Posts from the Massachusetts Category
Notes on Wine Distribution v.32
February 4th, 2010
The latest version of “Notes on Wine Distribution”, by R. Corbin Houchins, is now available. Release 32 includes updates on legislation, litigation and general discussions on available distribution channels for wine. This release includes substantial changes, including new sections on age and identity, facial neutrality, and logistical support services, as well as updates to state summaries in Arizona, Delaware, Kansas, Kentucky, Maine, Maryland, Massachusetts, Montana, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Tennessee, Texas, Virginia, Washington, and Wisconsin. Read about these and other updates that affect the way wine is sold and shipped within the United States.
If you are at all interested in the shipping and distribution of wine, this is an excellent resource that is well worth reading. You can view the most recent version of the document anytime by visiting the ShipCompliant Blog and clicking the link located under “Compliance Resources”, or by visiting CorbinCounsel.com and clicking on the home page link, “Notes on Wine Distribution.”
High Fives in the First Circuit
January 26th, 2010
Justified jubilation greeted the 14 January 2010 decision of the United States Court of Appeals for the First Circuit, which affirmed the federal district court decision of 19 November 2008 in Family Winemakers of California v. Jenkins, invalidating the Massachusetts “volume cap.” (see previous post “Huge win for wineries, but can I ship to Massachusetts now?” )
Oddly enough, the appellate ruling may be more important outside Massachusetts than within. There are two reasons, one quite straightforward, the other less so.
The simple reason is that the First Circuit decision merely leaves things within the state as they have been since 18 December 2008, when Judge Zobel enjoined application of the state’s maximum volume requirement to “small winery” shipping licenses, which are necessary for sales directly to consumers. Since that order, wineries of all sizes, with and without Massachusetts wholesalers[1], have been eligible for the license. Nevertheless, the state is not practically open to direct shipment, because the major interstate carriers find the delivery vehicle licensing requirement too burdensome and wineries have no reliable way to know whether an order would be the 27th case of direct shipment wine purchased in the year by that consumer, putting the shipper in violation of a 240-liter limit. (Those obstacles, which were not involved in Family Winemakers, are described in a previous post “Why can’t I have a Boston wine party?”)
A more subtle reason is that the First Circuit has articulated an analysis, arguably even more favorable to trade than the decision it affirmed, that may prove persuasive in other circuits with challenges to volume caps and to other so-called facially neutral features that operate to the detriment of interstate trade. That aspect of the decision is well worth a closer look –though it does require striding into a bit of a legal thicket.
Which Yardstick?
Stripped to essentials, Family Winemakers is about choosing the proper test for determining the constitutionality of a state law that burdens interstate commerce in wine.
Before getting into the technicalities of constitutional tests, a little context may be helpful: As the readers of these blogs know, state laws that disadvantage interstate trade raise issues under the Commerce Clause of the federal constitution, which gives Congress power to legislate regarding commerce among the states. In subject areas, like wine distribution, where Congress has not enacted legislation that serves as a comprehensive regulatory scheme, states have some room for regulation, even if it affects interstate trade to a degree. However, the fact that interstate commerce is within Congress’s power to regulate means that in subject matter where it has not acted (where, in other words, its regulatory power is “dormant”) certain unwritten principles inherent in the Commerce Clause nevertheless limit state regulatory power. State laws that exceed those limits are said to offend the “dormant Commerce Clause.” As a leading case puts it, “The modern law of what has come to be called the dormant Commerce Clause is driven by concern about economic protectionism –that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.”
In Granholm, the Supreme Court famously invalidated Michigan and New York laws for violating the dormant Commerce Clause by reserving direct shipment privileges for home state wineries. Family Winemakers is one of the most promising among many lawsuits attempting to discern the core message of Granholm and apply it to different facts.
Why Granholm Doesn’t Provide All the Answers
Granholm dealt with laws whose “object and design” to discriminate against out-of-state wineries was “evident” from their text and which in fact did discriminate. The Court considered how the presence of those factors —intent to discriminate and effect of discriminating— affected the answers to two distinct questions.
The first question concerned the 21st Amendment and certain federal legislation, which, taken together, affirmed the right of states to regulate wine from outside the state as fully as wine produced in the state and declared it illegal to ship wine into a state in contravention of “any” its laws. Does that broad language, the Court asked, permit the states intentionally to discriminate against interstate commerce (as a literal reading might suggest)? After an extensive and somewhat controversial historical analysis of the federal statutes and the constitutional amendment, the Court answered “no,” concluding that the dormant Commerce Clause subjects alcoholic beverage regulation to the same tests of constitutionality as apply to laws governing other goods.
The second question was what test would apply. In Granholm’s analysis, the choice between the two relevant tests was obvious. As stated in a leading case:
[W]here simple economic protectionism is effected by state legislation, a virtually per se rule of invalidity has been erected . . . . But where other legislative objectives are credibly advanced and there is no patent discrimination against interstate trade, the Court has adopted a much more flexible approach . . . .
Having caught the two states before it red-handed at economic protectionism, the Court had no trouble applying the strict test, which invalidates a law unless the state clearly demonstrates with “concrete” evidence that it is necessary for an essential state purpose and there is no workable less-discriminatory means of achieving the purpose. Neither defendant state even came close to meeting that standard, with the result we all know.
So, great: No 21st Amendment immunity and a flunked dormant Commerce Clause test; commerce wins, grapes are freed. But what if the law in question were not overtly discriminatory? What if it treated all wineries alike and only incidentally burdened interstate commerce? Would it then receive the “more flexible approach?”
Pretty Faces
On its face, the law invalidated in Family Winemakers took no account of whether a winery were in-state or out-of-state. It was, in the phrase popular with its proponents, “facially neutral” as between local and interstate sellers.
Defenders of volume caps and on-site requirements argue that facial neutrality has two profound effects: For alcoholic beverages, it invokes 21st Amendment immunity from dormant Commerce Clause challenge, which was repudiated in Granholm for facially discriminatory laws; and, even if there were no immunity, it would require application of the “more flexible” test of constitutionality, under which a statute will be upheld unless the burden imposed on interstate commerce is “clearly excessive” in relation to the claimed local benefits, rather than the strict necessity test Granholm applied to facially discriminatory laws. Neither argument survived the First Circuit’s treatment of Family Winemakers.
Not a Vaccine
The district court judge had dismissed the immunity argument summarily, citing a passage in Granholm that actually refers to an extraterritoriality case in which the Court did not expressly reject immunity, but rather spoke of the need to “reconcile the interests protected by the two constitutional provisions” (i.e., the 21st Amendment and the Commerce Clause), and two post-Granholm decisions in other circuits that did not deal explicitly with the immunity issue at all. While her no-immunity conclusion seems sound, the opinion left room to argue that the lower court did not fully deal with the facial neutrality immunity argument.
The appellate opinion takes a different tack. First, the Court of Appeals articulates a more specific repudiation of a 21st Amendment immunity defense for all facially neutral laws, formulating a useful test: Even though the statute is “neutral on its face,” if its effect is to “change the competitive balance” between in-state and out-of-state wineries in a way that benefits local wineries and “significantly burdens” their out-of-state competitors, the result is the same as for facially discriminatory statutes in Granholm –no 21st Amendment immunity.
In reaching that conclusion, the First Circuit somewhat surprisingly begins by distinguishing[2] Granholm. That is, after admitting that Granholm dealt only with facially discriminatory statutes, the court set forth on its own to decide whether the 21st Amendment provided Massachusetts with immunity from dormant Commerce Clause challenge to a discriminatory statute everyone agreed was facially neutral. It nonetheless took guidance from Granholm in viewing the question as resolvable by historical context and in reading the 21st Amendment as preserving only the pre-Prohibition regulatory power Congress allows states under the Wilson Act and the Webb-Kenyon Act –i.e., the right to regulate out-of-state wine on the same basis as in-state wine, but not to discriminate against the former in favor of the latter.
By engaging in relatively extensive history-grounded analysis, the First Circuit has provided sound support for the proposition that Granholm’s no-immunity ruling applies to all discriminatory measures, whether overtly protectionist or facially neutral. Courts adjudicating laws that burden interstate commerce relative to local have in Family Winemakers well-expounded judicial authority for ignoring putative 21st Amendment immunity. On the other hand, extension of Granholm to different scenarios, no matter how persuasively reasoned, cannot forestall further argument over the “narrow Granholm” approach advanced by states and wholesalers, which would preserve pre-2005 law for every situation that does not exactly match Granholm’s facts.
Question and Answer
If immunity is out of the picture, the primary issue becomes how to test a statute under the dormant Commerce Clause –i.e., what questions should a court ask to determine whether a statute will be upheld or struck down? Family Winemakers follows prevailing Commerce Clause jurisprudence in recognizing the two possibilities noted above, a strict “per se” test requiring proven necessity or a more flexible balancing test.
The states and wholesalers argue that facial neutrality would, at least in the absence of proven intentional protectionism, automatically require the more flexible approach, known as the Pike test after the shortened name of the case that first formulated it[3]. However, the Pike test as developed in case law is not invoked by superficial characteristics.
As enunciated in Granholm and its progeny, the Pike test requires a two-stage inquiry. First, a court asks two questions: Does the challenged state law regulate “even-handedly” as between interstate commerce and local commerce? Is whatever burden it places on the former an “indirect” consequence of its pursuit of a legitimate local interest? Only if the answer is “yes” to both does one apply the balancing test, which asks whether the burden on interstate commerce is “clearly excessive” in relation to the legitimate state purpose. If the answer to that highly subjective third question is “no,” the state law stands. For none of those questions is the answer determined by facial appearance.
In the district court analysis, a law adopted for a protectionist purpose that has the intended effect of favoring in-state commerce relative to interstate cannot meet the even-handed regulation and indirect burden requirements for application of the Pike balancing test, and is thus subject to the strict necessity test employed in Granholm, irrespective of facial neutrality. Judge Zobel went on to buttress her ruling by declaring that that even if the law constituted even-handed regulation with only incidental burdens on interstate sellers, entitling it to application of the Pike test, it would still be invalid because it did not advance any local purpose (other than the illegitimate objective of protectionism). The court’s reasoning seems almost mathematical: As the Pike test preserves a statute only when its adverse impact on interstate commerce is not excessive in comparison to a legitimate local benefit, if its local benefit is zero, any burden is excessive, and Pike won’t save it.
Adding the “but even if” reference to Pike as insurance against reversal for applying the wrong test is de rigueur in the courts and good for the prevailing litigant in the case at hand. The district court approach does not, however, prevent argument that Family Winemakers is “really” a Pike balance decision because the statute’s “facial neutrality” should have averted application of the strict necessity test –i.e., the outcome is a simple failure of the state to make an adequate record of local benefit, correctible in future litigation.
Again, the Court of Appeals opinion has a slightly different slant. The appellate court regards application of the strict necessity test as unquestionable under Granholm when, as in that case, a statute is protectionist in both intent and effect. Probably the most significant aspect of the First Circuit opinion is the means by which it so classifies the Massachusetts law.
Put Away that Smoking Gun
If anything moderated pro-trade celebration of the district court decision in Family Winemakers, it was the concern that the record was so strong on protectionist purpose that the case might not serve as a highly useful precedent for other cases, whose records will mostly be at best ambiguous on legislative intent.
Judge Zobel placed great stress on what is by any standard a sensationally revealing legislative history. Senator Morrissey, who sponsored the legislation, is quoted at length in the district court opinion, but a short bite will serve here to illustrate the tenor: “[W]ith the limitations that we are suggesting in the legislation, we are really still giving an inherent advantage indirectly to the local wineries.” The court was also impressed by the fruit wine exemption, a product of lobbying whose sole purpose appeared to be shielding a large local winery from going over the cap by producing cider.
In the Court of Appeals, proof of protectionist purpose rests on a more broadly applicable base. The finding of discriminatory intent explicitly rests not on the “smoking gun” statements of legislators or lobbyists, which featured so prominently in the district court opinion, but on the appellate court’s reading of the statute itself. Close attention to the text revealed a volume cap at odds with prevailing industry classification of wineries as objectively large or small, or as able or unable to secure wholesaler distribution, as well as with the state’s own size demarcation for license fees. The court was particularly impressed by the facts that ultimately there was no winery size standard at all, given that non-grape wine volume would not be counted and that the fruit wine exemption allowed an over-30,000-gallon Massachusetts winery to enjoy “small” winery benefits. Revealing intent by a combination of textual analysis and reference to objective data should be applicable to other “facially neutral” restraints before other courts, without need for thrilling exposés.
Interestingly, the First Circuit’s discussion of what constitutes evidence of discriminatory intent includes the suggestion that putting forward palpably false claims of permissible purposes is itself evidence that the real purpose is impermissible. It would be charmingly ironic if the states’ and wholesalers’ practice of asserting that discriminatory statutes do not discriminate, were adopted to help small producers, and are indispensible for preventing a parade of horrible consequences resulted in judicial findings of protectionist purpose.
Objective data also underlie the First Circuit’s finding of burdensome effect. The court follows the approach of its petroleum product distribution decision, Exxon, when it says a statute is “plainly” discriminatory if its effect is to cause local goods to constitute a larger share, and goods with an out-of-state source to constitute a smaller share, of the total sales in the market –a demonstrable effect of the statute under consideration.
Once the statute was classified as discriminatory in purpose and effect, it became subject to the strict necessity test, with its “concrete record evidence” requirement, which the state did not attempt to meet. As the appellate court pointed out, the record revealed the opposite of necessity, i.e., the existence of a non-discriminatory means of helping wineries unable to secure wholesaler distribution –passing a direct shipment law based on the NCSL model bill, as he governor had urged– and no reason why that would have been unworkable.
Scaling Cherry Hill
The beneficial ruling from the First Circuit is all the more welcome in light of its earlier opinion in a failed suit challenging Maine’s on-site-only direct consumer sale law, Cherry Hill Vineyard v. Baldacci.
The Baldacci decision can be read in various ways and had been advanced by direct shipment opponents as recognizing a “no direct shipping market” defense to Commerce Clause challenge. In brief, the theory is that if no purchases in the state can be fulfilled by direct shipment, there is no market from which out-of-state wineries could be excluded or in which they could be disadvantaged, and therefore no discrimination. The Family Winemaker defendants claimed it supported the proposition that without “explicit” discrimination, a law would not violate the dormant Commerce Clause, or at worst would be judged under the Pike test.
In Judge Zobel’s view, Baldacci turned on the absence of evidence of indirect discriminatory effects and thus presented no obstacle to her decision in Family Winemakers, in which the plaintiffs had presented effects evidence. However, her argument for distinguishing Baldacci seems to consist of two conflicting lines of reasoning.
According to one branch of her analysis, it is possible to mount a Commerce Clause attack on “leveled down” systems that equally deny direct shipment to in-state and out-of-state wineries, provided the facts show that distant wineries are losing sales to locals because they cannot use the natural means of doing nationwide business, direct shipment. It follows that the result in Baldacci would have been different had the plaintiffs made the factual showing, a proposition consistent with statements in that opinion. Judge Zobel was able to cite extensive evidence of discriminatory effects in the record before her, supporting her decision not to reach the same result as in Baldacci. So far, so good; but judges have a tendency to pile on alternative rationales in distinguishing a difficult precedent.
The second branch of her reasoning explicitly adopts another aspect of Baldacci –that there was no discrimination in the Maine system because no winery was allowed to use direct shipment, while Massachusetts permitted it for wineries below the volume cap.
The “no direct shipping market” theory directly contravenes the district court’s first line of reasoning and is, I believe, fallacious, because the Commerce Clause protects commerce, not means of delivery. A Granholm issue arises if a state favors any local market in a line of goods, even one limited to on-site sales, by directly burdening interstate sellers who are compelled by economics to use a different distribution method. Whether leveling down to all face-to-face sales constitutes discrimination subject to the strict necessity test is a hotly contested question in current Granholm litigation.
The no-local market defense theory arises from Baldacci’s misapplying Exxon, where there was no local market, to a local market in which in-state wineries made on-site sales, protected from out-of-state competition. The First Circuit clarifies Exxon in Family Winemakers:
Exxon held that a law that restricts a market consisting entirely of out-of-state interests is not discriminatory because there is no local market to benefit. Exxon is not apposite where, as here, there is an in-state market and the law operates to its competitive benefit. Massachusetts cannot apply Exxon only to "large" wineries as distinct from "small" wineries; the wine market is a single although differentiated market, and § 19F’s two provisions [the statute in question] operate on that market together.
The First Circuit went on to distinguish its decision in Baldacci (which was submitted for decision on an agreed written fact statement) as dealing with an unsupported challenge:
That case involved a challenge to a Maine law that allowed wineries to sell to consumers only in face-to-face transactions. That challenge failed because plaintiffs did not introduce any evidence that the law benefitted Maine vineyards or harmed out-of-state wineries.
Baldacci only addressed the kind of showing required when a statute is challenged as discriminatory in effect but is concededly non-discriminatory in purpose. We did not address whether a lesser showing might suffice when a law is allegedly discriminatory in both effect and purpose. We do not reach this question because even under the standard in Baldacci, plaintiffs have shown § 19F is discriminatory in effect.
The First Circuit decision encourages examination of what has been regarded as a central tenet of Granholm jurisprudence, the “level field” model. It is a commonplace that protectionist discrimination can be cured by leveling up or down; it other words, that a state can comply with the Commerce Clause by permitting direct shipment for both in-state and out-of-state wineries or by denying it to both. Such a mechanistic approach, however, leads to uncritical acceptance of formalistically even-handed schemes like on-site-only laws, notwithstanding their disparate impact on nearby and distant wineries. Putting facial neutrality in perspective, as occurs in Family Winemakers, should support critical examination of other playing fields that are only superficially level.
You Can’t Have Everything
Welcome as it is, the First Circuit opinion in Family Winemakers does not answer all the questions the case raises. Following sound judicial practice, the court prudently made the most easily defensible ruling on the record before it. The opinion’s principal limitation is that on both 21st Amendment immunity and choice of test under the dormant Commerce Clause it deals with a statute convincingly shown to be effectively and intentionally discriminatory against interstate commerce.
Thus, Family Winemakers throws a spotlight on unsettled post-Granholm issues: What test applies if a state statute is discriminatory in effect but not intent? What if it was intended to discriminate, but fails to do so (assuming anyone has an interest in arguing about it in that instance)? If it is evenhanded, but would flunk the Pike balancing test on proof of the local interest pursued, could it be saved by using a lower standard for liquor? What, if anything, is left after Granholm of the concept that a state can balance “core 21st Amendment interests,” such as temperance, against the Commerce Clause?
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[1] The law had required wineries producing more than 30,000 gallons annually of grape wine to forego any sales to wholesalers in the state if they sold directly to consumers.
[2] To “distinguish” an earlier case is lawyer jargon for finding a difference in recited facts or some other aspect that could justify reaching a different result in the case at hand.
[3] I don’t have a snappy name for the first alternative, sometimes referred to in this post as the “strict necessity test.” If named after a case it could be the Philadelphia test, the Dean Milk test or the Maine v. Taylor test, etc., but no commonly accepted moniker has developed.
Huge win for wineries, but can I ship to Massachusetts now?
January 17th, 2010
First Circuit affirms District Court decision
On Thursday, January 14th, the United States Court of Appeals for the First Circuit affirmed the judgment of the District Court in the case of Family Winemakers of California v. Jenkins. The appellatte decision represents a major victory for wineries and may be the end of the case that was originally filed by Family Winemakers of California in September of 2006.
"We’re delighted with the decision on behalf of our members and all wineries across the U.S. We’re also glad that this court put its foot down about discriminatory laws, like production caps, not being able to withstand judicial scrutiny. Now it’s time to change Massachusetts law so that all wineries, not only in California but across the nation that produce more than 30,000 gallons will have an opportunity to fulfill the wine choices of Bay State residents," said Paul Kronenberg, President of Family Winemakers of California.
98% of domestic wine excluded
Massachusetts law allowed “small” wineries that produced less than 30,000 gallons per year to simultaneously ship wines directly to consumers with a “small winery shipping license” and to have their wines sold in traditional distribution through wholesalers. “Large” wineries (wineries that produce more than 30,000 gallons per year) did not have the same choices. They could either completely opt out of the three-tier system and ship wines to Massachusetts consumers with a “large winery shipping license”, or forego direct shipping to have their wines sold at wine retailers, restaurants and bars via traditional distribution.
According to the decision, the 637 wineries that qualified as “large” accounted for 98% of all wine produced in the United States in 2006. Of those 637, the top 30 producers accounted for 92% of the national market. The remaining 2% of U.S. wine production came from 4,713 “small” wineries, and 1,780 of those produced less than one gallon. In 2007, 100% of the 31 Massachusetts wineries produced less than 30,000 gallons per year.
Discrimination against interstate commerce
In November, 2008, the District Court ruled in that Massachusetts law had a discriminatory effect on interstate commerce. On Thursday, the First Circuit affirmed the judgment of the District Court. The decision states in relevant part:
The primary question before us is whether § 19F unconstitutionally discriminates against interstate commerce in light of both the Commerce Clause, Footnote art. I, § 8, cl. 3, and § 2 of the Twenty-first Amendment.
It is clear that § 2 of the Twenty-first Amendment does not protect state alcohol laws that explicitly favor in-state over out-of-state interests from invalidation under the Commerce Clause. Granholm v. Heald, 544 U.S. 460, 489 (2005). But § 19F is neutral on its face; it does not, by its terms, allow only Massachusetts wineries to distribute their wines through a combination of direct shipping, wholesaler distribution, and retail sales. Section 19F instead uses a very particular gallonage cap to confer this benefit upon "small" as opposed to "large" wineries.
We hold that § 19F violates the Commerce Clause because the effect of its particular gallonage cap is to change the competitive balance between in-state and out-of-state wineries in a way that benefits Massachusetts’s wineries and significantly burdens out-of-state competitors. Massachusetts has used its 30,000 gallon grape wine cap to expand the distribution options available to "small" wineries, including all Massachusetts wineries, but not to similarly situated "large" wineries, all of which are outside Massachusetts. The advantages afforded to "small" wineries by these expanded distribution options bear little relation to the market challenges caused by the relative sizes of the wineries. Section 19F’s statutory context, legislative history, and other factors also yield the unavoidable conclusion that this discrimination was purposeful. Nor does § 19F serve any legitimate local purpose that cannot be furthered by a non-discriminatory alternative.
We further hold that the Twenty-first Amendment cannot save § 19F from invalidation under the Commerce Clause. Section 2 of the Twenty-first Amendment does not exempt or otherwise immunize facially neutral but discriminatory state alcohol laws like § 19F from scrutiny under the Commerce Clause. We affirm the grant of injunctive relief.
New legislation needed
As we posted about almost three years ago, the capacity cap was not the only troubling issue with the Massachusetts wine law. The consumer aggregate volume limit provision and, more importantly, the requirement that carriers obtain a permit for each of their delivery trucks have been in some ways just as problematic for wine consumers. After DHL pulled out of the business of delivering wine, FedEx and UPS are by far and away the major two carriers for interstate delivery.
Both FedEx and UPS have chosen to avoid interstate wine shipments to Massachusetts because of the delivery vehicle permit system. This will likely not change following this decision. Technically, Massachusetts is now open to any domestic winery that holds the appropriate permit, regardless of its use of middle-tier distribution. But, without FedEx and UPS, Bay State consumers will still be out of luck for now. New legislation that eliminates the consumer aggregate volume limit and changes the delivery vehicle requirements will likely be necessary to truly open the state for Massachusetts consumers. This decision may just provide the momentum to pass a new wine shipping bill.
We’ll post further analysis from R. Corbin Houchins in the coming days, so please stay tuned. Also, for more background, see our previous posts:
Massachusetts Still Question Mark for 30K-Gallon Wineries
A Battle Well-Picked and Well-Fought
Family Winemakers Court Win is Big for the Industry
Family Winemakers of California Making Headway in Massachusetts
Why Can’t I Have a Boston Wine Party?
“New Vintage” of Wine Litigation
A response to the Family Winemakers lawsuit
Family Winemakers sues Massachusetts over capacity cap
MA Congress overrides Romney veto, court challenge likely
Massachusetts Governor vetoes wine bill
Massachusetts Still Question Mark for 30K-Gallon Wineries
February 8th, 2009
On January 16, 2009, the state filed its notice of appeal in the 2006 Granholm-based federal suit, Family Winemakers of California v. Jenkins. The District Court had entered judgment on December 18, 2008, enjoining enforcement of a statute that prevents direct shipment by 30,000-gallon-or-more wineries that sell through Massachusetts wholesalers (a category exclusively out-of-state), while affording smaller wineries, a category for which all in-state wineries qualify, “unfettered access.”
On February 3, 2009 the District Court transmitted the record of the case to the Court of Appeals, the first step in a process that may take a couple of years. The state can move for a stay in the District Court and, if unsuccessful, apply again in the Court of Appeals. Thus, it is unknown at this point whether the appeal will, at least temporarily, reinstate the status quo ante.
Up and Running (So Far)
December 19th, 2008
Happily for the plaintiffs, Judge Zobel’s final judgment in Family Winemakers of California v. Jenkins took the path that seemed most likely from the tone and content of her memorandum and order of 19 November 2008 and leveled up. The judgment entered 18 December 2008 orders the state “to permit wineries of all sizes to apply for licenses under Mass. Gen. Laws ch. 138, § 19F(b),” which does not contain the § 19F(a) disqualification of wineries that have sold to a Massachusetts wholesaler within six months of applying for the license, formerly applicable to all 30,000-gallon-and-over wineries. In her November opinion, the judge had noted that the “choice” to use direct shipment only after abandoning all sales through wholesalers for six months was, in effect, prohibition.
Final judgment does not settle the issue of a possible stay of the injunction pending appeal. The state has 30 days from entry of the judgment to file notice of appeal, which would be a prerequisite to moving for a stay in the trial court and, if unsuccessful there, in the Court of Appeals.
By R. Corbin Houchins, Attorney at Law
A Battle Well-Picked and Well-Fought
November 23rd, 2008
David does best when he can choose the right Goliath.
The Massachusetts volume cap on direct shipment, invalidated last week in Family Winemakers of Calif. v. Jenkins, was a good choice to challenge for at least three reasons. First, there was gold in the legislative record: a sponsor described the bill as “giving an inherent advantage indirectly to the local wineries,” and the cap was openly and carefully calibrated to fall just above anticipated production of the state’s largest winery. Second, the structure of the statutes permitted excising the cap without damaging the state’s basic regulatory system. Third, the statute had the additional feature of requiring wineries to choose between direct shipment and use of local wholesalers, permitting the suit to take a swipe at another dubious restriction deployed by three-tier defenders, with or without a volume cap.
Judge Zobel’s opinion proceeds from her observation that Granholm forbids both direct and indirect ways of subjecting out-of-state wineries, but not local ones, to mandatory use of a local middle tier. Granholm, however, follows precedent in drawing a distinction between state laws that openly (or “facially”) discriminate against interstate commerce and those that pursue some legitimate purpose with only an incidental disproportionate burden on interstate commerce. Courts apply a more stringent test of nearly automatic invalidity to the former, but for the latter give a state more latitude to balance its own objectives against the federal interest in free interstate trade.
Most of the court’s analysis is devoted to showing how the state law came about, which boiled down to a compromise between direct shipment proponents, who wanted a “straight” winery shipment law without a cap, and the wholesalers, who wanted no direct shipment. The middle ground was direct shipment for wineries defined as small, wherever located. If there were no more to it than that, the law could be regarded as facially neutral and therefore vulnerable only if its incidental adverse effect on interstate commerce outweighed whatever benefit the state sought in enacting the statute.
There was a great deal more to it, because the legislative history revealed an intent to set the cap so that no Massachusetts winery would fail to be categorized as small, leaving the producers of most wine sold in interstate commerce deemed large. Judicial principles governing the choice between the strict test , which applies to facially discriminatory statutes, and the more state-friendly balancing test applicable to incidentally discriminatory statutes, contain the interesting wrinkle that a statute whose purpose is shown to be protectionist is treated as facially discriminatory, even if its bare text does not reveal the discrimination. Thus, the intention revealed in legislative history put the Massachusetts statutes in the strict scrutiny category, which would require the state to prove that an important public policy objective could not have been met in any reasonable non-discriminatory way.
According to the state, its objective was to bring the blessings of direct shipment to small producers throughout the nation. Judge Zobel could not see how cutting out the larger wineries served that objective at all, and therefore flunked the statute under both the strict test for facial discrimination and the easier balancing test for upholding incidental discriminatory effects.
Invalidating the statute without requiring a finding of facial discrimination makes the case far more important in other states, where plaintiffs may not be so lucky as to find evidence of discriminatory intent leaping from the legislative record. It also makes the decision itself more robust on appeal, when the state and wholesalers argue that the sponsor’s statements quoted in the opinion were taken out of the context of a true benign intent.
Family Winemakers is also useful to pro-trade advocates in two less direct ways. (1) It explicitly rejects the defendants’ argument that the large wineries were not shut out of direct shipment because wineries of any size that had not sold wine to a wholesaler for six months could ship directly to consumers. While it might seem self-evident that forcing wineries of substantial size to abandon use of wholesalers as a precondition to using direct shipment is, in effect, denying them direct shipment privileges, in future litigation it’s much better to be able to point to a judge’s saying so. (2) In gauging effect on interstate commerce, it put the focus on the large volume of wine excluded or burdened by the statute, rather than (as the state urged) on the small number of producers who are responsible for it. That follows logically from judicial precedent, but again it’s advantageous to have it spelled out in a reported case.
Judge Zobel’s opinion is clear and impressively supported by citations to precedent, aided on both counts by the remarkably well-researched and well-argued case presented by the plaintiffs, but the suit is, of course, not yet over. The state and wholesalers will presumably move for reconsideration, which, in view of the forcefulness of the opinion, represents a dim hope for defendants. Other skirmishes may be more substantial.
What we have so far is an order granting judgment to the plaintiffs and identifying the statutes whose enforcement will be affected by the permanent injunction to be entered. The defendants will surely have much to say about how the injunction should be worded and whether it will be effective during the almost inevitable appeal.
It is important to note that the opinion of the court recognizes, as it must, that the state has the right simply to take the direct shipment statute containing the volume cap (§ 19F) off the books altogether, with the result of shutting down direct shipment for all wineries –i.e., level down. In their original complaint, plaintiffs had asked for a declaration that challenged statutes, including § 19F, were unconstitutional and an injunction against their enforcement. That left some uncertainty whether, in case the court agreed on unconstitutionality, it might grant the wish by invalidating § 19F altogether, leaving no winery with direct shipment, because of the general ban in §§ 2 and 18 on importation or transportation without specific dispensation.
In the summary judgment motion just granted, plaintiffs asked the court to enjoin enforcement of §§ 2, 18 and 19F “against any out-of-state winery engaged in direct shipping to consumers, regardless of the winery’s total annual production or affiliation with a Massachusetts wholesaler.” The court included all three statutes in its memorandum order, a clear indication that the final judgment and permanent injunction will level up by keeping the permissive and licensing parts of 19F in force and enjoining only denial of direct shipment privileges to larger wineries (including those that sell to Massachusetts wholesalers).
Less certain is the issue of a stay on appeal, which the court has discretion to grant or deny. The tenor of the opinion suggests that Judge Zobel will be reluctant to delay the effect of allowing larger wineries to use both wholesalers and direct shipment, though we can expect arguments from defendants that it will ruinously disrupt the orderly regulation of beverage alcohol in the Commonwealth. Moreover, denial of a stay in the district court does not mean the appellants would fail to obtain a stay from the Court of Appeals, which could take a couple of years to decide the case. Ultimately, the legislature can always take another cut at protecting wholesaler interests while appeals are going on, potentially rendering the ruling moot.
Even with questions about when it will become effective and the inability to predict with certainty what an appellate court or legislative assembly will do, Family Winemakers will ripple through all litigation dealing with indirect discrimination against interstate commerce. For pro-trade advocates, that’s cause to celebrate.
Family Winemakers Court Win is Big for the Industry
November 20th, 2008
On November 19th, 2008, Judge Rya W. Zobel, in the case of Family Winemakers of California v. Jenkins, allowed the plaintiffs’ motion for summary judgment, concluding that Massachusetts General Laws chapter 138, section 19F:
… has a discriminatory effect on interstate commerce because as a practical matter it prevents the direct shipment of 98% of out-of-state wine to consumers but permits all wineries in Massachusetts to sell directly to consumers, retailers and wholesalers.
Therefore, the Massachusetts statute in practice prevents direct shipment of approximately 98% of out-of-state wine while allowing 100% of Massachusetts wineries to sell direct. This clearly confers disproportionate benefits on both Massachusetts wineries and wholesalers.
In the decision, Judge Zobel provided a fascinating account of the history of what became Massachusetts House Bill No. 4498. She details the original lobbying from wholesalers, pleas from in-state wineries, negotiation in the Massachusetts House and Senate, passage of the bill on November 17th, 2005, veto by then-Governor Mitt Romney, and finally an override by the Legislature on February 15th, 2006. The detailed account sheds light on a fact that we known all along – that the 30,000 gallon capacity cap was set conveniently above the production capacity of the largest winery in Massachusetts (24,000 gallons). This cap was designed to allow the Massachusetts wineries to ship directly to consumers, while simultaneously protecting Massachusetts wholesalers by prohibiting out-of-state medium and large wineries from doing the same.
The wine distribution system is shaped like an hourglass, in that there are a large number of producers (the top) and a large number of consumers (the bottom), but significantly fewer wholesalers (the middle). This structure has the effect of giving wholesalers greater bargaining power with both wineries and retailers in states where it is mandatory to have a wholesaler. Generally wholesalers prefer to carry a larger volume of a particular wine, rather than an equivalent volume of several wines, because it is more profitable for a wholesaler to warehouse, manage and sell a single
wine. Many wineries produce both specialty wines in small quantities and higher volume wines. It is rare for a winery producing approximately 30,000 gallons per year to have all of its wines represented by a wholesaler.
Family Winemakers of California put out a press release immediately yesterday, hailing the decision as a win for the industry. Paul Kronenberg, president of Family Winemakers of California, was quoted as saying “State laws that protect and perpetuate wholesaler monopolies 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”. Tracy Genesen, lead attorney on the case from Kirkland & Ellis, said “The decision tracks Granholm, since ‘allowing States to discriminate against out-of-state wine invites a multiplication of preferential trade areas destructive of the very purpose of the Commerce Clause.” Kenneth Starr of Kirkland & Ellis explained that “Freedom to conduct commerce across state boundaries without undue restrictions was a fundamental principle of the framers of the Constitution”.
Free the Grapes! also published a press release yesterday, highlighting the case as a big loss for efforts by wholesalers to ban “legal, regulated wine shipping”. “Today’s ruling in Family Winemakers v. Jenkins strikes a blow to the wholesalers’ campaign by declaring that Massachusetts’ restrictions on winery-to-consumer shipments are unconstitutional”.
This is a big win for the industry. We applaud Family Winemakers of California, Coalition for Free Trade, Kirkland & Ellis, and everyone else involved for all of their hard work in fighting this long battle. The ruling will certainly have ripple effects not only in Massachusetts, but also Ohio, Arizona, and many other states as current and future examples of such non-facial discrimination will be questioned, challenged, and overturned.
We’ll keep you posted as this story develops. The immediate effects in Massachusetts are unknown at this time (see our post “Why Can’t I Have a Boston Wine Party?” from June, 2007). Common carrier restrictions will need to be clarified before any out-of-state shipping can commence. Stay tuned for more information and analysis…
Family Winemakers of California Making Headway in Massachusetts
June 15th, 2008
On May 29, 2008, Family Winemakers of California filed a motion for summary judgment in Family Winemakers of California v. Jenkins, now before the federal district court for Massachusetts. The suit alleges that section 19F, the Massachusetts law that permits direct-to-consumer wine shipping, is unconstitutional because it “unequivocally discriminates against interstate commerce in both purpose and effect” by limiting direct shipment privileges to wineries annually producing no more than 30,000 gallons. The motion asks the court to declare that discrimination unconstitutional and requests that the court allow section 19F to remain in force, but enjoin Commonwealth of Massachusetts officials from applying the volume cap.
Section 19F was modified to replace a prior Massachusetts local-only direct shipping law, which was found facially discriminatory and invalidated in Stonington Vineyards, Inc. v. Jenkins. The current motion argues that the new text in section 19F was simply a more subtle means to accomplish the same protectionist ends. The bill that amended 19F was vetoed by Governor Romney, who declared that the measure would not cure the previous law’s deficiencies. The Massachusetts legislature, however, overrode his veto and signed the bill into law, setting the stage for judicial determination of which side was right.
Section 19F as amended creates a two-classification system based on the size of the winery’s annual production and wholesaler relationship. Section 19F(a) presents a choice for wineries producing more than 30,000 gallons annually –in effect, they can ship directly to consumers or have wholesaler representation. Wineries producing no more than 30,000 gallons annually can ship directly to consumers while also maintaining a relationship with a wholesaler.
Family Winemakers of California’s summary judgment motion alleges that the “large” wineries are primarily out-of-state and that section 19F, though facially neutral on location, is in intent and effect protectionist and discriminatory. Moreover, the law specifically dictates that fruit wine does not count toward the gallonage cap; the motion argues that a much larger portion of wine produced in Massachusetts is fruit wine than wine produced elsewhere, enhancing the discriminatory effect.
Unsurprisingly, Massachusetts has filed a cross-motion for summary judgment in response, arguing that section 19F is facially-neutral, not discriminatory, and less restrictive than similar laws in other states that have been upheld. The Commonwealth’s motion requests that the court join the courts in Maine, Kentucky, and Arizona which have left production caps in effect in their respective states. An amicus brief filed by the Wine & Spirits Wholesalers of Massachusetts also supports the 30,000-gallon production cap. A key problem with challenges in other states has been the lack of economic evidence supporting discriminatory effects; the current motion attempts to bypass that requirement, in part on the grounds that the previous flat ban on out-of-state direct shipment prevented compilation of economic evidence, excusing the plaintiff from a burden of proof it could not meet because of the defendants’ unlawful conduct.
Oral argument is scheduled for July 29, 2008. If the court determines that a genuine issue of material fact does not exist as outlined in either of the individual motions, the court will grant the motion of the party whose legal argument It finds persuasive. However, the court could deny both motions and rule that evidence is required to resolve issues of fact.
If the court grants the plaintiff’s motion, the resulting injunction enjoining Massachusetts from enforcing the capacity cap and the wholesaler relationship restriction of 19F would, in theory, open the state to shipments from out-of-state wineries. However, obstacles to direct shipments into the state might persist. For example, the decision would not directly affect current carrier policies; FedEx and UPS could continue to refuse to ship to Massachusetts. In addition, an injunction might not resolve issues apart from the volume cap, such as how individual importation limits would be enforced by state officials.
Whatever its outcome, Family Winemakers of California v. Jenkins will serve as an important precedent on the constitutionality of capacity caps. In particular, a plaintiff’s victory on summary judgment would significantly lower the evidentiary bar for challenges to thinly-veiled protectionist measures presented as facially neutral.
Caps Off to Dolan’s Intentions
April 11th, 2008
In October of last year, wineries began shipping directly to Ohio residents under a new direct shipping permit law. When the provisions of the law in Ohio were first announced, one of the major subjects of controversy was the capacity cap, which only allows wineries that produce less than 150,000 gallons annually to obtain a permit. Capacity caps continue to be a subject of controversy in all the states that use them (currently Arizona, Massachusetts, Indiana Kentucky and Ohio; Florida could adopt a 250,000 gallon cap if SB1096 or HB1293 is passed).
Continuing the controversy, Ohio Representative Matthew J. Dolan is looking to increase the capacity cap for wineries from 150,000 to 250,000. Though the increase in production volume may be a “little step” in the right direction, it certainly seems like a very little step, allowing only 17 more California wine labels to be shipped to Ohio residents. According to The Plain Dealer, Dolan originally vowed to eliminate the cap altogether, but got a lot of pushback from the Ohio Department of Commerce and from Ohio Distributors (as Uncorked points out, “no surprise”).
Just next door, Indiana also prevents wineries producing over a certain amount of wine per year from shipping directly to its residents. Indiana’s original capacity cap was 500,000, but will increase on July 1, 2008 to 1,000,000 gallons since SB0107 was signed on March 13th by governor Daniels. Though this is the highest volume cap of the four states that have said restrictions,
Many will agree that any permit system that discriminates against a winery for the amount of wine produced is not an ideal permit system. Furthermore, the constitutionality of these caps is being challenged through litigation (see Family Winemakers of California vs. Jenkins). State legislators may adopt a capacity cap restriction for any number of reasons, but none of them seem very fair. The state may claim that it is trying to protect its own wineries by establishing the volume cap just above that of the highest producing in-state winery, but who else is being protected while the consumer’s interests fall by the wayside?
Update: In our original post, we mistakenly stated that that Indiana has a capacity cap that is similar to OH, KY, MA, and AZ. The 500,000 gallon “cap” in Indiana that will increase to 1,000,000 gallons on July 1st, 2008 only applies to wineries in that the applicant must not sell more than this amount of wine per year IN Indiana, excluding wine shipped to an out-of-state address.
Free the Grapes! Legislation and Litigation Update
August 8th, 2007
From Jeremy Benson at Free the Grapes! :
Free the Grapes! Media Update
August 2007
Now that we’re at the end of most state legislative sessions, we thought it timely to provide an update on direct-to-consumer (DTC) wine direct shipping as of month-end July 2007. Here are some highlights, followed by a more detailed description.
Highlights:
o DTC legislation was considered in 23 states;
o Two states transitioned from reciprocal to a DTC permit system (MO, WV) with additional states pending (OR, IL).
o The legal direct shipping states for wineries represent 78% of wine consumption in the U.S., although retailers can reach far fewer states.
Wins:
- Florida: the third largest state for wine enjoyment, remains a legal state for winery shipments after a fierce defense of the court order that allowed shipping;
- Hawaii: a concerted effort to reduce quantity limits failed;
- Missouri: transitioned from reciprocal to permit status (no fee);
- North Dakota: increased shipping quantity limits;
- Virginia: now allows Internet retailers without a physical presence to direct ship;
- West Virginia: replaced reciprocal status with permit bill.
Losses:
- Arkansas: DTC permit bill failed in committee;
- New Mexico: reciprocal transition bill failed due largely to opposition by wholesalers and the beer lobby;
- Georgia: effort to replace cumbersome law with permit bill failed;
- Texas: passed a law limiting DTC shipping from in-state retailers outside their particular county;
- Ohio: passed potentially unworkable permit system for DTC shipments, including capacity cap of 150,000 gallons;
- Legal rulings supported the on-site sale requirement in ME, and opposed a challenge to TN’s shipping prohibition.
LEGISLATIVE UPDATE
Wine Institute provided significant input to the following summary of state activity this year.
States with Legislation Under Consideration
Wisconsin – For 20 years, Wisconsin has been a reciprocal state, allowing its consumers to purchase wine directly from wineries as well as in-state wine retailers. But consumers will lose these privileges if the Budget Bill passes as it is currently written. Anti-consumer provisions were slipped into the Senate version of the 384-page, $66 billion, two-year Budget Bill in mid-July. The conference committee will now reconcile differences in the Senate and Assembly versions of the budget bill.
Illinois – House Bill 429 passed both House and Senate and is before the governor for signature. It creates a winery-only DTC shipping permit that replaces the existing reciprocity law. The Specialty Wine Retailers Association was unsuccessful in securing an amendment continuing shipments from out-of-state retailers, although in-state retailers were successful at maintaining their in-state shipping privilege.
Additional States
Alaska –House Bill 34 (Ledoux) would specifically allow in-state wineries to make DTC shipments to AK consumers, with a 5-gallon per shipment limit. Status: passed House and Senate, and was signed by the Governor on 5/31/07.
Arkansas – Senate Bill 592 (Whitaker), a positive bill that would have created a DTC shippers permit for wineries, died in House Rules Committee March 30.
Connecticut — Senate Bill 1204 was passed into law and changes the time period specified in the DTC shipping statute from 60 days to 2 months for the 5 gallon limit.
Florida – Shipping into FL is continues to be legal after competing bills—with and without discriminatory capacity caps—were considered but ultimately died in committees.
Georgia – House Bill 159 (Willard) and its companion Senate Bill 56 (Untermann) would have replaced the state’s convoluted shipping law with a DTC shipping license for all wineries (and retailers in SB56). The bills died in committee. Wholesaler-supported House Bill 393 (Stephens) sought to create new “domestic farm winery” and national “farm winery” categories with discriminatory capacity caps. The bill died in committee.
Hawaii – House Bill 1093 (Say) and Senate Bill 1019 (Taniguchi) sought to reduce consumer choice by limiting shipments under the existing DTC shipping permit from six cases per winery per consumer per year, to six cases per household per year. Both bills died in committee.
Idaho – House Bill 11 would have modified the permit legislation passed in 2006 to allow wholesalers and retailers in Idaho and other states to ship wine directly to consumers. Bill died in committee.
Maine – Senate Bill 54 (Bromley) would have created a DTC shippers permit for wine & beer. The bill passed the Senate on 6/12/07, but was killed in the house later that week.
Missouri — The Governor of Missouri signed SB 299 transitioning Missouri from a reciprocal state to a permit state effective August 28, 2007. The new permit law requires all wineries to obtain a direct shipping permit (no fee), limit shipments to two cases per consumer per month, submit an annual report by January 31, and pay excise taxes. The direct shipping permit application and instructions are available on the Wine Institute website at www.wineinstitute.org/programs/shipwine.
Nebraska – L441 (Mcdonald) will allocate funds raised by the existing $500 DTC shipper license fee paid by all wineries to be deposited to the NE Winery and Grape Producers Promotional Fund. The bill was signed by the Governor on May 30, 2007.
New Mexico – House Bill 1018 (Silva) passed the House, but was killed in the Senate after intense pressure from wholesalers and the beer lobby. It would have replaced reciprocity with a DTC shipping permit for wineries and retailers.
North Dakota – Senate Bill 2135 was signed into law and makes favorable changes to existing DTC shipping provisions, including: increased quantity limit from one to three cases per month, removed “reciprocal” provision passed in 2005 but never implemented, and removed vague language.
Ohio – During closing stages of budget process an amendment was adopted that will create a potentially unworkable permit system for DTC shipments into Ohio. The law has a capacity cap of 150,000 gallons, along with “per family household” aggregate limit that may prevent wineries from being able to ship even if they qualify for the permit. The bill was signed by the Governor on June 30 and becomes effective October 1, 2007.
Oklahoma – Several bills in the House and Senate were introduced, including a voter referendum to allow OK consumers to receive DTC shipments from out-of-state wineries, but a permit system has not been outlined. All bills died in committee.
Oregon – House Bill 2171 (Minnis) would transition state from a reciprocal DTC to a permit system for wineries and retailers. Status: The bill passed the House & Senate, and was sent to the Governor for signature in June.
Pennsylvania – House Bill 255 (Godshall) and Senate Bill 293 (Ferlo) are positive DTC shipping permit bills with a $100 registration fee, two cases per month to any individual. Taxes collected. Status: Both bills remain in Committee.
Tennessee – House Bill 1850 (Todd) creates a DTC shipping permit for 2 cases annually. Provisions: $100 fee, annual reports, annual excise and sales tax payments (companion bill was SB 1977, Stanley). Both bills died in Committee.
Texas – Senate Bill 1229 (Gallegos) was signed by the governor May 5, and limits the ability of TX retailers to use common carriers for DTC delivery outside their particular county. The bill was aimed at pending litigation spearheaded by the Specialty Wine Retailers Association seeking statewide sales via common carrier.
Virginia – House Bill 1784 (Cosgrove) and Senate Bill 1289 (Watkins) augmented current direct shipper permit to clarify that those shipments are by common carrier only, and created separate allowance for any legal shipper to make deliveries of up to 4 cases of wine to a consumer in their own vehicle. Additionally, Senate Bill 984 (Edwards) also became law, creating an “internet wine retailer license” to allow sales by a retailer having no physical premise.
West Virginia – Senate Bill 712 (Kessler) was signed by the governor and, among many other provisions, replaced reciprocity with a DTC permit bill for wineries, wholesalers and retailers.
LITIGATION UPDATE
Maine – As previously reported elsewhere, on March 5, U.S. District Court Judge Carter adopted the magistrate’s report and recommendation issued three months ago in the Cherry Hill (Tanford/Epstein) suit. This ruling supports an on-site sale requirement for any sales to consumers, contrary to an opinion rendered in December 2006 in KY ruling that on-site provisions were unconstitutional.
Tennessee – As previously reported elsewhere, the U.S. District Court in Tennessee ruled in favor of the state regarding what most thought was an ill-advised lawsuit (Jelovsek v. Bresden). The plaintiffs alleged that consumers faced a greater burden in traveling to another state to purchase wine in person at a winery than they faced in buying wine directly from a TN winery tasting room. The judge was not convinced, and the wholesalers have promoted their “victory” to bolster arguments for the preeminence of the 3-tier system in all matters.
Texas – All summary judgment motions have been filed. Oral arguments are scheduled for September 21 in Dallas. Wholesalers claim that passage of Senate Bill 1229 moots this lawsuit (see Texas paragraph under legislation, above).
Massachusetts — Motions for summary judgment are expected this winter in the case that seeks to overturn the 30,000 gallon production cap in the DTC law. Family Winemakers of California is the lead plaintiff.
Buckeye Budget Bill Could Affect Direct Shipping
June 19th, 2007
The Ohio Senate unanimously passed HB 119, which would move Ohio towards becoming compliant with Granholm. HB 119 creates a permit system for wineries seeking to ship directly to consumers in Ohio.
As reported by the Dayton Daily News, the direct shipping provision was inserted by the Senate as an amendment to the proposed 2008-09 budget bill. Some controversy regarding the bill exists as is evidenced by comments from vintners who feel that Ohio wineries have been purposely left out of the legislative process altogether. Others in Ohio, however, believe HB 119 is a good bill for both in-state and out-of-state wineries. HB 119 will next be considered in a Conference Committee of both chambers of the legislature.
If passed as is by the Conference Committee and signed by Governor Tom Strickland, the bill will require wineries who ship into the state of Ohio to obtain an “S Permit” at the cost of $25.00. Wineries that qualify for the “S Permit” must produce less than 150,000 gallons/year, send copies of invoices of all shipments to the Department of Commerce Division of Liquor Control, and report all shipments of wine into Ohio and its destination annually. HB 119 also creates the “B-2a Permit” allowing wineries that produce less the 150,000 gallons/year to distribute directly to retailers.
An interesting aspect of HB 119 is the customer volume limit of 24 cases of wine per year. The language in this provision is similar to that contained in the Massachusetts General Laws that we mentioned in an earlier post. This provision may burden wineries to track the shipment of wines by all “S Permit” holders. Furthermore, this limitation is applied to “Family Households,” a term which remains undefined by the Ohio Legislature at the time of this post.
Another important provision in the Ohio bill is the 150,000 gallon production limit. This limitation, while significantly larger than those applied in Massachusetts, seem to be of the same effects as those under current attack in the Family Winemakers of California v. Jenkins case. A ruling by the Massachusetts District Court in favor of Family Winemakers of California may give wineries some ground to challenge these limitations should they become law in Ohio.
Finally, HB 119 establishes a tax scheme for wines shipped into Ohio. In essence, wines containing 4-14% alcohol by volume are subject to a tax of 30 cents/gallon; wines containing 14-21% alcohol are taxed at the rate of 98 cents/gallon; and sparkling wine will be taxed at the rate of $1.48/gallon.
The ShipCompliant research team will track the progress and effects of HB 119. Stay tuned…
Why Can’t I Have a Boston Wine Party?
June 1st, 2007
The current lawsuit Family Winemakers of California v. Jenkins challenges an important aspect of the Massachusetts law regarding direct to consumer shipment of wine by out of state wineries. Recent articles have mentioned that the production limits adopted by Massachusetts act as a method of protecting in state wineries from interstate commerce and restrict the choices of Massachusetts residents. Family Winemakers of California’s complaint asserts that
“in purpose and effect, the limits imposed by these capacity caps fall solely upon out-of-state wineries, whereas Massachusetts wineries continue to enjoy unfettered access to the Massachusetts market.”
Another aspect of the Massachusetts law which is thwarting the delivery of out-of-state wines is the customer aggregate volume limit, which restricts the delivery of wine to 240 liters (about 26 cases) per consumer per year for all wineries. In effects, the law burdens wineries to keep track of how much wine each Massachusetts consumer has purchased not only from their winery, but from all wineries across the country. Wineries that do ship directly to Massachusetts consumers risk violating this provision exposing themselves to fines and loss of shipping privileges.
As important as the removal of production caps and customer volume limits are, the biggest hurdle facing wineries is that neither FedEx nor United Parcel Service offers delivery of wine into the state of Massachusetts. Under the current laws, common carriers are required to obtain and carry in each delivery vehicle a special permit to deliver wine. As a result of this and other anomalous provisions, carriers refrain from delivering wine into Massachusetts. Absent a vehicle for shipping, wineries are unable to send their wines into the Commonwealth, forgoing potential profits from one of the largest wine consuming states and a venue to showcase their artistry. Moreover, Massachusetts residents are affected as the law unreasonably restricts their access to the national marketplace and their freedom of choice in wines.
In the wake of Granholm, it makes sense for wineries to challenge the type of legislative provisions like those currently under attack in Massachusetts. However, once production limits are banned, the next step toward true Direct to Consumer shipping is the abrogation of customer volume limits and anomalous common carrier provisions like those found in the Massachusetts General Laws.
Free The Grapes! legislative update
March 19th, 2007
Free the Grapes! recently provided an update on direct to consumer shipping legislation and litigation for 2007. As you can see below, many changes are likely to come this year.
LEGISLATIVE UPDATE
Wine Institute provided the following summary of direct shipping legislation around the country.
Alaska –House Bill 34 (Ledoux) would specifically allow in-state wineries to make DTC shipments to AK consumers, with a 5-gallon per shipment limit. Status: passed House 2/14/07 and moves to Senate Community and Regional Affairs and to Senate Labor and Commerce.
Arkansas – Senate Bill 592 (Whitaker), a positive bill, creates a DTC shippers permit for wineries. Provisions include: 24 cases annually, $10 permit application fee, sales and excise tax payments annually. Status: Introduced.
Connecticut — Senate Bill 1204 (Joint Committee on General Law) makes a change to the time period specified in the DTC shipping statute from 60 days to 2 months for the 5 gallon limit. Status: Passed out of General Law on 2/27/07.
Florida – Shipping into FL is currently legal. Senate Bill 126 (Saunders) and SB 2282 (Geller) would implement a version of the industry’s model direct shipping bill, but both bills include a discriminatory 250,000 gallon capacity cap opposed by consumers and wineries. Alternatively, House Bill 1217 (Bogdanoff) does not include a cap.
Georgia – House Bill 159 (Willard) and its companion Senate Bill 56 (Untermann) create a DTC shipping license for all wineries (and retailers in SB56), repealing existing law which prohibits wineries with a wholesaler from obtaining a license. Other provisions: $100 permit fee, 24-case annual limit, sales and excise taxes to be collected. This bill is getting industry support.
The wholesaler’s House Bill 393 (Stephens) includes a discriminatory 100,000 gallon capacity cap, creates a new “domestic farm winery” using at least 50% GA grapes, and a national “farm winery” definition of a winery under 100,000 gallons that uses at least 40% grapes from its state of domicile. Such wineries can obtain a DTC shipping permit to ship up to 20 cases of wine per consumer annually. Status: Favorably reported out of House Regulated Industries Committee on 2/21/07.
Hawaii – Two bills, House Bill 1093 (Say) and Senate bill 1019 (Taniguchi), appear to be dead in committee. They would have reduced consumer choice by limiting shipments under the existing DTC shipping permit to 6 cases annually per household from an aggregate of wineries (current system is 6 cases per winery).
Idaho – House Bill 11 would modify the permit legislation passed in 2006 to allow wholesalers and retailers in Idaho and other states to ship wine directly to consumers. Status: Referred to House Revenue and Taxation on 1/22/07.
Illinois – House Bill 429 (Acevedo) is similar to last year’s transition bill that creates a winery-only DTC shipping permit to replace the existing reciprocity law. Provisions include a tiered permit fee based on size of the winery from $150 to $1,000, 12 cases annually, with sales and excise tax collection. Free the Grapes! is encouraging inclusion of retailers in the bill. Status: Passed from House Consumer Protection Committee on 2/20/07 by vote of 11-0. There is also a similar bill in the Senate (SB123, Silverstein).
Iowa – ABC hearings were held on 2/24/07. The ABC recommended to legislators that the reciprocity statute be replaced with a DTC shipping permit system. Other proposals addressed at the hearing include changing the local winery preferential tax rate, changes in Iowa wine labeling rules for IA wineries, and changes to existing designation of 5% of wine tax revenues to Iowa Wine Development Board. Status: Awaiting action by legislature.
Maine – Senate Bill 54 (Bromley) creates DTC shippers permit for wine & beer. Winery or retailer obtains a COA and nonresident shipper’s license ($100 fee). Annual sales and excise tax payments required. Status: Introduced.
Missouri – House Bill 944 (Cooper) creates a DTC permit for wineries to ship 2 cases per month, and requires permit and tax collection. Carriers must obtain permit. Amendment to add retailers drafted on 2/26/07. Status: Introduced.
Montana – Senate Bill 524 (Wanzenried) proposes changes such as adding “purposely, knowingly or negligently” language to the connoisseur’s license, which does not currently work for consumers or wineries. Status: Reported “Do Pass” from Senate Business, Labor and Economic Affairs on 2/21/07.
New Mexico – House Bill 1018 (Silva) creates DTC shipping permit for wineries and retailers to replace reciprocity. Provisions: $50 fee, pay excise and Gross Receipts Tax, 24 cases annually. Status: Passed favorably on 9-1 vote from House Business & Industries Committee on 2/25/07. Companion bill is Senate Bill 1047 (Taylor).
New York – Interestingly, Assembly Bill 4345 (Destito) replicates the wine DTC shipping program for beer manufacturers and beer wholesalers. Free the Grapes! has no activities or campaigns concerning this bill because it deals with beer and not wine. Status: Introduced.
North Dakota – Senate Bill 2135 (Senate Finance and Taxation Committee) makes changes to existing DTC shipping statute. Provisions: increases amount of shipments to 3 cases per month (currently 1 case per month), removes “reciprocal” provision passed in 2005 but never implemented. Removed vague language that could have been interpreted to allow an in-state winery to also hold a wholesalers license – clarifies no self-distribution, which was believed to be the case by in-state industry at this time anyway. Status: Passed Senate 1/23/07 and now to House Finance and Taxation.
Oklahoma – Several bills in the House and Senate have been introduced, several of which request a voter referendum to allow OK consumers to receive DTC shipments from out-of-state wineries, but a permit system has not been outlined.
Oregon – House Bill 2171 (Minnis) transitions OR from a reciprocal DTC to a permit system. Would cover wineries only. Status: Introduced. This is the OLCC bill. House Bill 2488 (House Business and Labor Committee) is similar, allowing wineries, retailers and “associations” to obtain permits. $50 fee. Excise taxes to be paid. Unlimited shipments. Status: Introduced.
Pennsylvania – House Bill 255 (Godshall) is a positive DTC shipping permit bill with a $100 registration fee, 2 cases per month to any individual. Taxes collected. Status: Introduced.
Tennessee – House Bill 1850 (Todd) creates a DTC shipping permit for 2 cases annually. Provisions: $100 fee, annual reports, annual excise and sales tax payments. Status: Introduced. Companion bill in Senate (1977, Stanley).
Virginia – Senate Bill 984 (Edwards) creates an “internet wine retailer license” to allow sales by a retailer having no physical premise. Status: Passed both House and Senate and sent to Governor on 2/22/07.
West Virginia – Senate Bill 712 (Kessler) is an omnibus liquor bill, that among many provisions, includes creation of a DTC shipping permit for wineries, wholesalers and retailers. Provisions include: $150 permit fee, 2 cases per month, sales and excise tax payments. Removes self distribution privilege for instate wineries. Original 50% tax increase has been removed. Creates a “wine spa” license, a wine B&B license, and a “mini” winery license to replace farm winery permits.
LITIGATION UPDATE
Texas — The Specialty Wine Retailers Association (SWRA, www.specialtywineretailers.org) litigation in Texas to address that state’s discriminatory stance between in-state and out-of-state retailers is in its discovery phase. Until the case is decided, out-of-state retailers may continue to ship to Texas consumers.
Massachusetts — The Family Winemakers of California reports that its lawsuit against the State of Massachusetts seeking to overturn the 30,000 gallon production cap in the DTC law is still in the discovery phase. Once discovery is complete both sides will be preparing motions for summary judgment for later in the year.
“New Vintage” of Wine Litigation
February 5th, 2007
There’s an excellent article on law.com titled “New Vintage of Wine Litigation is Fermenting”. The article summarizes the “next wave” of wine lawsuits that will continue to shake up the landscape of direct shipping.
New suits and amended complaints filed in the past year are attacking requirements that consumers must purchase wine in person, with the first court decisions recently issued in Maine and Kentucky. Wineries also are challenging legal shipping limits that are based on production volume.
In both types of cases, out-of-state wineries accuse the states of discriminating against them.
It’s interesting that almost two years after the Granholm decision there are over 30 lawsuits in over 20 states, and almost all of them are trying to clarify what the ruling actually meant. Richard van Duzer predicts,
Ultimately, this will be back before the Supreme Court, which will have to be more explicit about what it said and what it hasn’t said.
Ken Starr also contributes a quote to describe the de facto discrimination,
It appears that the wholesalers are simply seeking legislatively to do indirectly what the Supreme Court said in Granholm they can’t do directly.
Below is a summary of the litigation discussed.
Maine: In Cherry Hill Vineyard v. John E. Baldacci, No. 1:05-cv-00153 (D. Maine), the judge upheld the in-person requirement in Maine’s law , claiming the face-to-face restriction applies equally to in-state and out-of-state wineries.
Kentucky: In Cherry Hill Vineyards v. Hudgins, No. 3:05-cv-00289 (W.D. Ky.), on December 26th, 2006, the judge struck down the in-person requirement, but did not strike down the 50,000 gallon capacity cap restriction.
Indiana: In Baude v. Heath, No. 1:05-cv-00735 (S.D. Ind.), IN residents are suing over the requirement that the initial purchase of wine be made in person.
Massachusetts: In Family Winemakers of California v. Jenkins, No. 1:06-cv-11682 (D. Mass.), the Family Winemakers of California is suing over the 30,000 gallon capacity cap, which is conveniently just over the production of the largest producer in MA.
Arizona: In Black Star Farms v. Morrison, No. 2:05-cv-2620 (D. Ariz.), five AZ consumers are suing over the 20,000 gallon capacity cap.
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.
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.
The broader effects of Costco
May 1st, 2006
I. Discrimination against Direct Distribution from Outside the State
There seems little doubt that Costco�s reading of Granholm will survive appeal. Nothing appeared in the Costco record to distinguish direct shipment of beer and wine to retailers from direct shipment of wine to consumers.
Most states with wine industries allow local wineries some form of direct distribution. Only Washington extends an equal privilege to out-of-state wineries, a result of the Costco remedial legislation. A few states, such as New Jersey, have taken preemptive action by eliminating or restricting direct distribution rights of in-state producers. Limiting direct distribution according to annual production of the producer is emerging as a common theme. Florida recently arrived at a legislative “compromise” that set the cutoff just above the size of the largest Florida winery, a transparently protectionist measure that may or may not evade analysis as discrimination, but, like all size caps, is open to Commerce Clause objection for disproportionate burden on commerce originating outside the state.
Thus, the immediate concern is with legislation in the states that must level up or down. The Costco decision accommodated state concerns by leveling down (with a stay for legislative override) and thus does not constitute precedent for requiring open access to local markets. Because other lower courts may also find the unconstitutionality of discriminatory schemes in the protectionist measures favoring local wineries, rather than in the more basic regulatory objective of controlling the traffic pattern of liquor entering the state, neither Granholm nor Costco suggests that suppliers can rely on widespread opening of markets to direct distribution.
II. Posting and Ancillary Restraints
Costco illustrates a great divide in basic Sherman Act jurisprudence. For some observers, no contract, combination, or conspiracy can be inferred from private actors� facially unilateral acquiescence in state restraints, even if the effects are anticompetitive. That is, roughly, the Fisher v. Berkeley view. See, e.g., Sisters of St. Vincent Health Services, Inc. v. Morgan County, 397 F. Supp. 2d 1032, 1046 (S.D. Ind. 2005), citing Massachusetts Food Ass’n v. Massachusetts Alcoholic Beverages Control Comm’n, 197 F.3d 560, 564-66 (1st Cir.1999).
Naturally, the district court in Seattle regarded Miller v. Hedlund as controlling 9th Circuit precedent. The reasoning in Miller is difficult to pin down. It appears influenced by anticompetitive effects (which we know are alone insufficient), but also to rely on the participation of private actors, consisting of filling in the blanks of a posting system which was then enforced by the state. The opinion mentions potential for collusion, but does not seem to require it. Last December�s antitrust rulings in Costco clearly rest on the wholesaler�s participation in the form of supplying prices that then become mandatory by the power of the state, resulting in a hybrid system requiring state supervision (which was lacking in Washington’s case) to survive preemption. However, all the U.S. Supreme Court authority overturning price posting deals with systems that require or condone private conduct that itself violate the Sherman Act. The Costco judge, like the Court of Appeals in Miller, seems to find a combination by, so to speak, putting the state in the same room with each private actor who posts a price. By contrast, Midcal and the other Supreme Court cases invalidating price posting laws deal with systems that send the private actors to a room where they constitute the unlawful combination on their own. How the Fisher-Miller dissonance resolves is, I think, the most important issue for the Costco appeal.
Another significant issue in applying Costco to the law in other states is the extent to which the cluster of other restraints that frequently accompany posting would fall with it. I see three bases on which that might occur. First, the court might conclude that the system is so integrated that the legislature would not have enacted the other restraints if it had known posting itself to be illegal. Second, on general principles of equity, a court issuing an injunction against unlawful conduct has power to enjoin lawful conduct associated with it if necessary to render complete relief from the threatened harm. Third, a court might conclude that the other restraints constituted per se antitrust violations on their own, which appears as an alternative basis for decision in the December opinion on summary judgment motions, incorporated by reference in the conclusions of law for the final judgment.
That third possible approach would extend Costco�s effects to more states, including some without price posting. It is, however, the most controversial of the three, as it requires finding a public-private hybrid restraint without an overt role for private parties, such as providing prices the state then enforces.
In sum, Costco is not carte blanche for ignoring other states’ posting laws, although within the Ninth Circuit an aggressive position could be justified. As a rough first look, here are some immediately vulnerable points: AZ quantity discount limits, CA beer posting, CT posting, DE delivered wholesale pricing, FL malt beverage price change waiting period and possibly the limits on quantity discounts, GA posting, HI possibly restrictions on quantity discounts, ID posting, IN posting, IA posting (possibly), KS posting (possibly), ME posting and discount restraints, MD posting and quantity discount ban (already analyzed in TFWS I through III), MA posting, MI posting and quantity discount ban, MN posting and possibly restriction on quantity discounts, MO posting and 1% limit on quantity discounts, NH beer posting, NY posting (including amendments effective in September), NC quantity discount ban, OH posting, OK posting and quantity discount ban, OR price record-keeping (possibly, because of deterrent effect on spot pricing) and price uniformity requirement, SD posting, TN posting and quantity discount ban, VT posting, VA posting, WV beer posting.
III. Central Warehousing
Central warehousing bans are difficult to analyze, because (unlike the case in Washington) they are often based on interpretation of retail license privileges or tied house laws, rather than on express prohibition. Caveats regarding ultimate application of Costco to posting and its ancillary restraints apply strongly to central warehousing bans, because they may appear more severable from direct restraint on price than, e.g., quantity discount bans. The Costco antitrust opinion of December and the recent findings of fact and conclusions of law do not present a clear rationale for distinguishing the central warehousing ban, which it classified as an antitrust violations, from the retailer-to-retailer sales ban, which it found was unilateral state action not preempted by federal antitrust law. Thus, it is difficult to predict how courts, even those following the Miller v. Hedlund line on antitrust combinations, will respond to the Costco ruling if asked to evaluate central warehousing in other states.
The following represents a currently incomplete survey of states potentially affected by Costco on use of central retail warehouses:
Central retail warehouses banned: AL, AR, CO, DE, ID, IL, IA, KS, MD, MI, NH, NM
Not banned: AK, AZ, CA, CT, DC, MA, OR
We are still researching the status of central warehousing in the states not listed above.
MA Congress overrides Romney veto, court challenge likely
February 20th, 2006
The Massachusetts House and Senate overrode a veto by Governor Milt Romney , writing into law a bill that will allow small farm wineries that produce less than 30,00 gallons per year to ship directly to consumers. It also allows residents to take home bottles of wine purchased at restaurants if the restaurant re-corks the bottle.
This ruling will likely face a court challenge from consumer and industry groups because it treats small wineries differently than medium and large wineries.
Do these “small farm winery” bills make sense? With these new rules, states are treating out-of-state wineries and in-state wineries evenly and are technically probably compliant with Granholm, but different sized wineries now get separate sets of rules. This doesn’t seem sustainable.
Part of the argument for small farm bills is that the small wineries can not afford the three-tier distribution system. This is true, but it’s not the point. MA is now protecting both small wineries and distributors when they should instead let the market forces play out. This will lead to more choices for consumers as well as lower prices.
Romney introduces new bill
January 18th, 2006
After vetoing a bill passed by the Massachusetts House and Senate in January, Governer Milt Romney introduced his own bill that would allow for “unrestricted wine sales” while providing mechansims for preventing the sale of wine to minors.
Massachusetts Governor vetoes wine bill
November 21st, 2005
MA Governor Romney vetoed a bill passed by the House and Senate, calling it anti-consumer.
“This bill does not give wine lovers the opportunity to purchase the bottlings they want”, he said “It creates artificial barriers to protect Massachusetts wholesalers at the expense of a free market.”
