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Wednesday, September 24, 2008

Law - "Wine Lovers See Red Over State Laws That Restrict Home Delivery of Bottles"

"Wine Lovers See Red Over State Laws That Restrict Home Delivery of Bottles" is the headline to this story by David Kesmodel in today's Wall Street Journal (it is unclear to me whether the link will allow public access or not). Some quotes:

A handful of states in recent years have enacted laws that, while permitting direct shipments, include requirements that bar or discourage many out-of-state wineries from participating.

Besides Massachusetts, Arizona, Kentucky and Ohio have all passed laws that ban direct shipments from larger wineries, which disadvantages many vintners in big wine-producing states, such as California. Kansas and Indiana require residents ordering out-of-state wine to first visit that vineyard and show identification proving they're of legal drinking age; Kansas requires consumers to make the journey each time they order from the same vintner.

Critics say these laws fly in the face of a landmark 2005 Supreme Court ruling that struck down as discriminatory state laws that permit in-state wineries to ship to local consumers while denying the same right to out-of-state wineries. At the time, 26 states allowed some form of direct shipping from outside their borders. These were exceptions to the nation's so-called three-tier system, a patchwork of state laws that usually require alcohol producers to funnel their wares through distributors to reach a store or bar. Legislators created the system in the wake of Prohibition, partly to discourage overconsumption.

The high-court decision has been generally positive for the industry. But now some of the laws enacted after the decision are being challenged in several federal courts. A judge is expected to rule on a challenge to the Massachusetts law this fall.

Advocacy groups for wineries say local wine and liquor distributors have pressured state lawmakers into drafting laws that protect distributors, who fear a loss of revenue from direct shipping. "What the wholesalers really want is to preserve as much as they can their monopoly pricing power, which is considerable," says Bill Nelson, president of WineAmerica, a trade group for wineries. * * *

Bill Glick, a 58-year-old wine drinker in Columbus, Ind., says "it's criminal" his state requires him to visit a winery at least once before placing a direct-shipment order. He and his wife are fans of some small Napa and Sonoma Valley vineyards and can't find their wines at local retailers. "At some point, we're going to have to bite the bullet and fly out to California or New York or wherever and take a handful of affidavits that satisfy the Indiana code," says Mr. Glick, a financial consultant.

One of the ILB's readers did just that ealier this month and sent the ILB this note:
Spent part of last week in Napa Valley. Saw 6 wineries, 2 agreed to ship to home, 2 told us they would but not during the current heat, and 2 refused, but one (and the other 2) offered a local FedEx-Kinkos address for shipping to ourselves.

We paid the extra cost and carried most of it home in an insulated carry box provided for a price by one of the wineries.

More from the Journal:
The ability to ship wine to homes is important to many smaller winemakers, which often find it difficult to sign up with out-of-state distributors. Wineries' direct sales, including shipments ordered in tasting rooms, accounted for about $2.8 billion of the industry's more than $30 billion in revenue last year in the U.S., says Barbara Insel, head of Stonebridge Research, a Napa, Calif., market-research firm.

Myriad shipping statutes affect an industry with an estimated 5,000 wineries in the U.S. And the direct-mail business is expanding. In the next month or so, Web retailer Amazon.com is expected to enter the fray when it begins selling wines from 26 states. Earlier this month The Wall Street Journal's marketing department also announced the launch of a direct-to-home wine service. * * *

Last month, the U.S. Court of Appeals for the Seventh Circuit in Chicago upheld part of Indiana's law. The court, reversing a district-court ruling, said Indiana could require Hoosiers to visit a winery at least once before being able to place direct-shipment orders. The appellate court agreed with the lower court, however, that Indiana couldn't bar shipments by wineries that have licenses in other states to distribute directly to retailers, a stipulation that covers many California, Oregon and Washington wineries.

Jim Purucker, executive director of Wine and Spirits Wholesalers of Indiana, a defendant in the Indiana case, says the group was "real happy" to see a key part of the state's law upheld. He defended Indiana's requirement that consumers visit vineyards before a direct shipment, saying, "Indiana is a conservative state. We want to make sure alcohol beverages are treated with special care and...that they don't get into the wrong hands."

Posted by Marcia Oddi on September 24, 2008 10:57 AM
Posted to General Law Related