Ohioans Lose Direct Wine Shipments

New law cuts off larger, out-of-state wineries and their small-production bottlings for wine-club members
Oct 16, 2007

Residents of Ohio, who've enjoyed direct shipments of wine since a federal court in 2005 struck down the state's restrictive wine-shipping laws, are all of a sudden seeing less wine on their doorsteps since Oct. 1 of this year. That's when a new law took effect, prohibiting direct sales to Ohio consumers from wineries producing more than 150,000 gallons a year. That limit is forcing some out-of-state producers that had built a significant following among Ohio wine lovers to cease their shipments to Ohioans.

"It's disappointing that they've decided to take away rights of the consumer that they've enjoyed for the past two years," said Dennis Cakebread, senior vice president of sales for Cakebread Cellars in Napa, which processed around 1,500 orders to Ohio this year, to several hundred wine-club members. Cakebread produces more than the 150,000-gallon limit (about 60,000 cases) each year.

But what seems to have consumers and wineries more frustrated is that the new law was added, without public debate, into the state budget bill and passed—not proposed as a single, wine shipping—specific piece of legislation. State Rep. Matthew Dolan, who heads the House Finance Committee, told the Cleveland Plain Dealer just days before the new shipping law was to take effect that he didn't quite realize the impact it would have. "When [the bill] came back from the Senate, I probably didn't read it as closely as I should have," he told the paper.

In 2005, a district court ruled that Ohio's shipping laws were in violation of the U.S. Supreme Court decision earlier that year, which said that states must treat in- and out-of-state wineries equally. As part of the district-court ruling, the judge opened the state to direct shipments. Ohio's Wholesale Beer and Wine Association, which supports the shipping ban, claimed that the 2005 ruling required a new law—an interpretation challenged by Corbin Houchins, a Seattle attorney who specializes in alcoholic-beverage law. Houchins argued that the judge's ruling only struck down Ohio's laws; it didn't require that the state create new ones. So Ohio could have simply regulated wine shipments indefinitely without further legislative action.

"At the heart of this is the question of what public good is being promoted by excluding [larger] wineries," said Bill Nelson, president of Wine America, a Washington, D.C.—based trade association. "It seems protectionist for the wholesalers." According to Nelson, under the new law, only 9 percent of the wine produced in the United States will be available to ship directly to Ohio consumers, with the remaining 91 percent available only via the state's wholesalers.

The Cleveland Plain Dealer reported that wholesalers contributed $91,350 to Ohio politicians in the first half of 2007. But the new law also found support where some might not expect it: Donnie Winchell, executive director of the Ohio Wine Producers Association. Typically, local producer associations encourage open, direct shipping since, in theory, it helps small wineries grow their business beyond the borders of the state.

"We needed to continue the privilege of selling directly to retailers, because it's the only way we will continue to grow, and we need to be able to sell to people who come to our door and then ship to them when they get home," said Winchell. "When [this bill] came down the pipe, both of our concerns were addressed positively." All of Ohio's nearly 100 wineries produce less than 150,000 gallons per year.

Ohio joins Arizona, Kentucky and Massachusetts on the list of states that have added volume caps to their wine-shipping laws. But since Massachusetts' volume cap is far lower (30,000) than Ohio's, even more out-of-state wineries are cut off. Massachusetts' law is being challenged in federal court by a group represented by Kenneth Starr, dean of Pepperdine Law School.

In the meantime, consumers will be left with fewer choices—but they probably won't stay quiet about it.

Winchell said she has received a handful of e-mails and one letter from local consumers, angry over her group's support of the bill. And Jeremy Benson, executive director of direct-shipping advocacy group Free the Grapes, said the number of Ohio residents registered for his e-mail newsletter has increased by 50 percent in the past few weeks.

"Unfortunately, Ohio has chosen to replace one form of discrimination, based on a winery's location, with another, based on a winery's production size. And consumers lose," said Benson.

Direct Shipping News

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