Archive for April, 2010
Comprehensive Alcohol Regulatory Effectiveness (CARE) Act of 2010 Introduced
April 16th, 2010
As expected, the Congressional subcommittee hearing on Legal Issues Concerning State Alcohol Regulation has been followed by a House bill. H.R. 5034 was introduced yesterday by Representative Bill Delahunt (D-Mass.) with support from the National Beer Wholesalers Association (NBWA). The bill is also called the "CARE" (Comprehensive Alcohol Regulatory Effectiveness) Act of 2010, and Wine & Spirits Daily posted a copy of it on their site.
It is the purpose of this Act to—
(1) recognize that alcohol is different from other consumer products and that it should be regulated effectively by the States according to the laws
thereof; and
(2) reaffirm and protect the primary authority of States to regulate alcoholic beverages.
The bill would amend both the Webb-Kenyon Act and the Wilson Act to “support State based alcohol regulation, to clarify evidentiary
rules for alcohol matters, to ensure the collection of all alcohol taxes, and for other purposes.”
The Wine & Spirits Wholesalers of America (WSWA) applauded the legislation, saying
It is important that states retain their constitutional power to regulate the distribution of beverage alcohol and are able to fend off litigation, which serves to destabilize or destroy that authority. Although we may oppose direct shipping and self-distribution as a matter of policy, our goal is not to overturn existing state laws. We simply believe the proper forum for resolving legitimate differences over these issues is in the state legislatures – not the courts.
We will have more coverage of this bill as the story develops.
Read more:
Wine & Spirits Daily (subscription required)
Massachusetts will not appeal Family Winemakers decision
April 13th, 2010
Massachusetts Attorney General Martha Coakley will not appeal a January Federal Appeals Court decision upholding an earlier District Court decision which overturned the 2005 direct shipping law. In January, the 1st U.S. Circuit Court of Appeals upheld the 2008 district court ruling that found that the state law governing direct-to-consumer shipments by wineries was unconstitutional.
The court said the law has a discriminatory effect on interstate commerce because it favors instate interests by preventing direct shipments of nearly all out-of-state wine to Massachusetts consumers while allowing direct deliveries by all Massachusetts wineries.
The flawed shipment law provided that only wineries that produce less than 30,000 gallons a year and had not used a wholesaler for distribution in the last six months could ship directly to local consumers. The wholesaler backed law was enacted in 2005 and vetoed by then Governor Mitt Romney. It was enacted over his objection in 2006.
The Massachusetts Legislature is now considering legislation that will mimic the model direct shipping law which will establish a new regulatory framework for shipments by all wineries, large and small, including licensing, reporting and tracking requirements.
The Joint Committee on Consumer Protection and Professional Licensure in February reported favorably on legislation submitted by Senator Robert O’Leary (S 176) and Representative David Torrisi (H 317), two long time supporters of the model legislation. These two bills were combined into a single committee bill, H 4497. H 4497,”An Act regulating the direct shipment of wine”, has been referred to the House Committee on Ways and Means. It provides for a $100 per winery licensing fee, requires monthly reporting and tax collections, limits shipments to four cases per consumer per year per winery and establishes stiff penalties for noncompliance. The bill also attempts to address a cost-prohibitive issue that has kept common carriers such as FedEx and UPS out of the delivery market.
Wine Institute is currently working with the House Ways and Means Committee to improve the bill by addressing the common carrier issue and the four case limit. Once the bill clears this House committee, it will likely be approved by the full House.
-Carol Martel, Counsel for the Northeastern States, Wine Institute
New Hampshire Updates Monthly Reporting Form
April 9th, 2010
The New Hampshire Liquor Commission has just established a new fax line dedicated to direct shipping. Direct Shippers should fax their monthly report to the new fax number 603-271-8424 on or before the 10th of the following month. Direct Shipping Reports must be filed each month regardless of activity. Wineries with no shipments to report are encouraged to email their reports as attachments to directshippers@liquor.state.nh.us instead sending via fax. The Direct Shipping Monthly Report form has been updated with the new fax number and is posted on the Wine Institute website. Should you have any questions please contact Annie Bones, Wine Institute’s State Relations Coordinator, at 415-356-7530 or abones@wineinstitute.org.
by Annie Bones, State Relations – Wine Institute
Possible Effects of Recent Congressional Hearing on Direct Shipping
April 6th, 2010
You may have seen reports about a recent U.S. Congressional subcommittee hearing on “Legal Issues Concerning State Alcohol Regulation.” The hearing was important for anyone concerned about direct-to-consumer wine shipping since a primary question was whether federal courts should be stripped of their authority to strike down state alcohol laws that discriminate against out-of-state businesses—the very issue at the heart of the Supreme Court’s decision in Granholm v. Heald.
Click image to view video (RealPlayer required)
The hearing followed a reportedly aggressive lobbying campaign by the National Beer Wholesalers Association (NBWA). The common speculation is that NBWA is concerned that large retailers and global brewers are trying to put beer wholesalers out of business, and that litigation over self-distribution—Costco v. Hoen and a recent lawsuit in Illinois over whether Anheuser-Busch can obtain a wholesaler permit—is a particular threat to their state monopoly pricing power. The undertone of the NBWA effort is that the industry needs to return to a simpler time when the 21st Amendment meant what the wholesale tier thought it did, before the Supreme Court had a chance to weigh in and reset the balance.
While the wine industry has not always benefitted from court decisions, the federal circuits and the Supreme Court have for more than 40 years consistently sought to weigh the interests of states and the market carefully when examining state alcohol laws. Under this court precedent, states have broad authority under their police powers—their ability to protect the public—and the 21st Amendment to regulate the movement and sale of alcohol beverages. But they cannot use state power to discriminate against interstate commerce or to protect in-state monopoly behavior. Despite NBWA’s apparent beliefs to the contrary, there is no evidence that courts have abused their power of judicial review in any way that would justify the blunt reconfiguration of the relationship between federal and state law.
Not that all the state regulators who testified at the hearing would agree. The chairman of Michigan’s Liquor Control Commission offered completely unsubstantiated testimony that because of litigation, direct shipping is a free for all, allowing out-of-state wineries to deliver wine into Michigan on the “honor system,” and resulting in the loss of millions in uncollected tax revenue. This position is questionable since in the wake of Granholm states have more aggressively regulated shipping and have established comprehensive systems of licensing and compliance.
Apart from the fact that state licensing systems make it easier for states to determine whether alcohol is contraband—wine can only be shipped by licensees—Michigan has at least two substantial hammers to ensure their state direct shipping laws are followed. The 21st Amendment Enforcement Act allows states to file for federal injunctions against out-of-state businesses that ignore their laws, and Alcohol Tobacco Tax & Trade Bureau (TTB) policy provides TTB authority to punish federal basic permittees, such as wineries, that violate state law.
Whether the subcommittee hearing will lead to legislation is anyone’s guess. But should a new federal law along the lines sought by NBWA come to fruition, the impact could be substantial for winery direct-to-consumer shipping. States would be free to rewrite their laws to discriminate against out-of-state wineries and subsidize local monopoly behavior. Such a federal law would be an open invitation to roll back the gains wineries have spent nearly two decades fighting to achieve.
Virginia Passes Fix-It Bill for Third Party Shippers
April 1st, 2010
Wine Institute Eastern Counsel Terri Beirne has been working since July 2009 with the Virginia ABC Board, and representatives of Wine America and the Virginia wineries to resolve problems created by Virginia ABC Circular Letter 09-05. That Circular prohibited Virginia direct wine shippers from using any third-party service providers, namely fulfillment or pick and pack warehouses. To resolve this problem, Wine Institute drafted legislation and identified sponsors in the 2010 General Assembly to permit a third party, under the direction and control of a Virginia wine shipper license, to solicit and receive orders for wine, and to pack and ship wine.
Like sausage, the bill that started in Virginia was quite different from what passed. Most importantly, the new law allows wine shipments into Virginia from out-of-state shipper licensee through an “approved fulfillment warehouse.” The ABC is charged with developing regulations governing such approval. They will require the fulfillment warehouse to: 1) show ABC its home state license; 2) to maintain/give records that the ABC will describe; and (3) demonstrate it has a contract with a wine shipper licensee designating that fulfillment warehouse as its agent. Wine Institute will actively participate in the creation of these regulations, but it is unlikely they will be finalized before July of 2011.
The new law also creates a Virginia fulfillment warehouse license, as well as a Virginia “marketing portal” license. These two new licenses are available only to agricultural cooperatives (non-profit associations recognized by the Virginia Agricultural Cooperative Act of 5 or more growers within Virginia) operating under the direction and control of a Virginia wine shipper licensee. On behalf of wine shipper licensees, the fulfillment and marketing portal licensees can pack and ship wine for wineries/retailers, or solicit and receive orders for wine through an Internet site.
Virginia continues to permit wineries licensed as Virginia direct wine shippers to offer their wines to Virginians via their web sites. It also continues to allow retailers licensed as Virginia direct shippers to market their own inventory on a web site. However, the new law prohibits any marketing on web sites of wine not owned/possessed by the web site owner, unless done by a Virginia agricultural cooperative licensed as a marketing portal.
Unfortunately, the new law (resulting from HB 279, HB 630, SB 483 and SB 590) also raises the annual license tax for Virginia wine shipper licensees from $65 to $95. It will take effect on July 1, 2010, at which time Virginia ABC will begin to draft the regulations.
-Terri Cofer Beirne, Eastern Counsel, Wine Institute
