Archive for September, 2006
TSA eases liquids ban, but wine bottles are still prohibited
September 25th, 2006
TSA announced today an ease on their ban on liquids, but don’t expect to carry on a couple bottles of your favorite Cabernet any time soon.
The Transportation Security Administration (TSA) announced today it is adjusting its total ban on liquids, gels and aerosols effective Tuesday, September 26. There are two significant changes: Travelers will be allowed to carry travel-size toiletries (3 ounce or less) that fit comfortably in ONE quart-size, clear plastic, zip-top bag through security checkpoints. Travelers may also bring items, including beverages, purchased in the secure, boarding area on-board the aircraft.
A response to the Family Winemakers lawsuit
September 24th, 2006
Doug Caskey, from the Colorado Wine Industry Development Board, responded to our post about the lawsuit in Massachusetts with a lengthy comment. I wanted to republish it in a new post because it is well worth reading.
At the risk of sounding like a traitor to the cause of wine, free trade and the American Way, I would like to challenge the premises that underlie Mr. Kronenberg’s lawsuit against the revised wine shipping statutes in Kentucky. As a representative of the very small wineries in Colorado, the last thing I want to do is “protect and perpetuate a wholesaler monopoly at the expense of wineries seeking market opportunities,” as Mr. Kronenberg accuses the Kentucky legislature of doing. Yet, I take exception to his comment that we are “one national economic market.” As recent court rulings in Virginia and Michigan have shown, the local implementation of the three-tier system was reinforced, not invalidated by the Granholm decision, as long as the implementation is not discriminatory or preferential. States still have the right to regulate alcohol in a meaningful way that suits the “needs and desires” of their residents, as the language of the Colorado Liquor Code requires.
If a state chooses to impose size limits on certain privileges for liquor distribution or market access, that state may well be doing so because it has determined that small wineries have more difficulty getting their products through the three-tier system than large wineries with sales teams and marketing budgets. That state could be saying that it values small businesses that stimulate agriculture, and it should not have to defend that position against the legal whims of wineries that produce more wine in a year than the entire state. While the Family Winemakers of California represents the “smaller” wineries in that state, I doubt if many of Mr. Kronenberg’s members produce less than the entire state of Kentucky or Colorado or both states combined.
We should remember that prior to Prohibition and the 21st Amendment, the beverage alcohol industry was made up of small, local breweries and wineries in almost every community. The advent of the mega-breweries and corporate wineries was something that happened as a result of Prohibition. The 21st Amendment was designed to protect states against the liquor monopolies spawned in the void created by Prohibition. The framers of that amendment wanted to return to the alcohol industry model of the late 19th and early 20th Centuries. It is easy to accuse the wholesale industry of being monopolistic because a handful of companies dominate the market in every state. But the same can be said of the large wineries in California.
The grape growing industry did not disappear in California and New York as a result of Prohibition the way it did in most other states, such as Colorado. Our vineyards were replanted to peach trees. Consequently, California wineries, and certain breweries in St. Louis and Golden, were able to capitalized on the demise of the local wine industries and recover more quickly than those in the rest of the county. The wine industries in states other than New York, California and Washington are just now coming back from Prohibition.
So at this point in history when California’s wine industry, which has been growing nicely for 40-50 years, complains that states are discriminating in favor of small wineries, it is in truth asking the courts for special protections. In effect, the 40-50 year advantage that California has over wine industries in the rest of the country, during which time small wineries enjoyed special protections and privileges from the California government, makes them the monopoly now. Under the guise of “equal protection” as spelled out in the Granholm decision, their legal actions have the impact of squelching the advantages that state governments want to give small agribusinesses like wineries.
The economic reality is that large wineries can afford to navigate the spiffs and expenditures of the three-tier system. Just because few states have wineries that produce more than 20,000 gallons annually, or whatever number a state uses to define a small winery, imposing size limits on direct shipment or self-distribution is not an attempt to inhibit trade. It is an acknowledgement we are not starting with a level playing field.
To my friends (and I hope we remain friends, as this is a friendly debate) Paul, at the Family Winemakers, and Steve, at the Wine Institute, I call on you to recognize the historic disparity between where your industry is and where the industries are in Colorado, Kentucky, Missouri and other states. You have a big economic head start on the rest of us. Our attempts to limit how the “big boys” play in our states are not attempts to keep you out. They are the implementation of each state’s right to define the rules for the three-tier system within our state, to identify who is small enough to need help and who doesn’t. This is the American Way.
Arizona permit available, FedEx begins shipping
September 22nd, 2006
The new wine shipping laws took effect yesterday in Arizona. Arizona has posted the Application for Out-of-State Domestic Farm Winery or Domestic Microbrewery on their website. Currently, only wineries that produce less than 20,000 gallons per year can ship directly to Arizona residents. Wineries that produce more than 20,000 gallons must “Provide the names and addresses of the wholesalers licensed in this state through which you will ship spirituous liquor into this state.”
FedEx began shipping to Arizona from out of state wineries yesterday. The following is from their update:
FedEx is expanding wine shipping services to accept legal wine shipments to consumers into, out of, and within Arizona. The effective date is September 21, 2006. For those shipping wine to AZ consumers, please note changes on the State Pairing Guide.
https://www.dmz.fedex.com/cgi-bin/wineShipping.cgi?State=CA
For more info on shipping wine with FedEx: http://www.fedex.com/us/wine/
For more info on the new AZ direct shipping changes: http://shipcompliantblog.com/blog/?p=121 and http://wi.shipcompliant.com/Home.aspx?SaleTypeID=1
Kentucky appeals court ruling
September 20th, 2006
The State of Kentucky yesterday appealed the court ruling in August that struck down the interstate shipping ban in Kentucky. The State disagreed with the court’s finding that the in-person requirement for purchasing wine is unconstitutional. Thanks to the folks at Stoll Keenon Ogden for the tip and the insight. Their article was used a basis for the court’s finding that the in-person requirement was unconstitutional. It’s a great article that is well worth reading. As always, we’ll keep a close eye on this case as it will further slice and dice the Granholm opinion of 2005 that continues to shake out in the courts of Kentucky, Massachusetts, Washington, Texas, and many other states.
Family Winemakers sues Massachusetts over capacity cap
September 19th, 2006
In the previous post, we mention that a group sued Arizona over the discriminatory nature of their 20,000 gallon capacity cap. Now, the Family Winemakers of California, a group representing over 740 small and medium sized wineries, is suing the State of Massachusetts for the same reason. Paul Kronenberg, President of Family Winemakers, said the following about the 30,000 gallon production capacity cap in Massachusetts
Last year, the Supreme Court told Michigan and New York to stop the discrimination. But the Massachusetts legislators have chosen to ignore the Court’s message that we are one national economic market. State laws that protect and perpetuate a wholesaler monopoly at the expense of wineries seeking market opportunities and consumers seeking a wider choice in wine, run counter to the concept of free trade within the nation.
Read the full press release here.
Other hurdles in Massachusetts have effectively kept it closed for direct shipping to date. On top of the 30,000 gallon capacity cap, there is a burdensome 14 page permit application as well as a 240 Liter (26+ cases) per individual volume limit across all wineries. Similar to the rule in Indiana, this would mean the winery that ships the 27th case would be in violation. FedEx and UPS are not shipping to Massachusetts for direct sales.
New offsite rules take effect in Arizona on September 21st
September 16th, 2006
As we mentioned in June, the new laws for shipping into Arizona are scheduled to take effect on September 21st. However, the Arizona Department of Liquor Licenses and Control has not made available the forms or processes necessary for obtaining a permit and is not expected to until at least September 21st. Once the forms are available, only wineries producing less than 20,000 gallons (roughly 8,400 cases) can apply for a direct shipping permit. FedEx will begin shipping to Arizona on September 21st for permitted wineries.
As expected, a group will immediately challenge the new laws in court. Because the 20,000 gallon capacity cap will exclude 90% of wine produced outside of Arizona but include all but one Arizona winery, the rules are seen as discriminatory and in violation of Granholm. The lawsuit will be watched closely by everyone in the industry since several states have introduced similar capacity caps.
We’ll keep you updated as the permits become available and the lawsuit unfolds.
