April 28th, 2006
As you recall, Florida is currently open for wine direct shipping under the honor system. In the meantime, the Florida House and Senate are busy hashing out the details of what will become the permanent legislation in the Sunshine State.
HB 247 passed the Florida House Wednesday and now awaits the Senate. This bill would establish a cap where wineries that produce more than 250,000 gallons would not be eligible for a direct shipping license in Florida. According to the South Florida Sun-Sentinel, the cap was inserted as a result of a “Big-money lobbying campaign” led by non other than Miami-based Southern Wine and Spirits, who “has given $70,000 to the Republican Party of Florida so far this election cycle”.
A separate bill (SB 282) that does not include a production cap is ready for floor consideration in the Senate. The Federal Trade Commission recently weighed in on SB 282 with their Comment on Proposed Direct Shipment Legislation . This letter is worth reading in its entirety. Here is their conclusion (emphasis added):
Based on our review, FTC staff believes that, if enacted, SB 282 would enhance consumer welfare and allow Florida to meet its other public policy goals. By allowing interstate direct shipping, SB 282 likely would allow Florida residents to purchase both a greater variety of wines and many wines at lower prices. In addition, by requiring manufacturers to comply with certain regulatory requirements, SB 282 would allow Florida to prevent shipments to minors and to collect taxes on direct shipments. However, if SB 282 is amended to prohibit direct shipping by wineries producing more than 250,000 gallons of wine annually, as you suggest is being considered, such limitation likely would significantly reduce the benefits to competition and consumers that SB 282 otherwise would provide. We urge the Florida Legislature to take into account these likely effects on consumers when considering SB 282.
This letter makes a number of good points and also cites some great references. I was particularly interested in their argument that the 250,000 gallon (just over 100,000 case) cap would “significantly reduce the benefits to competition and consumers”. They mention that the cap would exclude in excess of 150 wineries in California alone
Although we take no position regarding the constitutionality of such a prohibition in light of the Granholm decision, we believe that such a prohibition likely would significantly reduce the benefits to competition and consumers that SB 282 otherwise would provide. In particular, limiting direct shipping in such a manner would reduce the variety of wines that SB 282 would allow Florida consumers to access directly. As discussed in more detail above, direct shipping allows consumers to purchase wines that may not be available in nearby bricks-and-mortar retail stores due to, among other things, limited shelf space at such stores. Although FTC staff has not undertaken a rigorous empirical analysis of the effect of a production-based limitation, information readily available to staff demonstrates the impact on variety that such a limitation would have. For example, a review of the survey of most popular wines of 2005 compiled by Wine & Spirits magazine � the same survey utilized in the 2002 and 2004 McLean Studies discussed above � indicates that 25 of the 50 most popular wines are produced by wineries with production in excess of 250,000 gallons per year. Thus, the production limitation being considered would prevent Florida consumers from direct access to half of the most popular wines identified in this prominent survey.
Although the FTC won’t comment on the constitutionality of the 250,000 gallon proposed cap – many other states have also introduced “small-farm” production caps – many opponents of such caps have argued that they will not hold up if challenged in court.