Pinot Law

ShipCompliant has an important entry for those of you who currently ship, or plan to ship, to the Illinois.  That state will be instituting its new permit process, effective June 1st.  The application is available here.

But I also came across another interesting item regarding this change to Illinois law.  According to this entry, “FollowTheMoney.Org” tracked state campaign contributions for the Illinois House representatives that sponsored the bill (HB 429).  Here are the results:

• Representative Edward Acevedo: received $32,000 from alcohol wholesalers since 2000,including $10,000 since the legislation was introduced last year.
• James Clayborne, Jr.: received $85,000 from alcohol wholesaler interests since 2000, including $15,000 since the legislation was introduced.
• Governor Rod Blagojevich: who signed HB 429, has received more than $500,000 just from alcohol wholesalers in Illinois since 2002, $50,000 of which was given to him since he signed the bill into law.

I have said it before, but it is imperative that the wine industry act as a group in order to avoid these unfortunate setbacks.  Whether it is through involvement with state or national associations, it is imperative that we make our voice heard on these types of issues.  While we lost Illinois, at least we won in Georgia.

Stay vigilant — Stay active — Stay informed!

If you are a Virginia winery, I hope you did not miss this article in a recent edition of the Washington Post.  It involves the launch of the Virginia Wine Distribution Company, a state subsidized entity that will act as a ‘virtual’ wholesaler for small, farm wineries.

The bottom line, the VWDC will permit small wineries to distribute their own wine to retailers.  The VWDC will essentially be a virtual middleman that is informed of the shipment, while the winery actually delivers the goods.  It remains to be seen how this all works out, but I think Virginia has taken a step in the right direction with this one.

“I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.”

-Jack Valenti, Motion Picture Association of America (1982)

Jack Valenti had it all wrong when he said that to Congress back in 1982, but he was merely doing what he thought was right at the time. Hollywood was terrified that VCRs would destroy their industry through illicit copies and — God Forbid! — fast forwarding through commercials.

Fast forward to today, and of course it is a different story. Hollywood embraced the VCR years ago, and has now transitioned to the DVD. And of course by embracing the technology, it has reaped the rewards. According to this report, in 2002 just over 50% of households in the US had DVD players, but by 2006 that number skyrocketed to nearly 86%. And according to this report, the movie ‘Transformers‘ has generated over $302 million in DVD sales alone. Keep in mind, that number does not include rentals and box office.

Now I know what you are asking: I thought this was a wine law blog. It is. And here’s why the MPAA and VCRs in 1982 is relevant to wine today.

Because much in the same way that the movie industry in 1982 feared technology, ignored the desires of consumers and failed to see the business potential of the VCR, the wholesalers in this country today are doing the exact same thing, this time with the Internet. In case you missed it, the Wine & Spirit Wholesalers of America (WSWA) issued a press release a couple of days ago touting a recent study indicating that their industry contributes over $137 billion to the U.S. economy every year and adds 1.1 million jobs that pay almost $71 billion in wages.

The press release and related studies are nothing more than defense of — in many respects — an outdated system. The WSWA’s CEO Craig Wolf, says that the U.S. wholesale system is “explicitly designed to prevent a black or gray market” and it keeps “all transactions for beverage alcohol in the U.S. on the books.” He then says the wholesaler system is “one of the main reasons we need to guard against attempts to erode the regulations we have in place.” Of course, that’s wholesaler code for “don’t permit self distribution by wineries” and “don’t permit direct sales to consumers over the Internet.”

And in case you doubt me, go to their “Wholesaler Economic Impact Wizard” and you can see what I am talking about. It is essentially a menu of reports available on a state-by-state basis. I pulled up the report for Direct Shipping in Wine in Virginia and learned that my home state “further harms the industry by allowing the direct shipment of products to consumers.”

I do not wish to belabor the point, but the sooner the wholesalers realize that a major paradigm shift has occurred in the wine market, the better off they will be. The Internet is not going away any time soon, and it is already revolutionizing how wineries and consumers interact. Arguably, by permitting self distribution and direct shipments to consumers, small wineries can grow into big wineries — and big wineries will need a wholesaler to ship their goods. As the wine industry goes larger and more competitive throughout the country, that is great news for consumers, wineries and yes, even wholesalers.

I bet somewhere Jack Valenti is smiling.

Untitled photo used under a Creative Commons license, courtesy of Marcin Wichary.

Wisconsin residents may still be reeling from the departure of their favorite son from Lambeau Field, but it looks like they will soon have something else to cheer about.  According to Free the Grapes, Wisconsin Governor James Doyle signed Senate Bill 485 which replaces the state’s current wine shipping law and will go into effect on October 1, 2008.

While this is certainly good news, one of the comments to the Free the Grapes  blog entry noted some valid shortfalls.  In particular, while Senate Bill 485 permits direct wine shipments to consumers, a winery may not sell wine directly to retailers and can only sell to wholesalers.  This same commenter noted that “What Wisconsin needs is a system that allows both in-state and out-of-state wineries to sell directly to retailers and consumers . . . [a]s for the wholesalers…do they really need protectionist legislation to survive?”

I could not agree more — and Wisconsin isn’t the only state with that problem.  Even Virginia, is still tinkering around with how to handle winery to retail shipments — nearly three years after the Granholm decision.

Anyway, for all you out there with an interest in Wisconsin other than football and cheese, I thought I would pass this along.

Welcome to Wisconsin used under a Creative Commons license  KATYA de countess of WIS.

After the fiasco up in Maryland, it is great to see that the folks down in Georgia are getting it right.  Granted, Georgia already has a decent direct shipping law on the books.  But apparently their legislature is considering some changes that will make a good situation even better.

Under current Georgia law, certain restraints  are placed on wineries represented by a distributor.  A bill in the legislature — House Bill 1061 — would change all that.  It also includes a couple of more changes, including an increase in the amount of wine that can be shipped (from 5 cases per household per year, up to 12 cases per individual per year); drops the bond requirement; and other administrative items.  Hat tip to ShipCompliant for the details.

It’s great to see that some states such as Georgia are taking a good thing and making it better.  Of course, other other states — like Maryland — just cannot seem to get it right.

As many of you know, I have been following the developments relating to possible changes to Maryland’s direct shipment laws. Unfortunately, according to this article, things are not looking good. According to the article, a House of Delegates committee yesterday rejected one bill that would have let Maryland consumers buy wine directly from Internet merchants and wineries.

Because God forbid Maryland do what 35 other states are already doing. A Senate version of the bill was also debated late last week, although its chance of passage also appears slim. Of course, my favorite quote comes from colorful Maryland lobbyist Bruce Bereano, who represents the Licensed Beverage Distributors of Maryland. According to Bereano, these bills are bad news because “[i]f you make it so profoundly easy for national wine brands to get their product directly to consumers, they’re going to take out Maryland wineries.”

Let me translate that for you: “Please protect the interests of my clients (the distributors) at the expense of small, local wineries. It is fantastic public policy to: 1) deprive consumers of choice; 2) keep small wineries beholden to the interests of distributors; and 3) cut off potential tax revenue to the states for no good reason. Because everyone knows that when someone who enjoys wine wants that something special shipped to their house, they are going to order some Box o’ Wine over the Internet from one of those national wine brands.”  The irony of Bereano’s comment of course, is that by depriving small wineries of direct shipment options, you are just reinforcing the tremendous advantage already held by the national wine brands.

As a Virginia winery owner, I would love to ship into Maryland so that consumers could enjoy our wine. And let me translate that for all of the Maryland legislators out there who for whatever reason are opposed to this bill: “I want to give you tax revenue.”

BYOB used under a Creative Commons license provided by Rick.

Following up on one of my earlier posts, it looks like Maryland may be one step closer to more consumer choice in wine shipping laws. This article reports that Senate Bill 616 will be heard by Maryland’s Senate Education, Health and Environmental Affairs committee this Friday, March 7, at 1:00 p.m.

If the Senate bill and its companion, HB1260, pass, Maryland consumers will soon be reaping the benefits of a more competitive market and increased consumer choice. Of course, this week’s hearing is open to the public, so I am sure that some will be comparing small farm wineries to the Godfather and Tony Soprano. Of course, I am hopeful that Maryland’s elected representatives will see through that smoke screen.

Tom Wark over at the Fermentation wine blog has a great entry that touches on that shrill strongly worded letter from the Wine and Spirit Wholesalers that I wrote about the other day. All of Tom’s points are great ones, in particular, his observation that the state regulators must choose from the following: 1) heed Craig Wolf’s letter and spend state resources protecting wholesaler profits; or 2) adopt reasonable direct shipment laws and increase the state’s coffers. Tough choice.

Tom correctly views the wholesalers as imploding — and that’s what got me thinking. You see, in addition to being a part owner of a winery, I also work in the telecommunications field as a policy guy and yesterday I heard a fantastic speech. It was a speech about the impact of communications, and it got me thinking about direct wine shipping (bear with me!).

Throughout history, developments in communications, have led to massive societal change. The development of the written language? That led to the establishment of societies. Creation of the Printing Press? That led to the Enlightenment. The telegraph and Pony Express? Each contributed to the expansion of the West. And now of course we have that new-fangled Internet that is revolutionizing communications throughout the world — and this brings me to the wholesalers.

When massive technological change sweeps through society, people either embrace the technology, or shun it out of fear, ignorance or both. The Internet is revolutionizing how people communicate, how businesses conduct transactions, how governments function and — yes — how consumers buy wine. A major paradigm shift is underway. I do not know the role of the wholesalers in this revolution, but they either need to adapt to the technology or stand aside.

Old Bakelit Phone used under a Creative Commons License provided by aussiegall.

I thought a fair amount of time would elapse between my entry last week and the next instance in which I would have to write about alarming accusations from wholesaler interests. Unfortunately, I was sadly mistaken.

It has only been a week, but the Wine & Spirits Wholesalers of America (WSWA) just fired another shot across the bow of wineries and retailers in the never ending battle over direct shipments. The shot took the form of a letter to liquor control boards, attorneys general and governors, and voiced “grave concern” about the practice of shipping beverage alcohol to consumers across state lines, outside of regulatory channels and in violation of most states’ laws. The letter apparently went to all 50 states.

This time around at least, wineries were not compared to Tony Soprano. Instead, we are just one of a “growing number of interstate purveyors of beverage alcohol” who are “flaunting” our “disdain” for laws designed to “prevent underage access and ensure accountability.” Not only that, but we are also “remorseless”

What evidence does WSWA President and CEO Craig Wolf present to these 50 state regulators and officials as a basis for his conclusion that illegal interstate shipment of wines is rampant? Government reports? Independent studies? Detailed exposes? Actually, he offers up a couple of blog entries from Decanter.com and Vinography and throws in a single New York Times article for good measure. Don’t get me wrong. Both blogs are fantastic and Eric Asimov’s Times article made for an interesting read. But two blog entries on a contentious issue and a single NYT article shouldn’t form the basis for: 1) urging aggressive legal action by 50 State AGs across the entire nation; and 2) criticizing an entire industry based on the (alleged) actions of a few.
The bottom line of course, is that often times letters such as these can result in action. There are lots of good resources out there for wineries to use in order to ensure compliance with the often times challenging direct shipping laws, like here and here. So be careful out there.

And finally, one comment to Mr. Wolf. I’m fairly new to the winery business, but I will echo the statement of Alder Yarrow on his original vinography blog entry cited in your letter. In it, Mr. Yarrow said, “the wine industry, while competitive, is generally marked by a real collegiality.” In that regard, could you and your cohorts please stop comparing us to Tony Soprano and full time lawbreakers? We would appreciate it.

Because the U.S. Supreme Court just issued a decision regarding chewing tobacco that could have implications for direct wine shipments. The Supreme Court opinion in in Rowe v. New Hampshire Motor Transport struck down a Maine law that required common carriers — for example FedEx — to obtain signatures of those having tobacco products shipped to them. The Supreme Court in this case concluded that federal law governing common carriers preempted the Maine regulation that required signatures.

So what does this have to do with direct shipments of wine? Well, as a press release from the Specialty Wine Retailers Association points out, the distributors will likely use this case as their latest bogeyman to scare lawmakers and regulators. But if any of your distributor friends try to make this argument, you just tell them the following: 1) retail winery’s are committed to ensuring the safe delivery of their product to legal age consumers (which is why we pay common carriers to confirm age upon delivery); 2) the Rowe case — while interesting — does not impact wineries in any way, shape or form; and 3) internet delivery of wine is not how most teenagers get their liquor — most get it from their parents.

Collection Device for Chewing Tobacco used under a Creative Commons License provided by midnightcom.