In the quickly evolving world of third party wine marketing, it’s important that marketers and licensed sellers work together in such a way that puts the licensed seller in full control of all aspects of each transaction. One of the most important elements of control is the concept of acceptance.

Why Acceptance?

The fundamental concepts behind third party marketing are quite simple on the surface: A third party provider (TPP) places and merchandises products from licensed wineries on its website, mobile application or platform, then solicits requests from consumers who would like to purchase the products, and passes the request on to the licensee for final sale and fulfillment.

Below the surface, the process can be much more complex. Technology has advanced to a point where almost all aspects of third party sales can be completely automated. For example, all of the following functions can be completed in real-time within seconds of the consumer actually clicking the button to complete/submit their order:

• Third Party Providers (TPPs) can dynamically display product information that licensed sellers have authorized for placement
• Inventory levels can be fully synchronized and reserved
• Sales tax can be calculated precisely based on the licensed seller’s tax preferences
• A comprehensive compliance check can be run against the licensed seller’s permits and volume from other channels
• Consumer age can be affirmed and validated
• Credit card funds can be authorized and reserved
• Orders can be released to the licensed seller’s preferred fulfillment location

In the past, many of these steps were typically carried out through some combination of phone, fax, snail mail, carrier pigeons, smoke, and mirrors. But today, as TPPs increasingly look for a world-class quality of service for their customers, automation and efficiency are paramount.

At the core of compliant third party marketing is the notion that licensed sellers are always fully in control of all aspects of each transaction. Although one could probably argue that the order-acceptance process could also be established contractually, we believe that it’s important for the licensed seller to always have an option to interrupt the automated flow so that they have every confidence in the orders that are fulfilled on their behalf, prior to payment capture and fulfillment.

Another significant consideration is that regulatory agencies place tremendous importance on this step. In its October 2011 Advisory on the issue of Third Party Providers the California Department of Alcoholic Beverage Control wrote, “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.” It makes sense that regulators want to ensure that there is a licensee involved that they know is in control and that they can hold accountable for orders that are shipped into their state.

The Nuts and Bolts

An easy way to implement an acceptance mechanism is for the TPP to send an email with the order requests to the licensee for their review. Licensed sellers can then review the order details, and will likely consider the following when evaluating whether or not they would like to accept or reject the order:

• Compliance: Has this order request been checked for compliance, and aggregated against my other order sources (my winery website, wine club, tasting room, and phone orders)? Has the consumer’s age been affirmed and/or validated using an online age verification service.
• Pricing: Are the prices for the requested items within the predetermined ranges I established with this TPP?
• Inventory: Do I have sufficient inventory for these items to fulfill this request?
• Advertising Fee: Is the advertising/customer acquisition fee (if applicable) for this order request within the predetermined range that I established with this TPP?
• Sales Tax: Has the appropriate amount of sales tax been collected based on my tax preferences in the destination state?

If the answer to all of these questions is yes, then the licensee should have no reason to reject the order requests, and can therefore feel comfortable accepting them. Once the requests are accepted by the licensee, the orders can be released to the designated fulfillment location, and payment can be captured (note: payment should ideally be authorized at the time of transaction, but captured after acceptance and fulfillment).

The acceptance email can be implemented in a way that batches order requests over set periods of time (daily, twice/daily, every 4 hours, etc.). Each licensee may have different preferences about both the timing of the emails (during local business hours, for example), and the review period (4 hours, 8 hours, etc.), based on their desired level of control. This preferences-based method of acceptance is what we implemented into ShipCompliant’s MarketPlace platform, as we believe it provides a good amount of flexibility for licensed sellers.

In summary, the relatively straightforward process of creating an acceptance mechanism can really go a long way towards establishing the most important regulatory requirement for working with TPPs — licensee control. As wineries more and more look to work with TPPs that complement their brand and their direct to consumer strategy, relying on a robust and consistent acceptance mechanism becomes increasingly important.

For most small and medium sized wineries, the path to increased sales, increased margins and brand growth is direct-to-consumer sales. Yet, we recognize that the wine industry is at the tail end of the market expansion that resulted from state-based regulatory changes that came in the wake of the 2005 Granholm v. Heald US Supreme Court decision. When and if Pennsylvania and Massachusetts open their borders to direct to consumer shipping, all significant states will be open to producing wineries for direct-to-consumer sales.

WHAT NEXT?

We believe that after all the significant states open to direct-to-consumer sales, the next and most important opportunity for wineries to expand direct sales and attract new customers will result from the expansion of TPPs.

First, we want to be clear what we mean by a TPP. Flash and private sales sites, community buying operations, product advertising platforms, collective tasting rooms, multi-brand company websites, and other online wine marketers make up this category. This sector of the market has been limited, as many potential TPPs have stayed away from the wine industry because of regulatory uncertainty.

That uncertainty is diminishing and new opportunities are emerging.

NEW REGULATORY GUIDELINES ON THIRD PARTY PROVIDERS

The most important development that will lead to reduced uncertainty in the realm of online wine marketing was the issuance of guidelines in November on licensee (winery and retailer) and TPP interaction by the California ABC. This set of guidelines described the process by which funds need to be transferred and controlled, how wine offers must be structured, and how acceptance and fulfillment of orders must be undertaken in order for the collaboration between licensed wineries and importers and TPPs to be considered compliant with California ABC regulations and state laws.

In short, the CA ABC wants to ensure that the licensee is in full control of all aspects of each transaction, and that the licensee will ultimately be held accountable for any actions by the third party that is soliciting order requests on their behalf. It’s worth noting that this advisory is obviously California-specific. However, it serves as a great framework for other states to contemplate the issues of third-party marketing and hopefully each state will take a similarly collaborative approach.

While complex, this new set of guidelines by the California ABC does put in place a path to growth and innovation in the online wine marketing arena. This opening for Third Party Providers and online marketers could not have come at a better time. There are notable signs of recovery in the wine market. Additionally, the oversupply of grapes and bulk wine that has plagued the industry for the past few years appears to have dried up. The combination of fewer states left to open up for direct shipping and the need for small and medium sized wineries to continue to increase their customer base means that there is great potential for innovative marketing approaches.

A NEW SERIES OF BLOG POSTS ON THIRD PARTY PROVIDERS

We believe that great innovations in wine marketing will come via collaborative marketing efforts between TPPs and wineries that will help reach new and larger numbers of wine buyers. With this in mind, we are planning to publish a series of blog posts that focus specifically on the issues surrounding Third Party Providers and how licensed sellers can work with them efficiently, compliantly and profitably. We look forward to generating discussion on this important issue and further clarifying this new landscape for wine sales and marketing.

We’ll start the series with some of the questions that we addressed at the NABCA Legal Symposium, but also would love to hear what your biggest questions are. If you have questions, comments, or suggestions, please email us at blog (at) shipcompliant.com .

The past year demonstrated the continuation of certain trends and the emergence of another that we believe will carry forward in 2012. The trend of more states opening their borders to the direct shipment of wine from other states continued steadily. Maryland and New Mexico both opened their borders to permit-based direct-to-consumer shipping in 2011, a continuation of a movement toward regulated consumer access to wine that began in 2005 with the Granholm v. Heald Supreme Court decision. Tennessee also saw a change in their law in 2011 that made the entire state “wet” for direct shipments from wineries.

The past 12 months also saw an increase in new “Third Party Providers” that help wineries market their products to a broader collection of consumers. Either as flash sites, wine product advertisements, or multi-offer marketplaces, these new entries into the wine market were helped along by a new California Department of Alcoholic Beverage Control (ABC) Advisory that set down specific rules as to how suppliers and non-licensed Third Party Providers can work together compliantly.

Finally, 2011 demonstrated that various forms of privatization of the sale and distribution of wine and spirits in control states are an important trend to watch. The passage of Initiative 1183 in Washington State that took the sale and distribution of spirits out of the hands of the Washington Liquor Control Board was the most tangible example of the privatization trend.

What To Expect in 2012

Direct-To-Consumer Shipping
Winery-to-Consumer shipping laws will continue to be modernized in those now few states that continue to prohibit interstate shipping. We expect New Jersey, the most important wine consuming state currently outlawing interstate shipments, to pass legislation allowing some form of direct shipments to consumers. Currently, a bill working its way through the legislature would allow all wineries making up to 250,000 gallons annually to obtain a direct shipment permit. The capacity cap of 250,000 gallons will be a point of concern, but wineries should expect passage and should be prepared to ship to New Jersy consumers in 212. The bill, which has passed the senate, is expected to be voted on in the assembly before the close of session tomorrow, January 10th.

Massachusetts too has seen a number of direct shipment bills introduced over the past couple of years, but none have found their way to the Governor’s desk. Recently, however, Governor Deval Patrick put a spotlight back on the issue by saying in a radio interview that he would sign legislation that permitted direct-to-consumer wine shipments. 2012 may be the year that Massachusetts finally opens to direct-to-consumer shipping.

Finally, Pennsylvania, traditionally one of the states where alcohol sales and distribution is most tightly controlled, may see a move to allow direct-to-consumer shipping. As talk continues in that state to privatize wine sale and distribution, there has also been much talk and the introduction of bills to “modernize” the PLCB, including allowing direct-to-consumer shipping, opening up a state with big consumer potential for wineries.

Modernized Marketing
Digital marketing in the wine industry has been behind the curve due primarily to the massive amount of regulations that govern the industry on a federal and state level. It’s unlikely that the wine industry will see significant deregulation. However, it appears that some clarity is coming to the issues that have historically deterred modern marketing methods.

Late in 2011 the California ABC issued an “Advisory” that spelled out the conditions under which non-licensed Third Party Providers (TPPs) and suppliers must arrange their relationships in order to work together. In a nutshell, the California ABC made clear that wineries and other licensed suppliers must always be in control of the transaction from approving each transaction to controlling the flow of funds. (Read our blog post that explains these new rules). While adhering to the new California ABC rules can be a complex task and require very specific actions and programming on the part of licensed suppliers and non-licensed TPPs such as flash sites and community buying sites, we believe this new clarity represents an important development for suppliers and marketers that will yield interesting developments in 2012

We expect to see a rise in the number of TPPs. In addition, we expect other states to follow California’s lead in issuing rules and regulations for how licensees and non-licensed marketers can work together to help market wine to consumers in innovative ways.

Privatization
With Washington State paving the way in the realm of privatization of sales and distribution with the passage of Initiative 1183 in November, we predict the privatization trend to regain momentum in 2012. Most eyes are on Pennsylvania where serious discussions are underway concerning the privatization of the sale and distribution of wine in that highly controlled state. Virginia too has seen discussions in the past years concerning the merits of reforming its alcohol control system. Meanwhile, in Michigan a task force has been empowered to look at updating its alcohol beverage laws.

This slow moving trend toward privatization, if it continues and gains more momentum, could lead to significant changes in the area of wine sales and distribution and the compliance measures that suppliers must undertake.

Federal Action on Wine Sales and Distribution
In early 2011, with the introduction of H.R. 1161 (read our series on the CARE Act here) in the House of Representatives, it looked like supporters of federal legislation that would give states greater control over how they can regulate alcohol and overcome judicial rulings that have put limits on state powers, would push hard to see this bill passed. Yet, H.R. 1161 garnered fewer supporters in the House than a similar bill, H.R. 5034, gained in 2010. Furthermore, no hearing was held in the House Judiciary Committee on H.R. 1161 and no Senate sponsor was introduced.

This bill, opposed by all supplier organizations and by retailers, has another year to gain more support and move through the legislative process. Most in the industry are taking a wait and see attitude on H.R. 1161 to determine its fate, but it seems unlikely that the bill will move on to President Obama’s desk in 2012.

Finally, federal legislation is moving forward concerning the United States Postal Services, and it could have long-term effects on the wine industry. The new bill moving forward is the 21st Century Postal Service Act 2011. If enacted as currently written it would allow the United States Postal Service to deliver wine to consumers and compete with Federal Express and United Parcel Service.

As always, ShipCompliant will continue to watch the political and regulatory landscape throughout the coming year and will work to keep you up-to-date on important changes that impact your ability to market and sell wine.

However, anybody that has operated as a TPP in California has done so under a great deal of uncertainty ever since the issuance by the California Department of Alcoholic Beverage Control (ABC) of an advisory in June 2009 that questioned the degree to which TPPs and wineries utilizing their services were acting in accordance with the laws and regulations of California. Most of that has changed with a new advisory letter issued today by the California ABC that provides clear guidance on how wineries and TPPs can work together.

This article lays out the key concepts every licensed seller (wineries and wine retailers) should understand and adhere to in order to work with non-licensed TPPs in a compliant fashion. We see this new advisory by the California ABC as a critical new document that will have a big impact for wine suppliers, consumers, and advertisers alike.

KEY CRITERIA FOR LICENSED SELLERS WORKING WITH THIRD PARTY PROVIDERS

Criteria #1: Placement & Pricing

What the Advisory says: “all sales transactions involving Third Party Providers must ultimately be conducted by and under the control of a licensee. This includes decisions concerning the selection of alcoholic beverages to advertise or offer for sale, the pricing of those beverages, and the ultimate acceptance and fulfillment of the sales transaction.”

Best Practice: When engaging a TPP, the licensed seller should monitor how their products are being represented, and should also communicate to the TPP an allowable price (or price range) for advertisement to the consumer. Sellers should also communicate to the TPP the states in which they are licensed to ship so the TPP can filter products by the consumer’s state and also show the list of available states for each seller.

Criteria #2: Transparency

What the Advisory says: “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.”

Best Practice: TPPs should clearly show to the consumer, prior to checkout, the name of the licensee for the transaction. For example, “This product is sold and shipped by Winery A, Sonoma, CA”. The licensee name should also be presented to the consumer on any generated consumer invoices.

Criteria #3: Acceptance

What the Advisory says: “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.”

Best Practice: A good mechanism for ensuring acceptance is a batch email that is sent out on a periodic (daily or semi-daily, for example) basis. The email would contain the order request information and details, and the seller would have the opportunity to reject or accept the orders by responding to the email, or clicking on an accept/reject button. If a comprehensive compliance check has already been run against the seller’s shipping license, then the seller would likely not have many reasons to reject the requests.

Criteria #4: Fulfillment

What the Advisory says: “Licensees must also be responsible for, and must control, the fulfillment of orders and the shipment of alcoholic beverages from the licensees’ licensed premises or other authorized shipping point (such as a licensed public warehouse).”

Best Practice: Following the acceptance process, the seller then provides instructions for releasing the order to fulfillment. Licensees should ensure that the wine is shipped either from their licensed premise, or a licensed warehouse. The wine is then shipped, and a shipping notification is sent back to both the seller and the TPP. Following shipping notification, payment is captured.

Criteria # 5: Payment and Disbursement

What the Advisory says: “The control of funds from a transaction involving the sale of alcoholic beverages constitutes a significant degree of control over a licensed business. As such, while a Third Party Provider may act as an agent for the licensee in the collection of funds (such as receiving credit card information and securing payment authorization), the full amount collected must be handled in a manner that gives the licensee control over the ultimate distribution of funds. This means that the Third Party Provider cannot independently collect the funds, retain its fee, and pass the balance on to the licensee. The Third Party Provider should pass all funds collected from the consumer to the licensee conducting the sale, and that licensee should thereafter pay the Third Party Provider for services rendered.”

Best Practice: At the time of transaction, payment is authorized, but not captured. Following shipment notification, payment is captured, and funds settle either directly to the seller, or into a trust account that is controlled by the seller. The funds can then be disbursed to the parties (for advertising fees, fulfillment fees, technology fees, etc.) from the control of the licensed seller.

The new criteria for licensees working with TPPs is a paradigm shift that will work its way through the industry over the next few months. However, we believe that as licensed sellers and TPPs understand the change and put in to place mechanisms to insure they are operating compliantly, the new rules will help both TPPs and licensed sellers operate with certainty, at least in California.

It is important to understand that this new criteria only applies to licensees in California. However, California’s regulatory system often acts as a benchmark for regulators in other states and we will be watching closely to see how other states react to this collaborative effort between the ABC and the working group of industry experts it established to provide recommendations on the issue of TPPs in California. It should be noted that this new CA ABC advisory was issued today in the midst of a meeting of the National Conference of State Liquor Administrators (NCSLA) meeting in San Francisco. So, regulators in most states are now well aware of the new California advisory and the process they used to come to the solution.

In the end, what’s important for licensees working with TPPs to understand is that it is the licensed seller (the winery or retailer) that is ultimately responsible for the actions of the Third Party Provider, which makes it in the best interests of the licensee to be sure the TPP understands these new rules and that they are in compliance with them.

California ABC Advisory

Activities Requiring Licenses: The Department describes when third party providers require a license. In CA a license is required when a business sells (transfers title), solicits a sale or delivers alcohol pursuant to an order. (B&P Code 23025) If interpreted according to its plain language, the definition of sale would require the following types of businesses to obtain licenses to sell wine: delivery companies, credit card companies that offer wine to certain cardholders, banks with loyalty programs, florists that offer wine through retail partners, airlines, and many more. To avoid opening Pandora’s box, ABC offers some exceptions. ABC allows a delivery company under the express direction of a licensee to operate without a license. The Advisory does not offer the same exception for a website that makes an offer to sell at the direction of a licensee. However, if a website merely publishes an offer made by a winery this would not be a solicitation by the web provider. If ABC were to hold otherwise, every media publication in California accepting winery advertisements would require a license. The Advisory does make clear that when selecting a marketing service provider, the winery or licensee must retain control of business decisions and core operations such as pricing, making offers, transferring title and directing delivery.

Tied House Risks: Beyond the cautions on unlicensed sales, ABC reminds wineries that they cannot pay retailers for advertising. Wineries cannot pay online storefronts licensed to sell as retailers for loading content, posting any material, or any advertising whatsoever. The retailer only can receive money from its markup and sale of the wine products. In some instances, the winery can pay for additional services such as age verification and compliance services.

Nothing is Free: ABC reminds industry that no free goods or premiums may be provided in connection with the marketing and sale of alcoholic beverages. This includes free shipping. Shipping may be included the price but it cannot be offered as free shipping.

Consignment Sales: Federal and state beverage alcohol laws prohibit consignment sales. Attempts to improve inventory management through just in time logistics can be problematic for innovative service companies. A licensee must sell alcoholic beverages to which they have title. Inventory cannot be returned if unsold. Any just in time delivery solutions should be carefully examined to ensure that the transaction is not a disguised consignment sale.

The web of federal and CA law is full of traps for the unwary. ABC’s advisory identifies many of the traps without offering solutions. Businesses must examine the totality of the circumstances and ensure that the essential elements of each transaction and control of these elements rest with licensees.

This analysis was authored by Susan Cagann, Special Counsel at Farella Braun + Martel LLP.  Susan will be speaking on the subject of marketing and retail agents at ShipCompliant’s Compliance Seminar and Users Conference June 11th in Napa, CA.

Re-posted with permission from Farella Braun + Martell

CABC – Advisory Third Party

The tax increase is part of voter-approved Proposition 1A, a budget package designed to increase state revenue by $16 billion throughout the next 2 – 3 years. Intended to be a temporary tax, “The 1% tax rate increase will expire on either July 1, 2011, or July 1, 2012, depending upon whether the voters approve the proposed Budget Stabilization constitutional amendment in a statewide election to be held on May 19, 2009”.

All suppliers licensed as Wine Direct Shippers in California are affected by this increase, as payment of sales and use tax is a requirement of the license. The new state tax rate will be raised from 6% to 7%, making the total of all state-wide tax rates, 8.25%. The rate of 8.25% is comprised of three separate taxes, which apply to the entire state: 7.0% “state” tax + 0.25% “county” tax + “combined state and local” tax of 1.0% = 8.25%.

In addition to the 1% state tax increase mentioned previously, there are also some district tax rate updates, which apply to the following cities and counties:

• The following cities in California have updated their local tax rates: Arcata, Arvin, Campbell, El Cajon, El Monte, Eureka, Galt, La Mesa, La Habra, Oxnard, Pico Rivera, Port Hueneme, Scotts Valley and Trinidad
• The following counties in California have updated their local tax rates: Amador, Sonoma and Marin

Sales and Use Tax Rate Increases on April 1, 2009

A month ago at the ShipCompliant Users Conference, Matthew Botting of the California ABC revealed that many 17/20 permit holders were not fulfilling all requirements of the combination license and were instead operating more like 02 licensees because many were unaware that 17/20 permit holders must act as a bona fide wholesaler in order to comply with the provisions of the license. Please note that in order to operate as bona fide wholesaler, a 17/20 permit holder must sell to retailers, in general, at least every 45 days. Section 23779 provides, in pertinent part:

No wholesale license shall be issued to any person who does not in good faith actually carry on or intend to carry on a bona fide wholesale business by sale to retail licensees of the alcoholic beverage designated in the wholesale license, and the department may revoke any wholesale license when the licensee fails for a period of 45 days actively and in good faith to engage in the wholesale business…Sale by a wholesale licensee to himself as a retail licensee is not the transaction of a bona fide wholesale business.

For more information on 17/20 licenses or other California wine-related licenses, check out Matthew Botting’s presentation and slides from the 2008 ShipCompliant Users Conference.

The fundamental question is whether the decision in Granholm v. Heald that said states must treat in-state and out-of-state wineries evenhandedly should also apply to in-state and out-of-state retailers. R. Corbin Houchins recently made two posts (September 18th and October 5th) that do an excellent job of highlighting the legal questions that come into play when attempting to extend Granholm to retailers. In his October 5th post, Mr. Houchins indicates his disagreement with the reasoning of the recent and important Arnold’s Wines v. Boyle opinion, which upheld discrimination against out-of-state retailers in New York.

There is a very interesting recent article, with substantial background materials for lawyers who do not practice in the subject area, on FindLaw.com titled “The Fight Over State Laws Favoring In-State Alcohol Purveyors: Do Such Laws Violate the Dormant Commerce Clause?” that also examines the important ruling in Arnold’s Wines. This article is definitely worth reading.

The Court has had to examine the intersection between the dormant Commerce Clause idea and the Twenty-First Amendment a number of times. Two years ago, in the seminal case of Granholm v. Heald, the Court appeared to send a message that while the Twenty-First Amendment may indeed empower states in some ways, it does not trump the anti-discrimination, anti-balkanization norm of the Commerce Clause.

The federal district judge in the recent Arnold case in New York properly acknowledged the importance of Granholm. Nevertheless, the judge held that Granholm’s ban on state discrimination against out-of-staters applied only to state laws regulating producers of alcohol, not laws (such as the one at issue in the recent New York case) that regulated wholesalers or retailers.

The New York judge’s interpretation of Granholm is, I believe, in error.

The Arnold’s Wines case will likely impact current (Texas, California) and future (Illinois?) cases in the battle over retail to consumer shipments and could possibly end up in the Supreme Court, where a favorable decision could potentially open the legislative floodgates for retailers as Granholm did for wineries in 2005.

Doug:

First, anyone accusing you of being a traitor to the wine industry simply doesn’t know you or doesn’t care for honesty.

That said, I want to comment on your elequent plea for respecting the postion Colorado and other smaller state wine industries find themselves in vis a vis the current debate over direct shipping regulations.

First, with regard to the Granholm ruling, it strikes me that the ruling did not so much “reinforce” the validity of the 3-tier system as much as it simply concurred that it was a legitimate way for a state to structure the distribution of alcohol. By this I mean, it did not endorse the excusionary charachter of system, but rather acknowledged its legitimacy. This is important.

The idea that the state is preventing direct shipping by those that produce over a certain amount because it “values small businesses that stimulate agriculture” belies the facts and machinations in the direct shipping debate. Were direct shipping to consumers open to all wineries, large and small, there is no reason to believe that a small Colorado winery would be hurt by CA wineries of any size trying to attracte consumers to wine clubs or occassional Internet sales. In fact, being closer to the Colorado consumer than a CA or WA winery, the Colorado winery should have an advantage in reaching that consumers.

The bottom line is that production limits are approved by Wholesalers becauase it keeps the vast majority of direct sales from occuring while allowing in-state wineries that they rarely deal with to go about their business without criticizing wholesalers. As a bonus for wholesalers, it puts wineries in-state into conflict with out-of-state wineries that are prevented from entering the market via direct sales.

As for monopolistic tendencies, it is indeed easy to accuse wholesalers of being monopolies. But the idea that “the same can be said of the large wineries in California” just doesn’t wash for one simple reason: The Wholesalers benefit from STATE SPONSORED monopoly status. By dictating the use of the three tier system the States guarantee that a smaller and smaller group of wholesalers take a piece of every sale in the state. Yet, there are no provisions that they represent any winery that wants to sell in that state. If in addition there are production requirements on those that can sell direct in a state that has granted a monopoly to wine wholesalers many wineries will be prevented entirely from doing business in that state.

The State of California does not impose any regulations that result in CA wineries selling the vast amount of domestic wine in the United States. This difference in who imposes a monopoly is important.

If the concern is for fairness and a desire to see Colorado wineries expand and prosper there is a simple way to accomlish this: Allow wineries to self distribute in the state as well as sell direct to consumers. No one represents a brand better than the owner. But as long as the state imposes the 3-tier system, this can never happen because under Granholm if CO wineries can self distribute then out of state wineries must be able to also. Wholesalers would just as soon see small state wine industries disappear altogether than allow this sort of situation.

And this brings us to the idea that “Under the guise of “equal protection” as spelled out in the Granholm decision, their (those bringing suits) legal actions have the impact of squelching the advantages that state governments want to give small agribusinesses like wineries.”

If government and legislators were truly interested in giving small agribusiniess a hand up, they would ignore the demands and campaign donations of wholesalers and allow unrestricted direct sales and unrestricttd self-distribution in their states. It’s clear the legislators too would rather throw CO wineries and other small state wine industries under the bus before upsetting the antiquated but very profitable apple cart known as the state sponsored wholesaler monopoly, AKA “Three Tier System”.

In the end, the restrictions that states put on who can ship to consumers don’t merely inhibit the “Big Boys”. They inhibit the very small boys too, the very boys that most distributors don’t want anything do do with. But the big problem is that as long as the three tier system is imposed by the state, small industries like that of Colorado will be hampered.