant Commerce Clause.

"This exact law was litigated in Michigan in 2008," Tom Wark, executive director of the National Association of Wine Retailers (NAWR) and opponent of the new law, told Wine Spectator. "[The state was] told straight-up by a federal judge that this is unconstitutional."

The state legislature responded by allowing all retailers to ship to Michigan customers. But there was a catch—retailers had to use their own trucks, a severe logistical handicap.

Michigan is not a small market. In 2015, 8.5 million cases of wine were sold, according to Impact Databank, making it the 12th-largest market in the United States.

The new law, introduced in the state senate as SB 1088, means retailers with a specially designated merchant license can use a common carrier, such as FedEx or UPS, to sell and deliver wine, beer and spirits to consumers. But the bill specifically prohibits out-of-state retailers from doing so. It also streamlines some labeling and invoicing regulations for direct shipping that wineries had found onerous.

"Michigan consumers will not have access to the vast majority of wines available in America," said Wark. "In addition, this law bans the [direct-to-consumer] shipment into the state of any and all imported wines—because only retailers sell imported wines."

Spencer Nevins, president of the Michigan Wine and Beer Wholesalers Association, disagreed. "Michigan residents will have even more choices under this new law," he wrote in an email to Wine Spectator. "Consumers can purchase wine from a Michigan retailer and have it shipped to their home, they can purchase wine through an app and have it delivered and they can have wine shipped direct from any winery in the country. It’s also worth noting that the vast majority of wine illegally shipped into Michigan by retailers is already available through an in-state retailer."

"Obviously, we’re disappointed that the wholesalers decided to screw Michigan consumers," said Wark. "But you know, we’re also disappointed to see that wineries didn’t stand up for Michigan consumers," noting that advocacy groups like the Wine Institute did not file testimony against the bill when it was under consideration.

Wine Institute’s vice president of communications Nancy Light explained the organization’s position in an email: "Wine Institute did not support the bill’s limitation on retailer shipping. We are pleased with the inclusion of ‘fix-it’ language on [direct-to-consumer] labeling and invoicing issues that were problematic for wineries and that we had been negotiating separately with [Michigan Liquor Control Committee] staff."

The Michigan Wine Producers Association supported the bill. "We support every legal aspect for people to have access to wine," wrote president Mike Beck in an email. "All wineries get better access to consumers with this bill. If everybody plays by the rules, then we see no downside."

But the new law may put Michigan back in court. Epstein and Tanford filed lawsuits in Illinois and Missouri in 2016 with the intent of striking down prohibitions on out-of-state retailer direct shipping into those states. While the NAWR is not a party in those cases, it supports the plaintiffs, and Wark promises similar litigation in Michigan. "Michigan consumers can look forward to a very expensive lawsuit in order to defend the protectionism desired by Michigan wholesalers. We’re working on it as we speak, as a matter of fact." NAWR is also exploring the option of trying to get out-of-state retailer shipping approved via another bill in the Michigan legislature.

With three federal cases potentially in play, Wark hopes the uneven legal status of retailer shipping has a good shot to be ultimately clarified at the Supreme Court level.

Lawrence Newcombe
bay City , MI —  January 12, 2017 12:16pm ET
I live in MI. My experience is the wines I seek are not always available at retailers. The Brand may be, but limited ,single vineyard , low production wines, or older vintages rarely are if not at all. If some wholesalers do get a little of these wines they only go someplace special (wink wink). I read wine reviews from what I consider reliable sources (like WS). If I want to obtain such wine I do check local . But when I get an answer like sold out, not available, wholesaler did not get it/ or have it. Why shut me out ? When I can use a service ( example; Wine Searcher) and locate what I'm seeking . I'm a combat veteran, let me live free.
Craig Lison
West Michigan —  January 15, 2017 1:23am ET
This law is unconstitutional. Period.
Craig Lison
West Michigan —  January 28, 2017 4:23pm ET
Lawsuit filed!

http://nawr.org/new-lawsuit-aimed-at-michigan-ban-on-wine-retailer-shipping-again/
Craig Lison
West Michigan —  February 20, 2017 2:31am ET
Some updates:

According to the following article:

http://www.alcohollawadvisor.com/2017/02/the-uncertain-legal-future-of-wine-direct-shipping-by-the-retail-tier/

The Michigan law does ***not go into effect until March 29, 2017***.

What I find very alarming in the above article is the following text (bolding by me):

"While the US Courts of Appeals for the ***Second and Eighth Circuits have interpreted Granholm to apply only to differential treatment of producers and products (and not to wholesalers and retailers)***, the Fifth Circuit Court of Appeals recently struck down as unconstitutional Texas residency requirements burdening out-of-state wholesalers and retailers. The Texas Package Stores Association appealed to the Supreme Court based on the apparent “circuit split” created by the Fifth Circuit’s decision. Although the Supreme Court denied certiorari in November 2016, differing outcomes in the currently pending suits could ultimately bring the issue of wine direct-shipping back to the Supreme Court, providing an opportunity for much-needed clarification of Granholm’s scope.

There is a very real possibility that the lawsuits the NAWR have filed will fail, since some courts have already ruled that Granholm does ***not*** apply to retailers.

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