Massachusetts Legislature Passes Direct-Shipping Bill

Heavily disputed regulations favor small wineries, yet prohibit producers currently using wholesalers from delivering to consumers' homes
Nov 18, 2005

With most states either allowing all direct-to-consumer shipments of wine or closing them off altogether, the issue of direct shipping has taken a strange turn in Massachusetts. Just a few weeks after a federal judge ruled that the state's wine-shipping laws were unconstitutional, the state legislature passed a controversial direct-shipping measure on Nov. 17. Though House Bill 4498 does allow some out-of-state wineries to ship to residents for the first time, critics say it erects several barriers between wineries and consumers, making direct shipping in Massachusetts more feasible in theory than in practice.

The state's former laws allowed only local wineries to ship to Massachusetts residents. Under the new bill, both in-state and out-of-state wineries can now ship to Massachusetts consumers, but only if they produce less than 30,000 gallons of wine per year and only if they have not been represented in the state by a wholesaler for at least the past six months. The wineries must obtain a $100 annual shipping license, file monthly reports with the state and pay all applicable taxes. Consumers are limited to 20 liters of wine (a little more than two cases) per household per month. Wineries must label all shipments as containing alcohol, and recipients must provide proof of legal drinking age and sign for the package upon delivery. (The bill also includes a provision that allows restaurants to recork an unfinished bottle of wine so diners can take it home with them.)

The bill passed the House and Senate after many changes went back and forth between the two chambers, with negotiations running through the dying minutes of the year's legislative session and into the following day's informal session. Gov. Mitt Romney (R) has yet to indicate whether he will sign the bill, veto it, try to amend it or let it pass without his signature.

The final bill was designed to satisfy the concerns of the state's wine wholesalers while bringing Massachusetts' laws into compliance with the U.S. Supreme Court decision that struck down New York and Michigan's shipping laws and declared that states must treat all wineries equally. At the same time, the legislature was trying not to put Massachusetts wineries--none of which currently produces more than 30,000 gallons per year--at a disadvantage when granting out-of-state competitors the same right to ship.

"We extend that benefit to wineries across the country, 30,000 gallons or less--small boutique vineyards who may want to do business in the commonwealth," explained state Sen. Michael Morrissey (D), author of HB 4498. He added, "We basically suggest that you make a choice--you use a wholesaler or you become a direct shipper."

But organizations such as Free the Grapes!, a winery-supported group that enlists consumers to push for more open direct-shipping laws across the country, are not happy with the compromise provisions. "There are several problems with [the bill]," said executive director Jeremy Benson. "The first is this 30,000-gallon limitation, which isn't in place in any other state. Other states limit the amount of wine that a winery can ship directly to an individual over a certain period of time, typically a year, but not based on the actual production. It sounds like a lot, but it's only 12,500 cases. Cakebread and Joseph Phelps are many times larger than that number."

Therefore, while the bill could help very small wineries with no distribution in Massachusetts, it isn't going to allow wine lovers to place online orders for whatever bottlings they want. "Consumers simply aren't going to have access to small-production wines from many wineries," Benson said. "Nearly every winery produces small lots of some kinds of wine--vineyard-designates and so forth. If you're a winery with a Massachusetts wholesaler, or your winery makes over 12,500 cases, then any of those vineyard-designate wines that you may make a couple hundred cases of would not be able to be direct-shipped to consumers in Massachusetts."

Morrissey, however, suggested that the system outlined in the bill still allows for wineries to send their small-production labels to Massachusetts. He said that if consumers want those wines, they can place an order with the producer and have the wine move through the three-tier distribution system along with everything else. "If they're shipping in bulk to the wholesaler, just throw 20 cases of the specialty wine on and call it a day," he said. "They can still market online, they just can't ship; they have to use a wholesaler and deliver it to a local package store. If you have [a winery] that has a relationship with a wholesaler and you're now going to allow them to do an end run and cherry-pick the accounts and leave the wholesalers doing all the marketing and legwork, it didn't seem fair to us."

Morrissey added that he thinks small Massachusetts wineries can only benefit from the new guidelines. "They've been well taken care of," he said.

Kip Kumler, owner of Massachusetts winery Turtle Creek, disagrees and would have liked to see a more open direct-shipping policy, since he believes the regulations will make it harder for him to sell wine beyond state lines. "The Massachusetts farm wineries have not opposed direct shipping at all--we welcome it," he said. "With all these restrictions on out-of-state wineries, don't you think this will create a little island here, and we will not participate in that larger national market? I guarantee it."

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