Oregon – The Next Round is Just Starting

With a new law allowing out-of-state wineries to sell directly to Oregon retailers, effective January 1, Oregon looked like a bright star in the winery self-distribution field. Oregon had chosen to level up, allowing both domestic and out-of-state wineries to sell direct to retailers. It seemed as if free trade in wine had arrived.

But, in a preemptive strike just before the New Year, the Oregon wholesalers decided that the new law was the perfect vehicle to attack central warehousing by Oregon chain retailers.

In an e-mail circulated in late December, the wholesalers told chain retailers operating in Oregon that “the central warehousing of wine by a retailer” was no longer allowed and that a “retail license does not allow the retailer to transport wine or beer from one licensed location to another, even if the two locations are owned by the same entity.”

Retailers, who had for years used Oregon wholesalers to import wine and then have it delivered to the retailer’s central warehouse for the retailer to transport it to their retail locations, found themselves scrambling when wholesalers refused to deliver wine to their warehouses, even before the new law took effect. This was not wine purchased in a direct sale between the out-of-state winery and the retailer, but wines imported by, and purchased from, the Oregon wholesaler, as had been done for years.

The regular readers of the ShipCompliant blog may recall that the issue of central warehousing by Oregon retailers was discussed extensively in a prior blog post titled “An Exchange on Central Warehousing”. While Oregon had no statute prohibiting the practice, the OLCC had enunciated the position that central warehousing was not consistent with its regulations. However, the blog post carefully analyzed the Commission’s position and found it unsupported by law or logic.

For retailers in Oregon, the OLCC’s position was strange because many of the chain retailers had been receiving wine into their central warehouses and delivering to their own stores for YEARS. Some of them had letters from the Commission specifically approving the practice. The Commission took no steps to revoke these prior letters and let the practice continue.

So the wholesalers took it upon themselves to see if they could end retailers’ practice of central warehousing. While not articulated directly, the wholesalers are apparently relying on the provisions of the new wine self-distribution law to claim the practice is now outlawed. First, the new law does require that wine purchased direct from a winery must be received at a premise with a license endorsed to receive direct sales. [Section 2.(5) of HB 2677.]

But does that mean that the wine, during transit, must always stop at a licensed location? Could the wine be stored and transported from an unlicensed location, such as a central warehouse, before coming to the premises with the license with the proper endorsement?

Second, the new law in Section 2b contains provisions relating to who may ship wine under this new permit. Apparently the wholesalers believe that since retailers are not mentioned as one of the licensees who may transport direct sales wine in this section, retailers may no longer transport or ship wine at ANY TIME, even between their own stores, a practice that had been allowed for years. Again, it is not clear that the new law dealing specifically with direct sales by wineries to retailers was designed to limit retailers’ rights to transport or ship their own inventories of wine. Apparently the struggle to define who can ship wine, and under what circumstances is now open for debate.

The OLCC has just convened a rule advisory committee this week to help draft the final regulations to implement the both Wine Direct Shipper and Wine Self-Distribution permits, with formal rulemaking to follow this spring. We can expect round two to be exciting as the wholesalers decided to open it with a quick punch before the bell.

1 Comment

  1. The attorney firm representing Wine.com is also the firm representing the Oregon Wine Board, unless things have changed recently. Also, the OLCC should watch their back, the Wholesalers are planning on suing them this year or next to open up the hard liquor trade and open retail in Oregon to large discount retail stores. This information comes from reps for a large Oregon wine and beer wholesaler. Middlemen are not ordained by a supreme being.

    By the way, Oregon wineries are a little slow figuring out that they are being taken advantage of. The recent law that requires taxes or fees to be paid on wine shipped within the state proves it. Supposedly, this was to bring us in line with reciprocity requirements, however, I believe that it is the first step in curtailing wine shipments.

    Also, what is the lobbyist for the Oregon Wholesalers, Paul Romain, doing still being a lobbyist? He has repeatedly violated Oregon lobbying ethics, and encouraged legislators to do so themselves. He has been caught a number of times. In fact, if he is an attorney, he should have been brought up on ethics charges before the bar. Several years ago, he had his underage daughter order wine from a California winery via UPS. When the wine arrived, she signed for it and took possession, without having her age checked. Mr. Romain(e) then testified of this to the Oregon legislature in an attempt to stop wine shipments into Oregon.

    If he is or was an attorney at the time, does this signify that he encouraged her to break the law? Since UPS does not deliver inside the home with a signature, did his daughter and or he take possession? That should have been contributing to the delinquency of a minor and minor in possession, both illegalities in Oregon, and against the rules of the bar. Yet no one, from the legislature on down, including law enforcement, stepped up. Perhaps this one deserves more investigation, in order to clear his name or perhaps to censure him or worse.

    Bush league politics, but, hey, that’s Oregon.

    The wineries need to grow a spine.

    P.S. please edit this well, as I am not self-employed. I would like my name withheld. I do not wish to be sued. These various situations could use some investigation, however, by someone well conversant with the laws of this state.

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