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An End to Wine Direct Shipping?

Wholesalers and states convince Congress to consider new legislation to prevent direct-shipping lawsuits in a campaign to protect the three-tier system

Robert Taylor
Posted: April 16, 2010

The battle over whether consumers can order wine directly from wineries is moving to the halls of the U.S. Capitol. Members of Congress yesterday introduced a bill (HR 5034) that could end direct shipping of wine and other forms of alcohol in the United States, or at least put major roadblocks in front of lawsuits by consumers and wineries trying to reduce restrictions on direct shipping. Wine Spectator obtained a copy of a draft of the bill on Wednesday, which was crafted by the National Beer Wholesalers Association (NBWA). It would strengthen state governments' control of alcohol sales, allowing them to protect the three-tier system of distribution while putting a much greater burden on people challenging it.

Talk of a bill first surfaced when a Congressional subcommittee held a hearing with little notice on March 18. During the session, wholesalers and state regulators argued that the three-tier system is under attack and that the U.S. faces "an alcohol epidemic" if Congress does not intervene and prevent deregulation of alcohol sales. The hearing took many in the wine industry by surprise, and no winery-, retailer- or consumer-advocacy groups testified.

State leaders and alcohol wholesalers argue that a law is needed to prevent frivolous lawsuits and to allow states to maintain firm control of sales and prevent alcoholism and underage drinking. Critics argue that the bill would allow wholesalers to protect their turf from competition and prevent consumers from being able to buy wines and other alcoholic beverages not carried by local wholesalers. An original draft of the bill contained an antitrust exemption for wholesalers, but that was struck from the language.

"The whole idea [behind the bill] is to make it prohibitively difficult for wineries and consumers to challenge discriminatory and irrational laws that have little or nothing to do with the protection of the public," said Kirkland & Ellis attorney Tracy Genesen, who has been the lead attorney on many direct-shipping lawsuits that have resulted in state alcohol laws being overturned.

Those lawsuits have been growing in number since the landmark 2005 Supreme Court Granholm decision, which ruled that states cannot discriminate between in- and out-of-state wineries in matters of direct-to-consumer wine shipping. The Granholm decision argued that the 21st Amendment, which ended Prohibition and put states in charge of alcohol regulation, does not trump the Constitution's Commerce Clause, which prevents states from restricting interstate trade. Granholm has led to a wave of winery direct-shipping challenges and new laws; direct-to-consumer wine shipping is now legal to varying degrees in 37 states and the District of Columbia.

A Bill to End the Legal Challenges

Wine Spectator obtained a copy of the NBWA's draft bill earlier this week and the introduced bill, HR 5034, on Friday. They are largely identical. Titled the Comprehensive Alcohol Regulatory Effectiveness Act of 2010, or the "CARE Act," the proposed bill would effectively allow the 21st Amendment to trump the Commerce Clause, granting states immunity to litigation based on discriminatory alcohol distribution laws.

In the proposed bill, the Commerce Clause is weakened in respect to alcohol: "It is the policy of Congress that each state or territory shall continue to have the primary authority to regulate wine. Silence on the part of Congress shall not be construed to impose any barrier under [the Commerce Clause] to the regulation by a state or territory of alcoholic beverages."

The bill also includes an amendment to the Act of 1890, otherwise known as the Wilson Act. The Wilson Act states "that all fermented, distilled or other intoxicating liquors or liquids transported into any state or territory" are subject to the same rules as alcohol produced within the state. The proposed bill calls for maintaining the states' control over alcohol shipped in, but no longer requires the state to treat it the same as alcohol produced within the state. Thus, in-state wineries could be given preference.

The proposed bill continues, "Notwithstanding that the state law may burden interstate commerce or may be inconsistent with an act of the Congress, the state law shall be upheld unless the party challenging the state law establishes by clear and convincing evidence that the state law has no effect on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age." Genesen said that will make it much harder to challenge laws. "To try to change the burden of proof to make it impossible to challenge these laws is turning the clock back 70 years."

Setting the Stage

The first hint that Congress was considering the wholesalers' proposed legislation was a Congressional hearing of the House Subcommittee on Courts and Competition Policy on March 18. Two panels of witnesses discussed the diminishing strength of the three-tier system for alcohol sales and the potential effects of deregulation of the alcohol industry.

Except for two Congressmen from wine-producing districts in California, no direct shipping advocates spoke. "It's pretty remarkable because it's not exactly like we have a clamor to examine the state-based alcohol regulations," said Tom Wark, executive director of the Specialty Wine Retailers Association. Wark believes the NBWA used its lobbying clout to raise the topic.

Among those testifying in favor of the three-tier producer-wholesaler-retailer system, several claimed that increased deregulation of the alcohol industry would lead to alcohol abuse and underage drinking. Pamela Erickson, an Arizona-based public policy advisor and a former Oregon state regulator, claimed that an "alcohol epidemic" has beset the United Kingdom due to deregulation of its alcohol industry. Erickson testified that as the U.K. deregulated between 1980 and 2007, "numerous nightlife centers sprung up … These became scenes of drunken debauchery, with people spilling out at closing time vomiting, urinating and passing out." She offered no explanation of how the three-tier system prevents "nightlife centers" from springing up.

Nida Samona, chairwoman of the Michigan Liquor Control Commission said, "In 1941, Supreme Court Justice [Robert] Jackson stated that liquor is 'a lawlessness unto itself.' That was true then and is true today. Alcoholic beverages must be highly regulated."

Samona went on to cite the Granholm decision as a reason that states should be exempt from antitrust laws on alcohol. "Because of this type of expensive and uncertain litigation, a federal statute is essential to confirm the primacy of state regulation," Samona testified.

Congressman Mike Thompson, a Democrat who testified against the proposed bill and whose district includes portions of Napa and Sonoma counties, rejected Samona's demand for protection against litigation. "We don't need a new federal law: The litigation will stop when the states stop passing discriminatory laws promoted by the wholesalers."

"For decades, wholesalers have expended great resources to protect their state-mandated distribution system in ways that have harmed wineries and breweries. These efforts have stunted competition and weakened producers, which ultimately leads to fewer choices for consumers," Thompson testified. "States should encourage, not stifle, competition."

"[The wholesalers] have done so well in exacting a monopoly for so long that they are now trying to pull out all the stops to make sure that we don't make any more progress toward a regulated wine economy in the future."—attorney Tracy Genesen

After the hearing, Wine and Spirits Wholesalers of America president and CEO Craig Wolf praised the idea of strengthening states' control over alcohol. "Easy and cheap access to alcohol is certainly not the answer—we know this from the many social ills that deregulation has brought on in the United Kingdom," Wolf said in a statement.

There was no testimony explaining how wholesalers, who never deal directly with consumers, prevent underage or excess drinking. "When Craig Wolf theorizes that without a strict adherence to the three-tier system, all bedlam will break loose, he [is] doing so to scare lawmakers and society into keeping the three-tier system in place," said Wark. "This is nothing more than a scare tactic."

"We have a very good system in this country. It is the best in the world," Wolf countered in an interview. "It is the most consumer friendly, but at the same time the safest and the most balanced. Look around the rest of the world and see the state of alcohol problems elsewhere that you don't see in this country, and our three-tier system helps prevent those problems."

"While we don't like these [direct shipping] laws, we're not out there trying to roll them back," Wolf said. "What we want to do is stop the litigation. It's got to stop."

On March 29, the National Association of Attorneys General (NAAG) sent a letter to Rep. Johnson and the Subcommittee in support of the bill. The letter, signed by attorneys general from 38 states and American Samoa, stated, "We are writing to seek your help with the growing threat facing our states from unprecedented legal challenges that seek to eliminate our ability to regulate alcohol."

"Alarmingly, legal challenges have been filed in over half of the states challenging their alcohol laws or regulations designed to encourage temperance, collect taxes and prohibit the sale of alcoholic beverages to minors," the letter continues. "All too often the judges hearing these cases have misinterpreted federal law and the intention of Congress regarding the states' right to regulate."

"I view this whole effort as a backlash to some of the successes that we've had, including Granholm," said Genesen. "This is an effort by the beer wholesalers to make sure that the status quo is protected at all costs, including the costs to consumers, the wine industry and the general economic welfare of our country."

"[The wholesalers] have done so well in exacting a monopoly for so long that they are now trying to pull out all the stops to make sure that we don't make any more progress toward a regulated wine economy in the future," Genesen said.

The Start of the Fight

Berkshire Hathaway chairman and CEO Warren Buffett might have given an important signal of the security of the wholesaler business and the future of the three-tier system when he purchased Georgia-based wholesaler Empire Distributors in March. "[Buffett] understands that alcohol wholesaling is one of the few government-protected industries in the country," Wark said. "When you find an industry where the state says these types of businesses must carry out all transactions, that's pretty good."

"The next step in this battle is to educate members of Congress on the importance of letting the federal courts around the country interpret the laws that currently exist, in light of Granholm," Genesen said.

The likelihood of the NBWA's proposed legislation coming to pass is still slight. A hearing and an introduced bill are very different from a signed law. But the lobbying battle is just beginning.

During the hearing, California Congressman George Radanovich, a Republican whose district includes parts of the Central Valley, urged the committee to closely examine whether the proposed legislation is "innovation or monopoly protection." He added, "[The wholesalers] present this committee with a very long, broad and, quite frankly, outrageous wish list. There must be extraordinary reasons why states should get a free pass from the Constitution or antitrust laws."

K & L Wine Merchants
Hollywood, California —  April 16, 2010 1:39pm ET
Once again, the wholesalers of wine and beer are working to try to reduce consumer choice and protect their local monopolies. It is shameless behaviour and tragic for wine-lovers, if they succeed. Write your congressman now!
Christopher Cribb
Kansas City, MIssouri - USA —  April 16, 2010 2:37pm ET
As an independent wine importer/exporter this legislation is outlandish and unneccessary. A letter is going out to my congress representative asking them to throw HR 5034 in the trash and get back to real business initatives that help our economy!
Don Rauba
Schaumburg, IL —  April 16, 2010 2:51pm ET
Craig Wolf is relying on all to NOT realize that regulation and enforcement are two separate things, particularly in two distinct countries, presumably with different laws regarding the responsibilities of tavern owners. His argument is so flawed and full of hypocrisy it's offensive. Isn't it bad enough already that we (in Illinois) can no longer order the things not sold here at retail from out-of-state online retailers? Now they're going to try to take away the direct route at the federal level as well? Sorry, but choosing from Fetzer and Woodbridge from the local Quickee Mart just ain't gonna cut it. This means war... maybe I'll start ordering DIRECT ONLY...
Joseph Romualdi
Canada —  April 16, 2010 3:04pm ET
Welcome to the LCBO.
Anthony Cianci
Malvern, PA —  April 16, 2010 3:06pm ET
This is sickening. More restraint of trade. The rest of the world and all other retail industries are more accessible with Ecommerce, not less. Next thing you know the federal government will take over all wine distribution as the state of PA does...then the wholesalers will wish they had kept quiet and just adapted to the changing business climate instead of hiring lobbyists and lawyers.
Ralph Griffin
Dunwoody, GA, US —  April 16, 2010 3:33pm ET
Perhaps, all of you might consider severely restaining the power of lobbyists, so this type of thing simply doesn't come up as an issue. Either that or combine your own dollars to lobby against these and all the other lobbyists who influence many, many aspects of your life, including nearly every political campaign held in this country! Join Common Cause or any number of organizations fighting the influence of money on our legislators. Would solve a lot of ills.
Stephen Stewart
new mexico  —  April 16, 2010 3:37pm ET
Is this a joke? If this goes through i shall go back to living in europe.
Doug Badenoch
Bozeman, Montana USA —  April 16, 2010 3:40pm ET
I have a good compromise: Three tier states could allow retailers to order and receive wines not carried by local distributors. I live in a college town; if I sell to people under 21, I lose my retail license. On-line retailers and wineries out of state don't know to whom they are selling and they face no penalty for selling to underage drinkers. I lose everything.
If an out of state retailer ships the wrong vintage or Red Bicyclette counterfeit wine, there is little the consumer can do in that case either.
If a local distributor doesn't carry Shafer or Beaux Freres, a licensed retailer could step in and make sure the right product is shipped and public safety is protected. Retailers can monitor age restrictions and make sure there is no fraud from on line retailers.
We need consumer choice but we also need consumer protection.
Mike Officer
Santa Rosa, CA —  April 16, 2010 4:06pm ET
I don't know who I'm more angry with - elected officials who can be so easily bought to consider inane legislation or the NBWA for wanting to put small wineries out of business. And not only would wineries go out of business, so would a lot of businesses supporting small wineries. Just what this country needs right now, more loss jobs.
Doug Charles
Washington State —  April 16, 2010 4:18pm ET
Just what we need, another way to restrict commerce while the rest of the country is trying to boost the economy. Way to go wholesalers! Next they will want subsidies for all the business they will loose due to the backlash by consumers.
Ann Suchta
Wimington, Delaware —  April 16, 2010 4:39pm ET
The three tier system is ridiculous and leads to fewer choices and higher costs to consumers. Have you ever tried to buy a decent wine at a Pennsylvania controlled store? It is very hard to find some premium producers wines even in nearby Delaware. The only people who truly benefit are the distributors and wholesalers. I'm not trying to avoid the taxes, I just want to be able to enjoy finely crafted artisan wines that aren't available locally. Thankfully we can find a way to buy Mike Officer's wines!
Lora Pallatto
San Francisco, CA —  April 16, 2010 5:30pm ET
Unfortunately this is a situation where distributor contributions to members of congress and the reassertion of state's rights in some quarters of our country may trump the Constitutional protection of free interstate commerce. I have a feeling that this measure has a better than even chance of eventually passing. Worse, our representatives in Congress may continue the sneaky tactics by burying this legislation in some huge appropriations bill so it gets passed by stealth and becomes law before anybody can effectively lobby against it. I would write my congressional representatives, but I live in California, where the interstate shipment of wine and liquor is supported by law. So I would be preaching to the choir.

Jordan Horoschak
Houston, TX —  April 16, 2010 5:34pm ET
Has the industry or Wine Spectator organized a website that shows consumers how to write to their Congressmen (who they are, what the mailing addresses are) and what to say in their correspondence? That may be helpful in launching a campaign.
Robert Taylor
New York, NY —  April 16, 2010 5:55pm ET
Jordan,

One website you'll find useful for determining your state laws as well as who to contact and how to find form letters is FreetheGrapes.org. If you don't find information on your Congressperson there, all members of Congress now have their own ".gov" website, which will tell you how to reach them. The Wine Institute's website is also a good tool for accessing information on your state legislature. You'll find that page here: http://www.wineinstitute.org/initiatives/stateshippinglaws/legislatures
Scott Oneil
Denver, CO —  April 16, 2010 5:59pm ET
When I lived in Utah, I repeatedly said, "Wine is not an illegal substance. Why do we treat it as if it were?" Now I hear a bunch of self-serving loonies say that the U.S. faces an "alcohol epidemic," and I'm forced to add, "Wine is not a disease. Why do we treat it as if it were?" The fact that these interest groups were able to get the floor on March 18 essentially in secrecy so that no dissenting view could be expressed is outrightly anti-democratic! Shame on them, and shame on us if we let them successfully outlaw free, inter-state trade! Indeed, this is war!
Jordan Horoschak
Houston, TX —  April 16, 2010 6:05pm ET
(OK, I took the initiative) WRITE YOUR CONGRESSMAN!...

You find your congressman's name and mailing address here:
https://writerep.house.gov/writerep/welcome.shtml

You will need your ZIP code + 4-digit extension, which can be found here:
http://zip4.usps.com/zip4/welcome.jsp

Tell your congressman that you do not support bill HR 5034 and that you urge them to vote against such legislation.
Peter Dengenis
los angeles CA —  April 16, 2010 6:14pm ET
This is outrageous. This government it totally for sale. Whats next? Outlaw all independently produced wine in favor of Pelosi Vineyards Red Blend. When does it end? I'll tell you when. It ends in November.
Don Rauba
Schaumburg, IL —  April 16, 2010 8:38pm ET
Thanks Jordan - that made it easy! I've just emailed all my friends and relatives & put it on Facebook, too.
Don Rauba
Schaumburg, IL —  April 16, 2010 8:42pm ET
Uh, Peter, check out the related story: conservative Sarah Palin to endorse the bill (by giving keynote address at the NBWA conference, the org responsible for this bill) to the tune of a six figure fee... I don't think this is purely "partisan" stupidity at play here...
Eric Stumpf
Sacramento, CA —  April 16, 2010 9:08pm ET
It's easier to purchase and ship a gun from another state than a bottle of wine! Peace! Our values are whack!
Peter Dengenis
los angeles CA —  April 16, 2010 10:47pm ET
Don - I agree with your point here. This is pay to play on both sides. The only reason I picked on Nancy was because she is in the wine biz. I want them all out.
David Tietz
Columbus, OH —  April 17, 2010 12:08am ET
Please keep us updated on this. Given that this is just in committee right now, only consumers whose representatives sit on that committee need to contact them. It would be helpful to know what committee this is in so those individuals can write letters now. Only if it goes to a vote of the full House should everyone be in contact.

Keep in mind also that unless the Senate also takes up this measure, it will never go beyond the House, so there is not too much to fear yet, although this is a selfish play by the wholesalers. I have wine shipped to me frequently, and UPS/FedEx are always very diligent in age verification, sometimes not even taking the box off of the truck until they have the appropriate signature, so all of this 'under 21' nonsense is pure bull/scare tactics, IMO.
C Savino
New Jerseu —  April 17, 2010 9:11am ET
I read this article an immediately sent a letter to my congressman.
John Kmiecik
Chicago, IL —  April 17, 2010 9:35am ET
I guess I'll go back to drinking Bartles and James....Thanks Mr. Congressman
Frank Perry
Burke VA —  April 17, 2010 10:58am ET
Yes, please keep us updated on this.

Your reporting is balanced, but perhaps too balanced. I really do appreciate your objective reporting of the facts. But this is clearly a publication targeted at a community that would be injured if this went farther. As such, I for one would prefer an additional section taking a position of advocacy; and clearly identified as such. Provide your readers with "targeting" so we can easily know which of our representatives to send messages to; help crystalize action.

While this is still early stage legislative action I would not underestimate the degree to which lobbying has invaded the institutions of our democracy, and the power that targeted action by groups like NBWA can bring to bear.
Samuel N Kolas
Rochester Mn —  April 17, 2010 1:48pm ET
Check out ArtisanVineyards.com. They offer a bevy of great wine choices and will ship either to your door or to a nearby retailer for pick-up. Their model gives great online choices and still maintains the three teir system. It is great!
Maryanne Prince
Maine —  April 17, 2010 1:59pm ET
It doesn't make sense to pick on Nance Pelosi because she owns a vineyard. Pelosi vineyards would actually suffer not benefit. Right now in many states (due to Granholm) her winery can ship direct to consumers. If this bill passed - that would stop.

Sarah Palin on the other hand is well documented that she has a price and as long as you pay her - she will speak. She owns no winery in Alaska or anywhere else (yet) so this bill does nothing to her.
Arun Lillaney
Liquor World Cromwell Ct. —  April 17, 2010 3:16pm ET
I think as a retailer 3 tier system or direct sales is okay as long as every state has the same policy so the retailers in some states that have the direct buying does not have an advantage over us......FAIR TRADE that is what America is.
Christopher Miller
New York —  April 17, 2010 4:00pm ET
http://judiciary.house.gov/hearings/hear_100318.html
http://judiciary.house.gov/about/members.html

Yikes...have a look at these two web-pages and you'll understand why this bill is moving along quite nicely thanks! Chairman is from Michigan and the Ranking Member is from Texas. And plenty are from states trying to keep wine from flowing in. Also have a look at all the witnesses...does the wholesale industry have their own seats on the committee?
Jeffrey Hellman
New Haven, CT —  April 17, 2010 4:07pm ET
I am a Champagne importer and a consumer and I think that this proposed law is absurd. Does anyone think that teenagers are ordering Hermitage from Zachy's or Woodland Hills? Teenagers are having their older friends/siblings buy a six pack of Miller just as they have always done. Meanwhile because of our ridiculous system, many European wines are cheaper at retail in California than at wholesale in CT.
Martin Diehr
Jacksonville, FL USA —  April 17, 2010 5:30pm ET
This whole control system is nothing but a monopoly. There is no difference if I order wine online or go to a store to purchase my wine/beer/spirit. If I order online, I still need to be 21 to receive the goods, same as if I go to the store. If I am not old enough, I can send somebody old enough to the store, or have them sign for it - NO difference. Both illegal. I think that the Constitutional rights are being abused enough, and shouldn't be changed to make states untouchable in regards to suits. The people have rights, a right to voice their opinion and be heard.
Reading this article makes me sick to my stomach, as I thought, we finally made progress moving like most of the world, forward. Just to find out that the u.s. states are planning to move us good 60+ backwards.
In Germany, ordering online and/or home delivery isn't a problem. Alcohol consumption doesn't spin out of control because you allow people to order that online, that is such an absurd statement with no proof. It is a matter of giving people the right to choose and have a competitive market to choose from.
Patrick Pringle
Houston, TX —  April 18, 2010 12:16am ET
The text of this bill hasn't yet posted to Thomas but when it does it should be here:

http://thomas.loc.gov/home/c111bills.html

I will be interested to track sponsorship of this legislation back to the FEC to see if a pattern of contributions from wholesalers can be determined.

These sites might prove useful for watching that kind of activity. Dollars to donuts you'll see that money flow as the reports get updated.

http://maplight.org/

and

www.fec.gov

It not only important to know who is contributing to the representatives in question, but it is important to let the representatives in question know that you know...and you won't be quiet about it.

Patrick Pringle
Houston, TX —  April 18, 2010 12:45am ET
Follow the money. Let's start with Rep. Conyers.

In the 2009-2010 Election Cycle Rep. Conyers has received contributions of $5000 from the National Beer Wholesalers Association PAC on 2/19/2009 and another $5000 from the Wine and Spirits Wholesalers of America PAC, the first $2500 coming on 10/04/2009 and a second contribution of $2500 coming on 12/30/2009.

http://www.fec.gov/DisclosureSearch/HSRefreshContributorList.do?election_yr=2010&contComeFrom=candList&cand_id=H6MI01028&contCategory=PAC&category=searchCand&searchKeyword=CONYERS

Next up, we'll cross the aisle to Lamar Smith.
Patrick Pringle
Houston, TX —  April 18, 2010 12:53am ET
Money flows freely across the aisle. As with Rep. Conyers, the Democratic Chair of the Committee, Rep. Lamar Smith the ranking Republican also has been cashing checks from some interested PACs.

Rep. Smith's campaign received $5000 each from the National Beer Wholesalers PAC and the Wine and Spirits Wholesalers of America PAC with both contributions being booked on 11/009/2009.

http://www.fec.gov/DisclosureSearch/HSRefreshContributorList.do?election_yr=2010&contComeFrom=candList&cand_id=H6TX21012&contCategory=PAC&category=disH&stateName=TX&congressId=21

Not saying money buys support but...we'll see.
Gary A Didomenico
Holland, PA, USA —  April 18, 2010 7:41am ET
I live in the most restrictive of all states, The Peoples Rebublic of Pennsylvania. Here, the "STATE" itself is at the top of the food chain. They prohibit
direct shipments to protect against underage drinking.
But, we all know that it's about revenue collection.
I will write my rep, but there is little intrest in this state about changing a system that brings in so much money to the state coffers and some nice campagign
contributions as well.
The casualities here will be the small wineries that depend on direct sales for their existance and those of us who preffer drinking them. But that has been the trend in our economy over my adult life. Corporations get larger, more powerful and our elected officials generally work for their benefit, not ours.
Jonathan Horvath
IL —  April 18, 2010 11:30am ET
and yet on more unconstitutional act being put forth by the current administration and congress...
Alex Andrawes
USA —  April 18, 2010 12:15pm ET
As the owner of a wine retail establishment, Wines.com by Pervino (In no way affiliated with Wine.com) I have spoken out against this kind of legislation for quite sometime. The fact of the matter is that retailers do not have the money to influence our legislators to the effect that wholesalers. To add to the burden, consumers do not and have rarely been able to effectively voice themselves to change their legilators stance, especially when the opponent is maximizing campaign contributions which is "pay to play" politics at it's finest.

Not only will small wineries be devastated but so too will retailers who are not given the ability to sell competitively via ecommerce. The SWRA and Tom Wark have worked hard to bring a voice to retailers but with limited results due to the mammoth budgets of the WSWA. I feel as if this entire debacle will only play out fairly if legislators understand that giving a carte Blanche to wholesalers with regards to the Dormant Commerce Clause will only result in damaging it's entire purpose which would no doubt be pursued by other private interests. As an economist by education and an entrepeneur by trade, this will increase pricing and eliminate consumer choices resulting in lessbtax revenues for our country.

I have stated my voice clearly in other forums that the main argument that tightening up the three tier system has NO merit whatsoever. Wholesalers have never had control over minors access to alcohol. That access has always been made available by irresponsible adults. The arguement that deregulation causes alcohol abuse is unsubstantiated and completely false.

I have a proposal that I believe is the most fair and balanced. Create direct shipping licenses for wineries and retailers. Make them limited as they currently are limiting quantity per household purchases. Require licensees to obtain $2 million dollar liability policies (underage purchase accidental death). This alone will eliminate fly-by-night operations). Require wineries AND retailers to pay ship-to-state sales taxes monthly AND require shipping carriers to obtain age verification.

A process such a the one outlined above would result in greater access to selection, increase sales tax revenues, and would address any abuse concerns. The process above allows our Constitution to remain an Instituion that was created by the people, for the people, and protects consumers from special interest groups' selfish goals.
Shane A Jackson
Flower Mound, Texas —  April 18, 2010 2:36pm ET
I am in complete agreement with Alex's comment on the ripple effects of this proposed bill. I do not know the count but I am sure there are hundreds of wineries who ship only to consumers and stay away from wholesalers. I personally belong to 4 wine clubs in Napa/Sonoma that do not sell retail. They are small wineries that only have clubs to consumers in various states. This would absolutely put those wineries out of business immediately or make it cost prohibitive to sell retail. The Wholesalers are scared that there are options for consumers and they may lose their "monopoly" on how they distribute wine/beer to local retailers. For those of you who do have small wine/beer retail shops you know all too well how large wholesalers treat small retail shops vs. larger competitors! I do hope that everyone gets behind this and does write their congressmen/women.
Paul Gscheidle
St. Augustine, FL and Cliveden, UK —  April 18, 2010 3:15pm ET
This is a naked attempt on the part of wholesalers to preserve a monopoly and on the part of speculators and large producers intent on reducing the presence of small winemakers and small retailers in the fine wine market. It is Un-American.
Jason Adams
Florida —  April 18, 2010 5:03pm ET
Scary stuff to be sure, but lets put it in perspective. The methods we see used here means they are getting nervous. The big boys are spending all this money and they keep losing states anyway. The normal methods are no longer working and I smell more than a little desperation here. As bad as the bill reads, it means the little guy is winning and momentum is on our side.
Karl Mark
Geneva, IL. —  April 18, 2010 8:58pm ET
What's next? Will states pass laws prohibiting me from buying online music, books and anything else from out of state retailers in an effort to protect those companies within the state? Goodbye Amazon.com! Goodbye Ebay! I don't care if it's alcohol, it's anti American!
Patrick Pringle
Houston, TX —  April 19, 2010 11:41am ET
HR 5034 is sponsored by Rep Delahunt of MA-10 which includes Cape Cod. He is not running for re-election but in the previous election cycle (2007-2008) he received $10,000 from the National Association of Beer Wholesalers.

The bill is co-sponsored by Rep Chaffetz of UT-3. He's received $5000.00 from National Association of Beer Wholesalers and $1000.00 from Wine Wholesalers PAC.

Another bill co-sponsor is Rep Quigley of IL-5, a freshmen representative from Cook County. So far he's received $5000.00 from National Association of Beer Wholesalers and $1500.00 from Wine Wholesalers PAC.

The last co-sponsor is Rep Coble of NC-6. He got $10,000 from National Association of Beer Wholesalers in the 2007-2008 and another $7,500 from them in this cycle. Add in another $1000 the Wine Wholesalers PAC for $8500 total.

By contrast he's collected $12,450 from individuals in NC. But when you look at those indidvidual contributions from NC you find executives at alcohol beverage distributors RH Barringer, IH Caffey and Wisdom Beverage have contributed $4000.

So between the national PACs and the local wholesalers, Rep Coble has received $12,500 so far this cycle. From individual non-wholesalers in his home state...$8,450.

All data from www.fec.gov
Patrick Pringle
Houston, TX —  April 19, 2010 11:48am ET
HR 5034 is sponsored by Rep Delahunt of MA-10 which includes Cape Cod. He is not running for re-election but in the previous election cycle (2007-2008) he received $10,000 from the National Association of Beer Wholesalers.

The bill is co-sponsored by Rep Chaffetz of UT-3. He's received $5000.00 from National Association of Beer Wholesalers and $1000.00 from Wine Wholesalers PAC.

Another bill co-sponsor is Rep Quigley of IL-5, a freshmen representative from Cook County. So far he's received $5000.00 from National Association of Beer Wholesalers and $1500.00 from Wine Wholesalers PAC.

The last co-sponsor is Rep Coble of NC-6. He got $10,000 from National Association of Beer Wholesalers in the 2007-2008 and another $7,500 from them in this cycle. Add in another $1000 the Wine Wholesalers PAC for $8500 total.

By contrast he's collected $12,450 from individuals in NC. But when you look at those indidvidual contributions from NC you find executives at alcohol beverage distributors RH Barringer, IH Caffey and Wisdom Beverage have contributed $4000.

So between the national PACs and the local wholesalers, Rep Coble has received $12,500 so far this cycle. From individual non-wholesalers in his home state...$8,450.

All data from www.fec.gov
Patrick Pringle
Houston, TX —  April 19, 2010 11:56am ET
Mr. Horvath, this legislation is sponsored by a Democrat and co-sponsored by another Democrat and 2 Republicans. It's not really a partisan bill.
Brian Moore
Richmond, VA —  April 19, 2010 12:37pm ET
I have a different perspective coming from a wine wholesaler. My commentary will likely receive a negative response but here goes.

1) wholesalers provide a means of transporting goods to all size accounts
2) in most states (not VA) wholesalers run on 25 to 30 day payment terms which allows retailers and restaurants to maintain stock and use OPM (other people's money)
3) collect and pay state regulated taxes that fund various state funded programs

I hear about the small wineries being restricted and put out of business but what about the small retailers? I am in a cash market right now and the small retailer is being swallowed by the larger chains with greater means. Do you think FedEx or UPS work on credit terms? Do you think the small retailer could compete with the big box stores without the ability to buy better deals? The wholesalers provide a service, a valuable one at that. We provide transportation, service and education of goods (wine). We buy larger quantities from suppliers and offer those deals on to our retailers/restaurants. We level the playing field. Without a Three-Tier system you can say goodbye to the small retailer and get used to buying from large chain operations.

No system is perfect. Someone will always complain and cry foul. The system in place may not appeal to some but it does provide a valuable service to all. I am all for a winery being able to ship IF they are not already represented by a wholesaler within the state. The crys for bringing down the system is simply unfounded and not thought completely through as to the consequences. Until these advocates of change walk in the shoes of all parties they cannot see the big picture.
Patrick Pringle
Houston, TX —  April 19, 2010 2:42pm ET
Mr. Moore, I understand the arguement you make but I don't quite buy it completely.

Under a three tiered system (or at least under the TX version), if a winery is not in a distributor/wholesalers portfolio, it doesn't matter if the retailer is small or ginormous, if you don't have the option for direct shipment, you ain't getting that winery's product.

And even if a small winery is in a distributors portfolio, it doesn't mean that all of the wines that winery produces and would like to distribute will be carried by the distributor. Most won't, actually as distributors ususally look for a base level of case production that will allow them to keep all their customers with some supply. Lots of wines, including manyof the very best, won't hit that treshold and without direct shipment are locked out of markets.

Wineries, many already struggling, may have to abandon smaller productions for larger volume, less distinctive cuvee wines. That curtails the number and quality of wines.

Certainly smaller retailers have a role to play. I buy directly from wineries when I have enough volume to make the shipping costs worthwhile, but even more frequently I go into wine shops, large and small and pick up bottles to try from locations I haven't visited or producers I haven't tried. They still get my business. That model has a vital role to play, but it's should be a one performer show.

This legislation, backed by sizeable political contributions from wholesalers PACs, seeks to eliminate an entire competing market. That's restricting choice of vendor, restricting choice of product and ultimately adding costs to the wine.
Chris Haag
vancouver, bc —  April 19, 2010 3:52pm ET
Folks, I love my country and where I live, but if you want less choice and more expensive wine, let Congress pass the bill and you will become like Canada wrt the sale of wine. Where I live, the provincial govt, is the wholesaler. They set the pricing and decide (with the help of private wine reps) what gets sold in BC. A bottle of wine that retails for $20.00 in the US, will often cost close to $40.00 CDN (even with a close at par dollar) after all of the taxes and govt markups. Your system is fine, don't change it as it will kill small wineries and any incentive to start a new winery as wholsalers will control and dictate what gets sold in each state. This is a bad idea.
Brian Moore
Richmond, VA —  April 19, 2010 4:00pm ET
Patrick -

I worked for a large wholesale operation out of Texas for numerous years and quite familiar with the market dynamics. As the fifth largest alcohol consumption state (sometimes even fourth), there are many more wineries represented than in other markets. Do I feel that the minimal amount of wineries arguing the fact that they cannot self distribute into Texas or any other state upset the apple cart? Of course not and neither do the majority of my collegues in the business. But because a handful of wineries feel slighted or that the system is unfair we should scrap the entire process or consider it all unjust?

I have been in this business for well over 20 years in all facets from restaurateur, wholesaler and supplier. In those years I have yet to see a winery completely abandon their premier lines for a more bulk juice approach. The consumer in the end is the drving force for any brands success. If the consumer feels the quality does not meet the value the wine fails. Just because a wine is 'made' does not always mean it will sell.

I can only speak for myself when I say I like depth in a suppliers portfolio of wines. I may not bring in every wine but there usually is a just reason - price, quality, marketing and the list of criteria goes on. But if I have a customer request for a wine that I represent why would I not want to fill that need? It is a pre-sold item and in and out of my inventory quickly.

Not all businesses survive, that is part of the capitalistic system. There are more reasons involved in that survival than the 'unfairness' of the system. I just got off the phone with just such a small winery and we mentioned this bill. The wineries comment was "But there are over 20 wholesalers in your market. If all 20+ wholesalers say no I would think about finding a new career path because obviously I can't make wine". This from a winery that produces less than 2000 cases per year at an average retail of $35/bottle.

Again I see no problems with regulating a winery that has no market representation through direct shipping. I do feel that measures have to be in place on the constant legal assaults. As with all lawsuits, the ones that prosper are the lawyers. My issues are the linch-mob mentality over right/wrong or fair/unfair.
Richard Wilson
Texas —  April 19, 2010 4:56pm ET
Recently, the federal appeals court with jurisdiction over Texas held that Granholm, which does allow wineries to ship directly to customers, does not permit retailers like K&L and Wine Country to ship directly to consumers. The Texas Liquor Code, which prohibits such shipments unless the retailer has a physical location in the county where the goods are being shipped, is constitutional.

While I understand the historical bases for the three-tiered system, many of those historical bases have been rendered less useful or obsolete through the passage of time. I am no longer at a risk of buying rot-gut liquor that may blind me if I buy liquor without going through the wholesaler and the retailers with whom the wholesaler does business. Further, the market segment we are discussing, wineries, and that the wholesalers now seem to be targeting is outside the risk factors being offered by the wholesalers. I doubt that the unruly crowds frequenting "nightlife centers", which is the supposed downside the wholesalers are focusing on to advocate their proposed changes, are resorting to expensive wines to get a buzz.

I am opposed to changes that limit my options without a compelling public good to justify the limitation. Here, there is no such public good. If there truly is a concern over direct sales of hard liquor, then why not craft the bill or law with a minimum alcohol requirement, say 20%, which would prohibit the sale of hard liquor but allow for the sale of almost all wines and ports?

The argument that small retailers need to be protected from this risk is also hollow. The small retailers face a greater risk from Costco, larger retailers, and grocery store wine sales than they do from direct sales by wineries. I, presumably like many of you, prefer to buy more easy to find wines from my local retailers. Going to the store is less expensive that buying direct and spending money on shipping costs. However, if I want to buy one of Mr. Officer's Carlisle wines, or another hard to find wine from a smaller producer who has yet to allow me on its mailing list, I should be able to do so from an out-of-state retailer that may have the wine in stock. This is especially true when I cannot resort to the local market to meet my needs, since the wholesalers that get these wines in my area tend to sell them directly to restaurants. In the current market, my local wholesalers are not losing my sale. They have already deprived me of the opportunity to buy that wine from a local retailer.
Patrick Pringle
Houston, TX —  April 19, 2010 5:16pm ET
Brian,

Thanks for the response and I appreciate your point of view, I just don't agree with it in paricular this bit.

"Do I feel that the minimal amount of wineries arguing the fact that they cannot self distribute into Texas or any other state upset the apple cart? Of course not and neither do the majority of my collegues in the business. But because a handful of wineries feel slighted or that the system is unfair we should scrap the entire process or consider it all unjust?"

I guess I would respond to your question with a question - why should we perpetuate a system that ever prevents ANY producers from shipping their wine to ANY consumer of legal age? If a winery can find a market selling directly, accurately collects and pays the applicable taxes where is the harm...I mean, other than to the obvious inherent and entrenched monopolistic forces of the wholesalers.

I don't expect that you as a wholesaler/distributor should carry anything and everything. You SHOULD pick the wines that you can move and make a profit. I fully recognize that in Texas "there are many more wineries represented (by wholesalers) than in other markets."

Yeah, so what? I should be thankful I live in Texas because I've got a lot of options by virtue of the noble wholesalers? Well, bully for me. But what if I move somewhere else with fewer options? Or what if I want something that falls in that portion of product not offered? That's the problem.

It's about choice. If I choose to support a tiny start-up winery by overpaying for crap wine with shipping to boot, and they're willing to sell it to me...well, it's my money to spend/waste.

I don't need you to pick wines for me, thank you very much.

And please, spare me the lecture on "capitalistic forces". Seeking to reduce competition through government action and regulation flies in the face of market driven capitalism. And that's EXACTLY what this bill's backers who have been showering money on the members of this committee are trying to do. I intend to do eveything that I can to make certain that PAC is wasted...and I don't think I'm alone.
Joe Dekeyser
Waukesha, WI —  April 19, 2010 5:40pm ET
My interest in buying wines direct from wineries has nothing to do with anything other than gaining access to wine and wineries that are not available through local retailers. If I can buy a wine that I want locally that is what I do. Here is another prime example of a special interest trying to maintain an unfair competitive advantage with the imprimatur of Congress. On the one hand the laws governing alcohol in my state, Wisconsin, have always been very liberal and this should not effect me personally. On the other hand the willingness of this Congress to enact sweeping legislation under the cloak of darkness should make me concerned and it does. Much of the most interesting wine comes from independent wineries and they are the ones who would be excluded and put most at risk.
Glenn Mcphee
Charlotte, North Carolina USA —  April 19, 2010 8:32pm ET
I am utterly flabbergasted to think such a bill could be making an appearance without so much as a boo from those who will be most negatively affected by it. I just wrote my representative a long healthy letter and hope the rest of us wine lovers will do the same. Leaving wine in the hands of the few wholesalers who do nothing but rape us financially and prevent access to wonderful wine is in no way helpful to consumers or the American economy at large. Coming from Canada I know all to well the sad state of affairs with which not having choice means. It is pathetic and certainly does nothing to promote the wine industry as a whole let alone offer free choice to wine consumers
John Albritton
Irvine, CA —  April 20, 2010 12:03am ET
The most dreaded words in any laguage, "I am from the Government and I am here to help you."

Do us all a favor and just leave us alone!!!
Stephen C Pattison
Round Hill Va —  April 20, 2010 12:20am ET
[this comment from Louise Pattison]

As a Brit, I can assure you that the UK situation is a very poor excuse of an argument in favour of restraining direct ship. Believe me, those people who over-indulge in public in the UK are NOT doing it on quality wines they had shipped direct, rather on cheap lager from chain taverns associated with the beverage giants.

I support many of our local Virginia wineries, as well as having wines from out of state producers shipped direct. I just hope that Congress sees sense. I don't have a vote, so I can only encourage those who do to use it wisely.
Brian Moore
Richmond, VA —  April 20, 2010 10:52am ET
The continuing theme I hear in all posts against the Three Tier System is "I and Me". Very little thought has been given by the protestors to the role of the wholesaler or the consequences in removing them. Of course we are evil and unjust. You caught on to our master plan to rule the world...

Seriously, wholesalers provide services that most small wineries champion;

• We provide a central location to receive payment for goods. Not many small wineries (none that I know of) have the resources to chase after delinquent customers.
• We provide sales representation in our respective markets. We give a voice to wineries that otherwise may go unnoticed. How many of you would know to even look up Wild Hog, Solitude, Manfred Briet or White Rose?
• We offer transportation of goods to local retail and restaurant outlets defraying shipping costs over a much larger volume thus lowering costs.
• We use our capital to purchase larger quantities (1000s of cases) and offer those savings to our customers at a lower volume.
• Contrary to the beliefs here; wholesalers operate much lower margins than suppliers, retailers and restaurants but offer a service that many of those establishments on both sides of the equation need and require to stay in business.
• We act as a collection agency for local and state governments on taxation, eliminating the need for special agencies and further government involvement.
• We create jobs for your friends and families in the markets we do business. We spend money with your local retailers and restaurants and support our local communities.

The list is extensive (more than my 5000 characters allows).

I offer one challenge. Everyone who feels eliminating wholesalers is the answer please visit a winery website, look at their pricing and compare it to your local market. 90%+ the price will be higher and then factor in the freight to get it to you. Eliminating the wholesaler will not affect that.

Most of the arguments against the system are stemming from little to no foundation other than the fact that "I can't get what I want..." The inter-state E-Commerce businesses argument of unfair business practices is equally unfounded. They are in business to make a buck anyway they can, regardless of consequences or competition. Next they will target not being allowed to sell cigarettes across state lines via the internet.

Lastly, Alcohol does have inherent issues that your pair of jeans, books or whatever you purchase off eBay, Amazon, etc. do not. To think otherwise is limited, self-serving and short-sighted.
Terry Burton
Millbury, MA —  April 20, 2010 11:12am ET
Could you please list the names of the 38 states Attorney Generals and the states they represent so that we can reward them for there "good work" in the upcoming November elections.

Thanks

Joseph Kravec
McMurray, PA, USA —  April 20, 2010 11:13am ET
Now they can apply this thinking to all products.
And all wineries can become wholesalers.
Joseph Kravec
McMurray, PA, USA —  April 20, 2010 11:57am ET
This is complete crap. If this is allowed, it would open the door to allowing them to prevent us from even brining wine back with us on the plane. The key is the new bill would allow the 21st Amendment to trump the Commerce Clause. The Commerce Clause is what provides the “free flow of commerce” (i.e, our right to take wine across state lines). Welcome to the dark ages.
Robert Taylor
New York, NY —  April 20, 2010 12:17pm ET
Terry,

Interestingly, just after the letter from the attorneys general was sent to Congress, Massachusetts Attorney General Martha Coakley announced that she had dropped any plans to appeal the First Circuit's ruling that struck down Massachusetts' cap-limit law (see sidebar, "Winery Direct Shipping Coming to Massachusetts Residents"). Coakley was one of the few AGs that did not sign the letter. I'll try to post the list of those who did sign shortly.
Robert Taylor
New York, NY —  April 20, 2010 12:27pm ET
Here is a link to a .pdf of the letter sent by the National Association of Attorneys General: http://naag.org/assets/files/pdf/signon.Final Alcohol Letter Submit Committee.pdf
Patrick Pringle
Houston, TX —  April 20, 2010 12:36pm ET
Brian,

You wrote:

"I offer one challenge. Everyone who feels eliminating wholesalers is the answer please visit a winery website, look at their pricing and compare it to your local market."

I'm trying to find which of the people that have commented mentioned that they want to elminate wholesalers. I would be willing to wager that everyone that has commented here has in the past year purchased wine from a retail establishment or a restaurant that has purchased wine from a wholesaler. I have and plan to continue to do so.

But despite your protestations to the contrary, that's not the issue. The issue is that this legislation, largely supported by wholesalers, seeks to restrict or eliminate direct shipment of wine. It seeks, through the purchased power of Congressional intervention, to eliminate an entire market that allows buyers access to wineries not represented by wholesalers. It seeks to restrict competition, trade, and choice.

We value the role that wholesalers play, but when they seek to eliminate competition and create a monopoly it makes them look like greedy little bastards...and we're going to point that out.

And as to your comment: "Lastly, Alcohol does have inherent issues that your pair of jeans, books or whatever you purchase off eBay, Amazon, etc. do not. To think otherwise is limited, self-serving and short-sighted."

True. But don't extend that to try to sell me that direct shipment of wine supplies the alcohol that ends up fueling underage consumption. That has been an issue for YEARS and underage drinkers have been quite adept at obtaining alcohol from sources almost entirely supplied by wholesalers under a 3 tier system. For some reason the phrase "doctor, heal thyself" seems somewhat appropriate.
Sarah Gende
Illinois —  April 20, 2010 1:33pm ET
Brian Moore, I see no one here advocating destruction of the wholesale industry and/or the three-tier system. We simply want the freedom of choice - our own choice, not yours - to buy and drink any wine we want.

I buy wine from many sources, including small wine shops, large wine shops, occasional big-box stores, internet wine retailers, and direct from the winery. This is MY choice, and that is all I ask for - the continued freedom of choice.

I would hope you have the same consideration for the small wineries, that would be destroyed by such legislation, as you do for your own industry. You, and the government, do not have the right to limit my choices.
Patrick Pringle
Houston, TX —  April 20, 2010 1:40pm ET
Brian,

I re-read your most recent post and really feel the need to offer point by point response.

"• We provide a central location to receive payment for goods. Not many small wineries (none that I know of) have the resources to chase after delinquent customers."

Maybe I'm te only one, but on most (all?) direct shipments I've made, I'm tendering payment prior to shipping.

"• We provide sales representation in our respective markets. We give a voice to wineries that otherwise may go unnoticed. How many of you would know to even look up Wild Hog, Solitude, Manfred Briet or White Rose?"

That's great, really. I appreciate having visibility to smaller producers. But I've been to a lot (100s) of tasting rooms and frequently I will ask if a wine is distributed to Houston and will hear, these 2 wines are but these 4 wines aren't. You can only get them from the winery. That happens ALL THE TIME.

"• We offer transportation of goods to local retail and restaurant outlets defraying shipping costs over a much larger volume thus lowering costs.
• We use our capital to purchase larger quantities (1000s of cases) and offer those savings to our customers at a lower volume."

You may want to tread carefully on the lowering costs to the consumer argument since in the opinion of Ms. Erickson, cited in the aritcle above, the power to lower the price through volume purchasing plays a very large role in the UK alcohol epidemic. Here is the IP address of her testmony.

http://www.healthyalcoholmarket.com/pdf/Stmt_PamelaErickson.pdf

"• Contrary to the beliefs here; wholesalers operate much lower margins than suppliers, retailers and restaurants but offer a service that many of those establishments on both sides of the equation need and require to stay in business."

That maybe true but the margins are apparently robust enough to have provided at least $45,000 in campaign contributons to the 4 sponsors or co-sponsors of this bill.

"• We act as a collection agency for local and state governments on taxation, eliminating the need for special agencies and further government involvement."

I can see that would be of benefit to a winery. But if they are willing accept the responsibility for collecting and paying the taxes, why should we legislate out of existence their right to do it?

"I offer one challenge. Everyone who feels eliminating wholesalers is the answer please visit a winery website, look at their pricing and compare it to your local market. 90%+ the price will be higher and then factor in the freight to get it to you."

As I thought about this I recalled that during numerous visits to tasting rooms, the person commented that they couldn't sell a particular wine cheaper because "...my distributor won't let me. He doesn't want to have his prices undercut." I understand the need to establish those conditions, but they can't be blithely ignored when making the comparison that you have challenged us to make.
Morewine Bishar
Del Mar, California —  April 20, 2010 1:58pm ET
I guess all you have to do to get in bed with Congress is lay your money down. There's a word for such people, but I won't use it here!

David Clark
for The Wine Connection
Kathy Simpson
Napa, CA —  April 20, 2010 4:38pm ET
In response to Brian --

Yes, wineries appreciate the role distributors play in the wine sales process - when you can get one to work with you. Small wineries face insurmountable odds in building a distribution network. There are too few distributors to support the number of wine SKUs in existence. As a result, many wineries are forced to build their direct-to-consumer business because they have no other sales channel available to them.

Further, I am in the biz on the high-end side (over $100/bottle) and it has been several years since I have seen one of my wines sitting on the shelf somewhere for cheaper than it is at the winery. The distributor's laid-in costs, plus their margin, plus a retailer's margin usually prices it at about $3-5 more than the winery's retail price. So yes, buying at the winery and paying shipping is a viable alternative. Of course, only if bills like these aren't passed giving consumers that option.

Its stunning how stupid politicians think we are, using the excuse direct shipping promotes underage drinking. We are to believe that a teenager will pay $50 for a Napa Cab and wait up to a few weeks to get it so they can have a nice expensive buzz with their buddies on a Friday night? Hell no! They're going down to the Quicky Mart for a 6-pk today with their fake ID. Just like we've done now for decades.
Maurjourie Godfrey
Parker, Colorado, USA —  April 20, 2010 8:34pm ET
FROM DR.VINO:
Tom Wark, head of the Specialty Wine Retailers Association, described it as “the most onerous consumer wine law since the passage of the 18th Amendment and the onset of Prohibition. One worrisome aspect is that in order for the bill to become law, it must get voted out of committee. The bill has been assigned to the House Judiciary committee, chaired by John Conyers from Michigan. Tom Wark has described Michigan as one state whose elected officials are “completely controlled” by wholesalers through their campaign contributions. (Michigan was the losing plaintiff in Granholm v. Heald, the 2005 case that liberalized wine shipments.) Indeed, the National Beer Wholesalers Association was one of the top 5 donors to John Conyers for the past two election cycles.

Hopefully, legislators will see this as the gross overreach that it is on the part of distributors. It would be great if it turned out to be the wholesalers it will be their last stand. But that is unlikely.

We need to fear for all the little botique wineries that use direct ship for and good portion of thier revenue some even get at least half of thier revenue is from thier wine clubs. I oreder direct from MAYO in Sonoma and ZD in Napa. I would never be able to get wine unless I went there and that just is not possible. I encourage everyone to call thier congressman and order from the wineries directly.
John Albritton
Irvine, CA —  April 21, 2010 12:07am ET
Free the Grapes! has an action alert that will allow you to send a fax or email easily and for free to your representatives in Congress. Here is the link:

http://www.capwiz.com/freegrapes/issues/alert/?alertid=14948676

Tell a friend!
Brian Moore
Richmond, VA —  April 21, 2010 11:51am ET
To Peter -

I am all for the continued growth of small wineries and as I mentioned previously I have no issues of direct winery shipment, IF, they are not represented in a state by a wholesaler. Shipments from people like Tom Wark, Gary Vaynerchuk and those involved with the Specialty Wine Retailers Association across state lines should be restricted. Their cause is simply wrapped in the veil of being unjustly restricted from eCommerce when their goal is simply to line their own pockets. I give as much credence to Gary Vaynerchuk as I do Kevin Trudeau and every other late night infomercial king.

"In March 2009, Vaynerchuk signed a 10-book deal with HarperStudio for over $1,000,000 and released the first book, "Crush It! Why Now is the Time to Cash in on your Passion," in October 2009. The book encourages people to determine what truly makes them happy and pursue monetizing around it on the internet. It argues that because of recent social and technological trends the cost of producing content has been driven low enough that passion, knowledge, and effort, which the book calls "sweat equity", are now all one needs to build a brand and business."

This is who you are championing.

To Kathy Simpson -

Small wineries face the same challenges as do small wholesalers. Like a small winery comparing itself to Kendall-Jackson, the Southern's, Glazers and RNDCs growth to a national presence has increased the challenges for the small wholesaler. By asking the right questions and taking the time to know the markets in which you wish to sell to is essential for success. I see Harris Estates is registered to VA Importing as their statewide distributor. VA Importing does not ship south of Frederickburg, thus limiting your sales potential in areas like VA Beach, Richmond and Roanoke to name a few. Taking the time to know your markets, the players etc. you will find yourself gaining much more success.

Politics makes strange bedfellows. Everyone has their own agenda. For those of you championing the cause of direct shipment I warn you to look at your supporters very carefully and think of the repricautions of your actions.
Patrick Pringle
Houston, TX —  April 21, 2010 12:37pm ET
Brian,

Holy cats, man...

"I am all for the continued growth of small wineries and as I mentioned previously I have no issues of direct winery shipment, IF, they are not represented in a state by a wholesaler."

So you don't want competitors muscling in on your territory. Sounds like a discussion between Tony and Johnny Sack in season 2 of the Sopranos. "I got Jersey, you got New York, but if it's Delaware...that's free ground. Go for it."

Oh please, Brian, get over that sense of entitlement to a market monopoly.

Besides, you ironically point out the biggesst flaw with that plan with your very first paragraph to Kathy. To wit -

"By asking the right questions and taking the time to know the markets in which you wish to sell to is essential for success. I see Harris Estates is registered to VA Importing as their statewide distributor. VA Importing does not ship south of Frederickburg, thus limiting your sales potential in areas like VA Beach, Richmond and Roanoke to name a few."

Cool, so if a winery is represented by a wholesaler in the Viginia, you suggest there shouldn't be direct shipment to that state. And then you point out that under your very suggestion, Richmond and Hampton Roads ar would be shut out since the presence of a wholesaler in the state would restrict direct shipment. Brilliant.

Um, care to revise that plan, Brian?
Brian Moore
Richmond, VA —  April 21, 2010 2:52pm ET
Patrick -

Had Harris Estates done their due diligence and investigated the markets and potential wholesale partner they would not have assigned a brand to a wholesaler that does not cover the entire state.

At this point in VA, being a franchise state (instituted as a protection for wineries and wholesalers alike), there is no true 'state-wide' distributor. If you have a brand and it is important to you why take the path of least resistance and not do your due diligence in investigating the market dynamics. If Wholesaler A handles Region X and you are comfortable with Wholesaler A then assign Region X and leave yourself open to assigning other counties to other wholesalers, which IS possible. Being represented statewide is an option in this state, not a requirement.

After prohibition each state was granted the rights to handle alcohol consumption, sales and importing on their terms. 50 states = 50 different laws. If a small winery wants to be a part of a market the onus is on their shoulders to get to know the laws and market. To cry foul for not doing their homework is not the fault of the state or wholesale system.

The phrase "Have your cake and eat it to" comes to mind. If you as a small winery look to be represented by a wholesaler, using their resources for transporting your goods, putting educated people on the streets promoting your brands you should not 'bite the hand that feeds you' by circumventing their efforts for greater profits.

Case in point; A customer experiences a bottle of wine from their local restaurant which was sold into the restaurant by their wholesaler. The customer contacts the winery inquiring where the wine can be purchased and you feel it would be ethical for the winery to ship the wine directly to the customer bypassing the efforts of their wholesale partner? Essentially this is the direction you are promoting.

Your arguement over a winery having 6 wines produced and only 2 available is also far reaching in your advocacy of direct shipment. Many times I receive requests for wines we represent and where to find them. If they are not in my current inventories I make arrangements with customers on securing the wine and finding a retailer in their market for purchase. I have worked for large and small wholesalers in multiple states and each one was willing to do the same.

Continue to argue the point if you prefer but we are on two seperate sides. My interests, though motivated in part by my own income, are still very much for the overall picture. You on the other hand feel it is okay to only peek into Pandora's box. I still see concessions such as this being the first step to a dismantling of the entire system, a system that has a purpose and a place. Oh and the talk of a monopoly? As far as I am aware no state has prevented anyone from starting up their own wholesale wine business. Here in VA we have over 20 wholesalers...a far cry from a monopoly.
Patrick Pringle
Houston, TX —  April 21, 2010 4:22pm ET
Brian,

Again, point by point.

"Had Harris Estates done their due diligence and investigated the markets and potential wholesale partner they would not have assigned a brand to a wholesaler that does not cover the entire state."

And under your proposed restriction, the area of the state not served by that wholesaler would be out of luck because if as you have presented it, any wholesaler in the state would make that winery inelgible for direct shipment. Sounds like a system that would limit access or am I missing something?

"After prohibition each state was granted the rights to handle alcohol consumption, sales and importing on their terms. 50 states = 50 different laws."

Well aware of that. When I was tasting in Orange and Mudgee in Australia, that was the chief deterrent for those producers from even trying to enter the US market. But of course you understand that the very crux of this proposed legislation is to ask the Congress to cede the broader rights that apply to the country under the Commerce Clause, back to the states so that they may perpetuate and reintroduce the byzantine set of 50 different laws. It's asking Congress for pemisssion to create/recreate confusion and build obstacles to legal access.

"Case in point; A customer experiences a bottle of wine from their local restaurant which was sold into the restaurant by their wholesaler. The customer contacts the winery inquiring where the wine can be purchased and you feel it would be ethical for the winery to ship the wine directly to the customer bypassing the efforts of their wholesale partner? Essentially this is the direction you are promoting."

If I taste a wine in a restaurant that I like, my first stop is going to be a retailer, supplied by the wholesaler, in my area to see if they have it in stock or if they can order it. I suspect that is what most people do, too.

But if they don't or can't, you bet your bippy I would think it would be "ethical" to contact the winery directly to see if I can get that wine OR other bottlings not currently distributed. You're a wholesaler, Brian, you aren't Jerry Maguire or Scott Boros.

"Your arguement over a winery having 6 wines produced and only 2 available is also far reaching in your advocacy of direct shipment. Many times I receive requests for wines we represent and where to find them. If they are not in my current inventories I make arrangements with customers on securing the wine and finding a retailer in their market for purchase."

That's great and I'm sure that your customers appreciate that level of service. But let's revisit that scenario for a second. I'm at the winery and there are 6 wines currently undistrbuted and I can:

A. Place my order as I stand in the tasting room to have wine shipped directly to my house, or

B. Get the name of the distributor, call them, have them call the winery to make the order, have it shipped to the wholesaler who then delivers it to the retailer and let's me know that I can go pick up that wine. At which point I go buy it for a price that I'll find out when I arrive.

Yeah, B is terrribly inefficent and just ain't gonna work for me, Brian.

"My interests, though motivated in part by my own income, are still very much for the overall picture."

You should have stopped with "income". That covered it well enough.

"You on the other hand feel it is okay to only peek into Pandora's box."

I've already SEEN inside Pandora's box. In the last few post-direct shipment years, the popularity of wine has boomed and Specs, the largest wine seller in the city has added boatloads of new locations and expanded to San Antonio and Austin. Lots and lots of new shelf space for you wholesalers to fill with your product and for me to giddyily peruse and invariably purchase.

But I cannot for the life of me figure out how on God's green earth, you figure that it is your right to control the access to products not carried by you or your breathren.

QUIT BEING GREEDY.
Scott Chaffee
Sacramento, CA —  April 21, 2010 4:31pm ET
The three tier system is outdated and flawed. It is controlled by large companies that want nothing more than to squash any small winery or brewery from getting their product to market. How can you expect this system to work? Budweiser is losing market share to the craft brew industry every day...and they don't like it! The only way to ensure their way of doing business is to send their lobbyists (i.e. bribes) to Washington and cut off the one source these small companies have to get their product out...direct shipping. Soon...if they have their way...we will all be drinking Gallo and Budweiser because that's all that will be available.

This sucks!
Brian Moore
Richmond, VA —  April 21, 2010 5:36pm ET
And under your proposed restriction, the area of the state not served by that wholesaler would be out of luck because if as you have presented it, any wholesaler in the state would make that winery inelgible for direct shipment. Sounds like a system that would limit access or am I missing something?

You missed something. By assigning one distributor the rights to their brand for the 'State of Virginia' they limited themselves to being represented by that wholesaler only. If that wholesaler does not service different areas they are stuck until the current wholesaler issues a release for different counties or the entire state. If the wholesaler is not doing their part the winery has the option of appealing to the VA ABC for a release and given cause they are granted.

The Federal Gov't tried once (a little thing called Prohibition) to regulate alcohol nationwide. We see how well that went over. Regulation is necessary. You may not like it or agree with it. It may not even be convenient to you but it is necessary.

If you have a better system in mind I am sure we would all be interested in the details. For now all I hear is "I want, it is my right and if it isn't convenient to me then Damn the torpedos full speed ahead..."

William Gechtman
Charlotte,NC/USA —  April 21, 2010 6:53pm ET
Brian -

"Regulation is necessary. You may not like it or agree with it. It may not even be convenient to you but it is necessary."

Oh really? Why? I don't remember hearing a booming heavenly voice and seeing 1000 ft letters in the sky proclaiming alcohol sales must be regulated. That was a decision made by people w/particular political axes to grind, pockets to line, and, in some cases an invisible sky daddy to appease.

Damn straight I've got a better system. Them that makes it can sell it. Them that wants it can buy it. As a free American citizen why should I have to jump through hoops to buy a legal product?

Ohhh...that's right, some people have a problem w/alcohol. Well then, that's between them and their god(s); someone else's alcohol issues are no reason to curtail my liberty. Someone else's profits even less so.
Christopher Dunn
Hawaii —  April 22, 2010 2:27am ET
Brian,

You say, "The Federal Gov't tried once (a little thing called Prohibition) to regulate alcohol nationwide. We see how well that went over. Regulation is necessary. You may not like it or agree with it. It may not even be convenient to you but it is necessary."

Prohibition was the ultimate in regulation...regulated everything out of business, period. Regulation was NOT necessary, and over-regulation, as being proposed here, is simply an attempt to squeeze money out of consumers by robber barons. If this 3-tier system is so wonderful, then let's institute it for everything...cars, petroleum, education. Crap...Wine Spectator teaches about alcohol. Maybe we should have that regulated, too. Hell, we don't want impressionable young minds reading about the evil drink.
Scott Chaffee
Sacramento, CA —  April 22, 2010 11:44am ET
Brian...who was it that filled the role of distribution prior to the three tier system? It was the Mob! When the Mob inserted themselves into this industry and took their cut from sellers and consumers...we called it a crime! When a distributor gets to do it...we call it the three tier system.

Am I missing something? Why does a third company have the right to be between me and the products I want to buy? Almost every other product in our country has the ability to be sold directly from Producer to Consumer.

I am a retailer that sells beer and wine...and I see the mess that the three tier system creates for the small winery and brewery every day. It's like pulling teeth for them to get someone to carry their product...then if they are lucky enough to get distribution...they can only sell 1 or 2 of their labels...not all of their product gets to market. But guess what...I can get every damn product ever made by Budweiser and Gallo (both who own their own distribution). Is that because they are just making a better product...hardly.

How can you keep a straight face and tell me that distributors have the small wineries and breweries best interests at heart. BS!
Steve Stroud
New York —  April 22, 2010 4:48pm ET
First, cudos to Brian for joining the discussion. I may not agree with what he says, but he has the guts to say it in a very unfriendly forum.

Second, the law, as I understand it, only serves to reduce options for consumers and wineries (and small breweries). While this objective in a proposed law is frustrating already, having it couched as an effort to prevent underaged and binge drinking is absurd to the point of maddening. The "CARE" act!

It is bad enough that money is all that matters to many elected officials, but I wish they would at least have the common decency not to insult me while they are taking away my ability to choose for myself.
Dennis D Bishop
Shelby Twp., MI, USA —  April 22, 2010 6:34pm ET
This is horrible, just when it looked like we were headed to free trade!
Patrick Pringle
Houston, TX —  April 22, 2010 7:25pm ET
Brian,

I must echo Mr. Stroud's point. Your participation here does take guts.

That said do you intend to be this obtuse? You wrote:

"If you have a better system in mind I am sure we would all be interested in the details. For now all I hear is "I want, it is my right and if it isn't convenient to me then Damn the torpedos full speed ahead...""

Um, how about a system that allow distribution through wholesalers AND allows for direct shipment? You keep setting up the false choice that it is an either/or proposition, when AND is the operative conjunction at this junction.

Why is that unworkable?

And previously you wrote:

"Case in point; A customer experiences a bottle of wine from their local restaurant which was sold into the restaurant by their wholesaler. The customer contacts the winery inquiring where the wine can be purchased and you feel it would be ethical for the winery to ship the wine directly to the customer bypassing the efforts of their wholesale partner? Essentially this is the direction you are promoting."

If I follow your logic, that the wholesaler does so much to market a wine and educate the public as to its merits that it deserves to be the sole channel for me to obtain it. But if I experience a good wine at a winery, at a friend's house, or on the recommendation of Wine Spectator, wouldn't that logic dictate that each of those parties, having filled that role of exposing me to that wine deserve to be the channel by which I obtain that wine.

Of course not. Just like Wine Spectator has already been compensated for the information in their magazine or on their website for the good advice on a particular wine, the wholsalers has already been compensated for their work with the purchase of that bottle. You may get more sales through additional purchases at that restaurant or at a retailer, but it does not ENTITLE you to any additional compensation beyond the initial purchase.

And by the way, you seem to overestimate the importance of the wholesaler/distributor in this equation complaining that your margins are thinner.

Guess what, Brian, the folks who are by far most responsible for that product and who have taken the most risk are the producers of the wine. They tend the crop, pray for a good crop, make the call on when to pick and hope like hell they don't get late rain. They work long hours during the crush, they craft the wine, buy the barrels, deal with the ATF, and shudder at the thought of a TCA contamination. There are myriad perils they must negotiate to make it work.

That audacious risk is what determines value and deserves reward. By comparison, your value added and risk assumed is slight...thus your narrower margins. Take it and be happy.
Eldon Lauber
Omaha, NE  —  April 26, 2010 8:21pm ET
I suggest that all wine lovers contact their congressmen and senators protesting this proposed law.
I love purchasing wines direct from the wineries for the quality and selections. This is one of the few and sometimes only way to get the wonderful crafted wines from the small wineries.
Joel Bates
None stated, US —  April 27, 2010 1:36am ET
This article intimates that there is a good chance this bill will never become law. I bet that is what the people of Illinois thought right up to the point that direct shipment by retailers was outlawed two years ago. I used to live in Geneva (hey Mark) and would have hated losing my access.

Here in Houston, Specs owns the market and if they don't have it, you don't get it. Further, I have heard plenty of stories from retailers about the relative lack of usefulness of beverage distributor reps other than pouring at an in-store tasting on a Saturday. We also have heard complaints from retailers and restauranteurs who are forced to take cases of a cheap wine to get a few bottles of the "good stuff". Them is the facts man, and the system stinks. This bill is scary.

Of course the states are most concerned about losing the tax revenue, not underage drinking (a feint). It makes sense to me to have out of state retailers and wineries get a license and collect it.
Rich Riehl
Charlotte, NC —  April 28, 2010 5:17am ET
If I wanted to buy cigarettes online from a distributor and have them shipped from another state...I could do that all day long, but they want to restrict my ability to purchase wine directly from a producer. What a bunch of crap.

One thing I have not read is about the small production winemaker, who does not have enough inventory to really gain the attention of the distributors. Are you going to tell them that they can't sell their wine unless they distribute it through a middleman. That is not the America we have built. Unfortunately it is the America we are coming to.

I hear the beaches in Cuba are nice....
George Elliott
Cincinnati, OH —  April 28, 2010 10:50am ET
Please write your Senators and Congressman and tell them to put an end to this madness. Everyday with this administration we lose more and more of our freedoms.
JAMES WIEBER
Washington, DC —  May 2, 2010 12:08pm ET
More Washington BS. One of the arguments is that protecting the 3 tier system is needed to guard against underage drinking. Like I'm sure there is a large contingent of underage drinkers who cannot imagine getting tanked with their friends without having wine shipped directly from their favorite small wine producer because of the special terroir.

Another argument is:

"Erickson testified that as the U.K. deregulated between 1980 and 2007, "numerous nightlife centers sprung up … These became scenes of drunken debauchery, with people spilling out at closing time vomiting, urinating and passing out..."

If this is such a concern, maybe the bill needs to be amended to include NFL stadiums.
David Virella
San Juan,Puerto Rico —  May 2, 2010 11:21pm ET
HR5034 is ridiculous, protect the local monopolies and they only want to restrict our ability to purshase wine directly from a producer. What a madness.
Arun Abrol
WineChateau.com —  May 11, 2010 6:03pm ET
Wholesalers will not rest until they get their own way. They are way too big and will likely throw their weight around for many years to come. However, we all will keep fighting this, so please write to your local congressman and let them know your stand.

Wholesalers already have their pockets full and they want to keep filling them.
Blake Leblanc
Delray Beach, Florida —  May 23, 2010 1:32pm ET
Focus a Wine Consumers' PAC - the merits don't matter in a compromised system.

Wine Spectator, Snooth, Wine Searcher, etc., potentially affected wineries. retailers, importers and the like could form a PAC and I would happily contribute. Our "special" consumer interests could surely exceed the firepower of the distributors' vested interests or shine a searchlight bright enough to send the roaches scurrying. Debating the merits is futile because the legislative process is already compromised. My suggestion is that we, as consumers, use the same method as the distributors to "convince" the legislators of the superiority of our position as the majority. Consumers' strength in numbers has to be focused to be effective. If we create a mess, tough, it's the majority's mess. The greater issue of PACs is for another fight. Afterwards, maybe the NBWA's PAC will seek federal protection as an endangered species - a monopolosaurus.

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