HR 1161: the threat to wine shipping, Part II

Last year, a rag-tag coalition introduced a piece of legislation that threatened wine shipments. It’s not even Halloween but the scary news is that, like Poltergeist II, this horror show is baaaaaack.

Now known officially as HR 1161, and unofficially as the Wholesaler Protection Act, the bill seeks to restrict legal challenges to the interstate shipment of wine (and beer and spirits) and keep the legislation that affects wine shipping at the state level. The reason that’s scary is because the judiciary is the consumer’s best ally in the fight to liberalize wine shipments–with more options to purchase wines, many consumers will get lower prices and a better selection than what is available in their local markets. Legislators, desperate for (re)election, frequently accept donations from wholesalers who seek to prevent freeing up trade in wine. The Beer Wholesalers wrote the legislation last time and the text is virtually identical this time.

The Wine and Spirits Wholesalers Association recognizes the threat that the judiciary poses to their well-lubricated legislative machine. Craig Wolf, the WSWA head, said “We are supporting this legislation in an effort to ensure that policy disputes are resolved by local elected officials rather than unelected and unaccountable federal judges.” Yes, those pesky federal judges who don’t have expensive campaigns to fund! Needless to say, beer and wine producer groups object to the legislation (here’s a letter they co-signed last month).

We are bringing our threat-down level on this issue two notches closer to danger and disastrous ullage levels. Why? Well, not only did last year’s bill gain a high number of co-sponsors, it actually got hearings in the Judiciary subcommittee. With the party change in Congress, John Conyers (D-MI), recipient of beer wholesaler funds, is no longer chairman. So say hello to Lamar Smith (R-TX) the new committee chairman! His fifth largest corporate donor is the National beer Wholesalers Association.

How far will the legislation go in this 112th Congress? Nobody knows on this issue that does not cleave along party lines. But don’t bet against it going farther than the last bill.

Follow the Stop HR 1161 page on Facebook to keep up with the latest developments.

H.R. 1161: Comprehensive Alcohol Regulatory Effectiveness Act of 2011
Sponsor: Representative Jason Chaffetz (R-Utah)
Co-sponsors: Bruce Braley (D-Iowa), Howard Coble (R-N.C.), John Conyers (D-Mich.), Ted Deutch (D-Fla.), Jim Jordan (R-Ohio), Dennis Ross (R-Fla.) and Debbie Wasserman-Schultz (D-Fla.)

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60 Responses to “HR 1161: the threat to wine shipping, Part II”

  1. Tyler:

    Your point about judges not being paid is very spot on. It’s hard to control someone you can’t buy off. Legislators are one thing, as we’ve seen. Judges are something else.

    Great post!

  2. I still don’t understand how this law poses a threat to direct shipping. In its worst interpretation, it merely gives the states what they theoretically already should have under the 21st Amendment: the power to regulate the sale of alcohol within their borders.

    Doing that changes little. States that want to allow direct shipping may do so, and states that don’t may choose not to. There is nothing in the law that, as certain wine industry lobbyists would have us believe, bans direct shipping.

    Another familiar claim is that the bill enables different treatment of in-state and out-of-state shippers. The significance of that political. As long as in-state and out-of-state shippers have to be treated the same, advocates of direct shipping will have highly sympathetic local lobbies (farmers, wineries) working in favor of direct shipping. But those lobbies in the past have not proven decisive.

    The Granholm decision affirmed the long-standing precedent that in-state and out-of-state producers had to be treated equally. It did not, as is widely believed, legalize direct shipping. In the wake of Granholm, and despite the pressure of that highly sympathetic local lobby, as many states tightened their restrictions on direct shipping as liberalized them. So even if this law does enable discrimination between in-state and out-of-state interests — something that is far from certain — it’s hard to see what the real-world political effect is going to be.

    Ultimately, the battle for direct shipping is at the state level. HR 5034/1161 is political theater, a sideshow of sorts that keeps people from focusing on what’s really effective. Wine lovers would be better off spending their time and effort lobbying state legislators than worrying about federal legislation that, even in the most extreme interpretation, really doesn’t amount to much.

  3. […] read the full piece HERE […]

  4. […] died, but the bill has been reintroduced to the 112th Congress. Read more about it here. Wine lovers: unite and send a clear message to your representatives that you want to be able to […]

  5. Tom,

    HR 1161 is hardly “sideshow”.

    It strips wine stores of their Constitutional protection against state based discrimination. The implications of this are so vast its hard to even gauge. In more than 225 years only the insurance industry has seen Congress remove this fundamental protection that was in fact the very reason the Constitutional Convention was originally called and the Constitution written.

  6. Tom

    You are so off base, so allow me to correct you.

    HR 1161 would allow states to regulate alcohol, in any way that they so see fit, having no regard for any federal laws, including the constitution.

    In this manner, the wholesalers plan is to have you believe it just reaffirms what the states already have, but it takes it one step further!

    So, if passed, the states could then pass laws that say, “in state retailers can ship to our residents, but out of state cannot.”

    This is in violation of the commerce clause, which only dates back nearly 250 years in US history.

    In addition, they could do many other crafty moves, like eliminate stores from producing private labels, as the wholesalers see no profits. The list of possibilities is endless.

    In the end, the consumer loses big time with HR 1161, as choice will be limited. That is a fact.

  7. Tom W. and Daniel,

    Your use of hyperbole is just as bad as the wholesalers. Everything that Tom J. noted is factually correct. There are no “rights” involved here. The constitution says that interstate commerce can only be regulated by Congress. If Congress passes a law affirming the states’ ability to regulate all aspects of the alcohol business, then nothing the states do after that would violate any Federal law or constitutional principal. Nothing would change the day that 1161 passed, the battle would simply move to the individual states.

    As for this being unprecedented, Tom W., who knows this issue inside and out, knows very well that all the early Supreme Court decisions following passage of the 21st amendment found in favor of the states having absolute power in regulating shipment of alcohol. (That’s why the 5-4 Granholm decision was so big, as it overturned precedent.)

    Framing this as the big bad wholesalers vs. the consumer is a bit disingenuous when the beer producers and distillers are on your side.

  8. James

    If HR 1161 passes, what good comes of it, in your eyes?

    Allowing the states to solely regulate will allow wholesalers to continue to buy state laws, which they have become very good at, lately.

    I see nothing good in HR 1161.

    Forgive the hyperbole, but that is opinion.

  9. James,

    First, the interpretation of Granholm moved away from that early view you cite LONG before Granholm.

    Second, what changes after 1161 passes is significant. Not only would retailers lose any protection against state based discrimination afforded by the Commerce Clause and which all other industries possess, but when those battles move to the states those discriminated against would no longer have access to the courts to fight blatantly discriminatory laws that violate the commerce clause.

    It’s a bit obtuse for you or anyone else to suggest this is no big deal.

    This is fast and hard example of wholesalers attempting to put their boot on the neck of retailers. Note that the bill explicitly prohibits facial discrimination against wine producers. Why would wholesalers not want to extend that same and very well established protection to retailers? What is it about retailers that demands they have their commerce clause protections stripped?

    The wholesalers NEVER address that question because they realize that the only answer they can give is “we don’t want competition”.

  10. Daniel,

    As I’ve repeatedly stated, I don’t agree with 1161, and pray it gets defeated. What I object to is those who choose to fight it by telling as many lies as the wholesalers.

    The wholesalers are doing what any industry that felt threatened would do… and with the other two tiers against them, plus consumers, there is no reason that this shouldn’t be a “fair” fight.

    The fact is, no other industry has a constitutional amendment stating that the states get to regulate said industry. Until recently, the Supreme Court clearly found in favor of state regulation. Clearly the wholesalers will use the passage of 1161 to attempt to pass state level regulations in their favor, but it is an outright lie to say that 1161 bans direct shipment.

    Remember that one of the reasons that many of the big retailers that have significant shipping business do not come forward to fight is that they would have to admit they they currently ignore existing shipping laws and do not pay the required state taxes.

  11. Tom W.,

    I am aware of the cases starting in the 80s where the court moved to “harmonize” the 21st amendment and the commerce clause, but you never acknowledge the early decisions made in the aftermath of the amendment.

    Again, however, the fight moves to the states if this passes. Retailers, consumers and Discus can all fight the battle there.

    It’s just hard to swallow the argument that it’s all about consumer rights and free choice when the same retailers will turn around and fight against Sunday sales, supermarket sales, etc… they want the same protections from their state legislatures that they rail against.

  12. James

    Talk about hyperbole and half truths…I suggest that you check my track record before clumping in retailers into your rant.

    I am very much pro Sunday liquor sales, and I am also pro wine in grocery stores, while residing in a state that does not allow it.

    I have even said as much, publicly.

    Anything else that you think that I am?

  13. My motives are simple, people ought to get to choose how they buy their wine and liquor.

    HR 1161 will not allow for that.

  14. Daniel,

    If you re-read my post, I addressed that to Tom, not to you. I know your record. You are, as I am sure you are aware, a rarity. (in a good way)

  15. Thanks, James.

    Nevertheless, we all need to look into the future and realize that we cannot fight this battle on 50 different states. We need to fight ot in a federal level.

  16. I think there’s an important point being lost in the discussion of whether HR 1161 enables discrimination contra the Commerce Clause, and that is this:

    If we assume that Mr. Wark’s interpretation is correct — that HR 1161 will overrule the Constitution and do all of the bad things he supposes — what is the net effect on the wine business? I submit it’s almost nothing. States still have the ultimate power to regulate alcohol under the 21st Amendment — a point not even Mr. Wark disputes. They can still legalize or illegalize direct shipping as they prefer.

    So the net effect on direct shipping is entirely political. If it enables discrimination, it divides in-state grape growers and wineries from out-of-state wineries as political lobbies. Instead of a unified front in favor of shipping, the in-state wineries would be politically neutralized, since they are unlikely to lobby for increased competition. And since, as has been previously established, in-state grape growers and wineries haven’t been particularly effective advocates of direct shipping, the net effect of that division would be small.

    That’s my main point in arguing that 1161 doesn’t matter. The action with or without 1161 will remain at the state level, and will be until the 21st Amendment is repealed.

    It’s harder work for advocacy groups to work at the state level, more expensive and requiring compromise. Winning through court challenges thus has significant appeal. It’s just a waste of time if the real goal is to pass direct shipping laws. No court is going to vacate the 21st Amendment.

  17. […] Jeez. Tom Wark and I are arguing again, this time over at Dr. Vino. We’re like an old married couple that just can’t get […]

  18. Tom,

    HR 1161 immunizes producers against “facial” discrimination. However, it would still allow now facial discrimination that has the effect of discriminating, such as with capacity caps.

    However, there is no such immunity in the bill for wine retailers. One wonders why wholesalers feel such an acute need to strip retailers of thier 225+ year old commerce clause protection.

    We know it’s not a case of wholesalers being concerned about states having the courts impose judgments on their alcohol laws. Afterall, wholesalers have used the commerce clause to challenge state alcohol laws very recently in Texas, Kansas and Indiana.

    No, the wholesalers are very simply trying to reduce the damage that has occurred to their state mandated welfare system by using the power they’ve gained from state-granted profits to at least stop consumers from buying wines from retailers outside the state. They know for a fact this will severely reduce consumer choice, yet they don’t care. Wholesalers don’t care because they have no concept of what the consumer wants. They’ve never had to care and they don’t deal with consumers. They deal in preserving a system that demands their use, even when it is wholly unnecessary.

  19. You’re largely making a moral argument here, Tom W, and I’ve got to say: I agree with your moral argument. Alcohol regulation since Repeal has had the effect creating state-protected monopolies. (Go with “monopoly.” “Welfare” is a little over-the-top.) And, not surprisingly, those who benefit from the non-competitive environment are trying to preserve it — though not because they want to deny consumer choice. They’re doing it because they want to preserve their profits. If they could increase their profits by increasing consumer choice, they’d do that.

    Persuasive as the moral arguments may be, HR 1161 is a law, and needs to be looked at as a law. And, as I’ve said, it ultimately is not consequential even if it does what you say it’s going to do. Regulations — at least those pertaining to the preservation of an orderly market, collection of taxes, and promotion of temperance — are going to be a state, not a federal, matter.

    Then this:

    “One wonders why wholesalers feel such an acute need to strip retailers of thier 225+ year old commerce clause protection.”

    First of all, the Commerce Clause isn’t 225+ years old. Second, those aspects of Commerce Clause protection that have been stripped from the liquor business were stripped largely by the 21st Amendment, which set alcoholic beverages into a unique consumer product category specifically regulated at the state level.

    You don’t like the three-tiered system and neither do I. I live in a state that it’s a felony to direct ship into, so I’m guessing the weight of that injustice falls more heavily on me than it does you. Not all injustices are unconstitutional. The remedy for those is not through the courts, it’s through the legislature.

  20. […] Remember HR-5034 from last year, the bill is back this year as HR-1161 The Weekly Virginia Wine Roundup: 3-19-11 by Virginia Wine Trips, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Posted under VA wine news roundup,Virginia Wine and tagged with best virginia wine, virginia, virginia wine, virginia wine blog, virginia wine trips Comments (0) […]

  21. Tom,

    The magic you ascribe to the 21st Amendment simply doesn’t exist. The 21st Amendment RETURNED to the states their right to regulate alcohol after regulation of that beverage had been placed in federal hands by the 18th Amendment.

    Alcohol isn’t that unique. States have the right to regulate every industry and every product, as long as those regulations don’t fall afoul of rights and powers granted to the government, such as the commerce clause. A state can pass a law that requires widget makers in their state to only sell those widgets to widget wholesalers, who in turn only sell them to state licensed widget retailers.

    The 21st Amendment simple re-affirmed the balance of state and federal power that existed before the 18th amendment. And where interstate sales of alcohol was concerned, that meant under conditions created by the Wilson Act and the Webb-Kenyon act, which is why HR 1161 amends these to Federal acts that were passed before the onset of prohibition.

    The idea of stripping wine retailers of their commerce clauses is such a unique idea the totality of the consequences can’t even be imagined. However, we do know that they would allow states to pass all kinds of laws that discriminate against out of state retailers, all of which would reduce consumer access to wine. Where producers are concerned any number of laws could be passed that would set up discriminatory outcomes.

    Believe me, we all understand that wholesalers want this law passed to preserve their profits. That hasn’t been lost on anyone.

    Finally, with regard to the age of the Commerce Clause, you are right. It’s 224 years old.

  22. Daniel,

    I don’t disagree, 1161 should be fought, let’s just not fight lies with lies. Let’s coordinate with Discus and the beer producers, explain how rare it would be for Congress to fully hand over commerce regulation of an entire industry…

    When we run around saying that the bill does things that it clearly doesn’t, such as banning direct shipping, the sophisticated lobbyists that the beer and wine wholesalers employ will simply chuckle and explain that it does no such thing. (and they’d be right)

  23. Granted, legislation prior to the 21st Amendment vested regulation of traffic in alcohol to the states. How does this enhance your argument that HR 1161 is going to rob retailers of Commerce Clause protections they’ve enjoyed since the passage of the Commerce Clause? As you point out, they haven’t enjoyed those protections since late in the 19th Century. So this changes things how?

    I believe, by the way, that giving states regulatory control of alcohol in the 21st Amendment did, in fact, enhance consumer choice, since it made the repeal of Prohibition a political possibility. Without that, several states that voted for Repeal would have voted against, and the amendment likely wouldn’t have passed.

    The state laws you object to do not prevent anyone from selling alcoholic beverages wherever they like. They simply require that retailers have outlets in the state where the alcohol is being sold and purchase their alcohol through the same regulated distribution channels as everyone else.
    Whatever you or I think of this policy, there is reasonable regulatory purpose for it. If the state of Texas, just to pick one, wants to inspect warehouses and audit tax payments, it is much easier for Texas to do that when the businesses being inspected and audited are lcocated in Texas. The cost and jurisdictional complexities of Texas attempting to monitor and regulate every single retail liquor outlet in the country would make the establishment of an orderly market and the collection of taxes a practical impossibility. (I’m guessing retailers, confronted by the possibility of snap inspections and audits by all 50 states, wouldn’t be real nuts about it either.) So, clearly, geographic limits on retail sales are well within the bounds of the 21st Amendment as established in any number of precedents.

    Under existing law, states can, if they choose, ban direct-to-consumer shipment from out-of-state retailers and producers. (In fact, they can ban all alcohol sales.) Given that, what is it that 1161 is going to do that is such a big threat to the wine industry?

  24. “Follow the Stop HR 1161 page on Facebook to keep up with the latest developments.”

    Will do and will support it.

  25. Tom,

    Wine retailers have never had their commerce clause protections stripped from them. Every product in America, including wine, may be regulated by the states, as long as those regulations don’t bump up against the Fed’s right to regulate interstate commerce.

    And the question is not whether or not a state can regulate its retailers. The questions is whether it may set up residency requirements to sell and ship wine to consumers. Courts have already said this is unconstitutional on a variety of ground, most importantly on commerce clause grounds. How do you think wineries won Granholm.

    Why should retailers be treated different. Afterall, wineries selling and shipping to Texas residents are acting as retailers, not producers.

    You seem stuck on the notion that the 21st Amendment gave states some sort of unusual power. It did not. It repealed Prohibition and returned the balance of power between the feds and the states to what it was prior to prohibition…and the state power at that earlier time did not include the right to regulate interstate trade in alcohol. That power remained with the feds.

  26. The 21st amendment “primarily created an exception to the normal operation of the Commerce Clause.”

    That’s a direct quote from Craig v. Boren (1976).

    And yes, subsequent rulings reversed this precedent, but IT DID EXIST for over 50 years, despite what is being argued here.

  27. The irony in your example, James, is that in Craig v Boren the Supreme Court held that the 2nd section of the 21st Amendment incorporates both the Wilson Act and the Webb-Kenyon act and with it the anti-discrimination principles.

    Also, the quote from Craig that you offer is not held as precedent from that case in the way you suggest. In fact, the following sentence reads:

    “Even here, however, the Twenty-first Amendment does not pro tanto repeal the Commerce Clause, but merely requires that each provision “be considered in the light of the other”

    Craig V. Boren was used in Granholm as an earlier example of the Supreme Court ruling that the 21st Amendment does not overrule the Dormant Commerce Clause.

    So, there’s that.

  28. I hope a mere consumer can chime in. I don’t really care about the legal dimensions. As a consumer, I want to be able to buy wine (& beer) where (direct from a winery) & when (Sunday) I want. In this day and age there is no excuse for any other outcome. And I am tired of politicians making these decisions for me – regardless of the reason.

  29. Bob

    Great post. And it ought to be that simple. COnsumers ought to be able to buy wine and beer 7 days per week, from any outlet that they choose.

    Unfortunately, it is not. The 21st amendment put alcohol laws into state hands. Just for clarification, it did not create a system for it, nor did it suggest one. The states chose their laws, all 50 of them. And now we are stuck with that. Which could be okay, so long as interstate commerce was not affected, like other industries. The problem is that the wholesalers and creators of CARE would like us all to believe that wine is some special and unique substance.

    It is only wine and I am only trying to sell it.

  30. […] Alder Yarrow urges every wine lover to call his or her representative about HR 1161 and Dr. Vino raises the threat level. Tom Wark should be everyone’s go-to blog for this […]

  31. I think we’re having two conversations here, and neither one of them is going to be resolved.

    On a pro-consumer basis, we all agree that everyone ought to have all the choice they can stand even if that means that rapacious middle-men lose their vacation homes.

    And, no matter how much we talk about it, non-lawyer Tom Wark and non-lawyer I are never going to agree on the subtle interplay between the Commerce Clause and the 21st Amendment. While I, personally, enjoy endless conversations about abstractions, I don’t enjoy them that much when I’m sober and I’m sober right now so allow me to propose we move on.

    Can someone here (I’m looking at you, Tom Wark) explain how, given that states under current (even if unjust) laws can prevent out-of-state retailers from shipping into a state, passing a law that explicitly grants states that very same power poses a threat to wine commerce.Given that under existing law states that want to allow interstate sales can, and states that don’t want to allow interstate sales don’t have to, doesn’t HR 116. So rather than changing anything, it merely supports the status quo.

    How is that a “threat to wine shipping”?

  32. OK, listen, Mr Fumblefingers here hit the wrong key and posted an unfinished comment. The last paragraph should ask how passing HR 1161 and giving states the power to do what they already have the (perhaps unjust) power to do — ban shipping by out-of-state retailers — constitutes a “threat to wine shipping”?

  33. Although I do not think that HR 1161 directly threatens wine shipments, what I do fear about it is that states will use this power to revert back to limiting or banning wine shipments to the consumer. Florida already has a bill in both the House and Senate on the heels of this bill prepared to do just that.

  34. Jessica has provided a perfect example. The proposed Florida law is an attempt by distributors to limit consumer choice in a totally self-interested way, just the kind of thing any number of businesses would like to do if they could. The thing is, Florida can do that with or without HR 1161. The solution to that is not the defeat of HR 1161, it’s wine lovers in Florida calling and writing their representatives to make sure they don’t vote for such a bad law.

    HR 1161 is a sideshow.

  35. Tom

    Would you rather fight this battle 50 times? Or just one time?

    My time is precious.

  36. I’d just like someone to explain how HR 1161 is consequential.

  37. Daniel,

    I think that Tom’s point is that 1161 does not affect the Florida bill one way or another. Based on the recent Texas case, retailers have to battle on the local level. The problem is that you will always have more support from out of state retailers than from in-state. (i.e. there are a lot more retailers who would like to ship into Florida than there are Florida retailers who would like to open up shipping) Thus, the legislature has the cover of “protecting” in-state interests.

  38. Tom,

    The “Craig” case was not a commerce clause case (it was an equal protection case), you are taking my comments completely out of context. I was merely trying to demonstrate that the idea that you put forth stating that the 21st amendment has NEVER been allowed to overide the commerce clause is just demonstrably false, and I cannot believe that you continue to state this as the case while railing against the wholesalers.

    I merely quoted Justice Brennan’s statement that it did create exceptions to the commerce clause, which you refuse to accept. (Especially in light of the 5th Circuit Texas case?)

    You are much better served taking the high road.

  39. It sounds unconstitutional to me, though I’m obviously no expert and clearly partisan.

    I used to live in Texas and as I recall, despite (or perhaps because of) the dry counties there, Texans liked to drink. a lot. Just a thought…

  40. Daniel, I’d rather not fight the battle at all. But whether it needs to be fought once or 50 times, it has little to do with what I’d prefer.

    Defeating 1161 won’t change a thing when it comes to Florida’s laws, or the laws of any other state. And if it passes it won’t make a lot of difference either, because the final decision will always belong to the state legislatures.

  41. Fighting CARE will make a significant difference in FL. FL Wholesalers recently introduced a shipping bill that includes capacity caps that have been ruled unconstitutional in the 1st Circuit. However, if CARE is passed, such laws will be unchallengeable.

    Also, neither congress nor the Supreme Court has ever said that wine retailers have no commerce clause protection. Under what conditions would wine retailers sit back and actually not fight an effort to have their commerce clause protections stripped from them. That would be crazy. It not only effects the issue of direct shipping but numerous other potential issues from market access and taxation issues to brick and mortar location and store issues.

    Wine Legislation is always debated at the state issue. HR 1161 is an anomaly insofar as it is federal legislation. Yet, its implications are so far reaching, particularly for retailers, that its impact can’t even be gauged accurately.

  42. Hi all –

    Thanks for the good discussion here. Tom Johnson, good to see you express your views and thanks to all for keeping it lively and civil.

    I think we can agree on one thing: passage of HR 1161 would be the high water mark for wine direct shipping (especially retailer direct shipping). Yes, the battles would continue to be fought at the state level, but with the ban on legal appeals, there’s little way that any more than the current number (11?) states that allow retailer-to-consumer shipping would grow. As Tom W. points out in the Florida example, wholesalers could support legislative change in whole or in part that could then not be challenged. The thing is, wholesalers are much better organized at the state level than wine consumers. Thus protecting judicial appeal is a crucial means to affecting a policy end that is all-too-often not practically viable in state legislatures.

    Tom J–do you agree that HR 1161 would be a setback and/or the high water mark for liberalizing state wine shipping laws? Do you see greater liberalization of state policies if HR 1161 were to become law?

  43. It’s nice you congratulate me for being civil. It reminds me of how my grandmother used to compliment African Americans for being articulate or Hispanics for being clean. You, perhaps, expected something else?

    No, I do not think HR 1161 would be the high water mark for direct shipping. In fact, I find that assertion — pardon me if I’m uncivil here — staggeringly obtuse. Are you suggesting that, given the culture-wide movement toward technologically-empowered disintermediated commerce that the one area of the economy that is going to remain mired in a 19th Century business model is going to be wine sales, forever? Seriously?

    My whole argument has been that HR 1161 is insignificant. I’ve heard no substantial argument to the contrary. I’ve heard how horrible the motives of HR 1161’s sponsors are and how unfair and noncompetitive the laws are. What I haven’t heard is a credible set of horrible consequences to which the passage will lead. As I’ve said, repeatedly, states that want to block direct shipping will, and can, with or without 1161, and there’s not a damned thing anyone can do about it except political pressure at the state level.

    What hasn’t been considered here is the unintended consequence of court decisions limiting state control — in particular, the decisions to eliminate “discrimination” between in-state and out-of-state vendors. When Granholm came down, it was celebrated in certain circles as the end of bans on direct shipping. It was, of course, nothing of the sort. It just ordered that states treat in-state and out-of-state wineries the same.

    A few states inclined toward liberalism said what-the-hell and opened themselves to direct shipping. What Wark and the other proponents of legal action don’t talk about is unintended consequences in other states. In Kentucky where I live, and where Baptists hold sway, the state’s reaction was not to loosen regulations, but to tighten them. Rather than allowing all wineries to ship, the state banned all wineries from shipping. This has dealt a serious blow to the nascent local wine business.

    That Kentucky is lousy with Baptists who will never accept direct shipping is my bad luck. But if I were counseling Wark on strategy, I’d stop paying law firms and start organizing wine drinkers in states that are less Baptist-intensive than Kentucky. That way, there’d be liberalization in places inclined that way without increased regulation in other jurisdictions.

    My suspicion is that Wark’s organization chooses against that strategy because 1) grassroots organization is hard work, 2) confronted with the possibility of out-of-state competition, some wine retailers might rethink their devotion to the public good, and 3) the underlying argument is not as much about direct shipping to consumers as it is about direct sales of millions of cases of wine from, say, Kendall-Jackson to WalMart.

    I have no doubt that consumers in most states will eventually be able to buy wine directly from anyone who’s selling it. People who are used to getting whatever they want whenever they want it in every area of personal consumption are not likely to forever tolerate the kind of dumb regulations that limit wine selection in places like Kentucky.

    As I’ve said before, I don’t think HR 1161 matters even a little. It’s great for political fund raising and, I’d bet, hasn’t done the membership rolls in Wark’s organization any harm either. Advocates on both sides of the argument are doing just fine.

    Do I think HR 1161 is a high-water mark? I’m a little disillusioned, Dr. Vino, that you would even ask such an obviously ahistorical question.

  44. Tom J

    I gave up my legal career aspirations a long time ago, so forgive me for my brevity, and my attempt to explain in lamens terms.

    Simply put, HR 1161 allows for states to pass any damn law about alcohol that they damn please.

    Currently, states can try to do that and some have succeeded (Texas recently) but the commerce clause protects certain rights of consumers and retailers.

    Kentucky and other states followed Granholm and made a decision. An unfortunate one for the consumers of that state.

    Nevertheless, states will continue to attempt to abloish out of state wine shipping from retailers, if HR 1161 passes. Why? Because of sales tax revenue, as well as wholesaler dollars.

    Wholesalers believe that out of state shipping affects their three tiers. So, they are attempting to cut it all off, and take us back to the good old days of the 60 years ago. Shop at your local merchant for wine. Only, many states, Kentucky included, have limited selections, especially of fine wines. The wholesalers do not care and the state legislatures will decide with whomeever gives them a contribution check.

    So, we fight. Consumers and retailers need to band together, to open up shipping laws, not shut them down.

    You say that in the future, people will be able to buy wine from wherever they want.

    With the current bill in Congress, and the current proposals in states like Florida, I do not see how that is possible.

    HR 1161 does no one any good. There is nothing good in that bill, for anyone, except the wholesalers.

    Why not fight it?

    You want to receive wine from out of state merchants? Well, this is step 1. I suggest you get on board.

  45. Tom:

    You say you’ve heard no substantial argument to counter your notion that the passage of HR 1161 is insignificant. You also don’t think the area of wine retailing “is going to remain mired in a 19th Century business model.”

    You and I disagree that an entire industry losing its commerce clause protections being “insignificant.” If this happens it will guarantee that wine retailing will stay mired in an 18th CENTURY business model. Not since 1787 has a single industry, let alone America, operating under an economic model whereby states are free to ban the goods of another state with no other reason than they desire to.

    But let me put this in terms that are probably easier for most folks to understand.

    Suppose Congress stripped the book selling, pharmecuetical selling, electronics selling and clothing selling industry of their commerce clause protections.

    This would mean that Kentucky could constitutionally ban consumers from importing computers, books, prescription drugs and clothing.

    The problem with this is not whether they WOULD do it if they could, but if they COULD do it.

    Wholesalers have a 70 year head start in influence in state legislatures. They have taken every opportunity to push for bans on both in-state and out of state winery shipping, in-state and out-of-state retailer shipping, as well as bans on retailers buying from out of state wineries.

    If HR 5034 passes, wine retailers will have ZERO protection against interstate commerce discrimination. It might come in the form of bans. It might come in the form of double taxation on out of state retailer wines. It might come in the form of requiring new brick and mortar outlets to be owned only by residents. It might come in the form of allowing out of state owned retail outlets only being allowed to have one store while resident retailers my have many. It may come in the form of wine from out of state retailers having to carry special labels fixed a the producer level.

    Perhaps its a case of only the persecuted being able to detect the persecution. But I think you should, by now, have a substantial argument against the bill.

    As for those states that closed down after Granholm, the common denominator is not that they have baptists. Its that they don’t have much of a wine industry.

  46. I’m pretty sure, for the last 125 years or so, that the legal assumption has been that liquor stores in one state can’t deliver into another state without the other state’s permission. That’s what your lawsuit in Texas is about, right Tom W?

    So I’m pretty sure that Congress passing a law that reaffirms that status quo isn’t going to be a universe-changing event. It may not be good for your particular special interest, and it may be morally outrageous, but keeping things the same constitutes, in the real world, a not-particularly-big change. Again, my contention has been been that 1161 is not consequential.

    It’s also important to note that the law specifically exempts direct-from-producer sales. meaning laws can’t give unfair advantage to in-state producers. I know that doesn’t help Mr. Wark’s particular special interest — retailers — but it is the direct channel of most concern to consumers.

    And Daniel, that you do not see how it’s possible for people to band together to get legislation passed leads me to believe to believe that you were deprived of Schoolhouse Rock when you were young.

    It’s easier to change the law at the state than the federal level. A couple of hundred activists can put an issue on the agenda. If wine lovers cared about direct shipping enough to do something about it the laws would change. But wine lovers, for all of out bitching, don’t care.

    I have an acquaintance in the state legislature, and I asked her once how many letters and calls she receives about direct shipping. She explained that after nearly a decade in elected office she had never received a single letter.

    Change that, and you can change the law. HR 1161 doesn’t alter that equation even a little.

    Can I go home now? Wark gets paid to do this kind of thing — I’m sure he bills it under “social media outreach.” But I have to do it in my spare time, and I’m supposed to be using that to write on my own blog.

  47. Holy, moly! This is like witnessing a good old fashioned argument about hunting dogs. I’m not sure what’s more entertaining, the intellectual questions these events pose or watching the old married couple (Tom & Tom) bickering.

    My 2 cents? Tom Johnson is right. Passage of HR1161 on its own wouldn’t change anything. Not immeidately, anyway. But looking beyond the bill becoming law and the predictability of what’s to follow doesn’t even require cynicism. If federal intervention at the state level can be pre-empted by natonal legislation, THEN it’ll make waging the battle to restrict interstate shipping not only easier, but more permanent and less expensive.

    Why else would this group be working so hard to keep things the same?

  48. Steve

    I think that you actually agree with me more.

    Tom Johnson is insisting that HR 1161 is a waste of time and we should let it pass and take up 50 separate battles in the state legislature.

    While HR 1161, directly does not do “anything,” it clearly has plans to make things worse for wineries, retailers AND CONSUMERS. Otherwise, why is this bill being written by the wholesalers? Why, when the Utah AG spoke before Congress, was his entire verbiage, written by the wholesalers?

    If it looks like a duck, and quacks like a duck…

  49. Tom Johnson is also rejecting your false dichotomy, Daniel. There is no magic bullet at the federal level that will allow one law or one court case to remove regulatory power from the states. Even Tom W is only pleading that in-state and out-of-state vendors be treated equally. Admirable though his devotion to justice may be, it is an abstraction that has no bearing on whether the laws become more or less restrictive. (Again: Granhom made laws in my state more restrictive, limiting consumer choice and damaging the local wine industry. Also: When Wark’s group sued Texas, Texas instantly changed their discriminatory laws to be less discriminatory but no more open, and if the complaint had persevered the outcome would likely have been a more, not less, restricted marketplace.) So the battle is going to have to be waged in 50 state legislatures whether HR 1161 passes or not.

    The impact of this bill, if passed, will be a change in the political landscape that will require a change of political strategy. Passage of the bill would forestall much of the legal action Mr. Wark prefers — and which has not, as I’ve said, proved all that beneficial to open markets anyway. Instead, it will force advocates of open markets to work at the state level, which is what they need to do anyway.

    So I continue to believe that HR 1161 is largely irrelevant. This is a battle between special interest groups that has little or no effect on the vast majority of wine consumers.

  50. So, bury our heads at the federal level, let Congress pass a law that will allow states to do as they please, because no one cares, anyways, right, Tom J?

    Seems kinda absurd don’t ya think?

    While HR 1161 may have no bearing on your life, because you live in Kentucky, please do not pass along your guided misbeliefs onto those of us that are attempting to make a difference in how wine and spirits are sold in this country.

    I am not interested in fighting this battle 50+ times. It may indeed happen, but if I can cut it off at the pass, or at least attempt to, I am going to try.

    My time is precious.

    With all due respect, your commentary is much better served on a site for wholesalers, attempting to strip consumers their rights as wine consumers.

    How many different ways can you say that you do not care about HR 1161? I think you have said so 10 times already. I get it. Dr Vino gets it. Tom Wark gets it.

  51. Hi Tom J –

    I am making a causal argument: some wholesalers make outsized profits because the legal environment in which they work often offers protections against competition. They then take those profits and help fund the political life of legislators who, in turn, maintain the status quo in the industry. (Take a look at a donor list here.) HR 1161 would prevent challenging these laws.

    By contrast, what you suggest lacks causality: an increasing number of wine consumers will one day in the distant future change the legal structure simply by drinking more; they will then rejoice in the free flow of wine across state lines and general Bacchanalia. This omits a convincing causal argument. Do you care to flesh that out? In my argument, rising wine consumption lines the pockets of wholesalers to an ever-greater degree who then have more funds at the disposal of protecting their narrow political interest.

    Have a good weekend.

  52. I don’t disagree with anything you said until you get to “prevent challenging these laws,” which I dispute, but which is also not central to my argument so I’ll let it go.

    On the other hand, I think your digest of my position is incomplete, indicating perhaps that I’m not as clear a writer as I had imagined. So:

    I don’t believe that Mr. Wark or his organization are claiming a Constitutional right to sell wherever they want wherever they want. They claim, instead, that laws must not discriminate between in-state and out-of-state vendors. The Commerce Clause forbids that.

    Here’s the problem: while the object of suing based on discrimination is to get states to treat out-of-state retailers the same as in-state retailers, the likely outcome is that states will change their laws to treat in-state retailers like out-of-state retailers. That is,rather than allowing everyone to deliver alcoholic beverages by common carrier, they will allow no one to deliver. While this may be an advance of the abstraction “justice,” from a consumer perspective it is not an improvement.

    The remedy to that less-than-marvelous result is to petition state governments to liberalize shipping laws. One of my key points is that this argument ultimately ends up in the states anyway, so why don’t we quit dicking around with the Feds and just go where we’re going to end up anyway?

    The next argument against me is, I think, that state governments are controlled by alcohol distributors. That’s cynical, but probably also true, at least as far as it goes. There are two other anti-open-markets constituencies as well: neo-prohibitionists and regulators. The neo-prohibitionists want alcohol to be more expensive and more difficult to get, and the regulators want an orderly and easily monitored marketplace. (And they are, according to longstanding case law, entitled to that as one of the legitimate purposes of the 21st Amendment.)

    When the court rules discriminatory laws unconstitutional, that coalition of diverse interests swings into action and — hey presto! — the laws get tightened in a non-discriminatory way.

    Which brings me to Maryland, my model of how direct shipping laws can be liberalized. Maryland is about to pass laws allowing direct shipping for consumers. The changes are possible because of a compromise that neutralizes the anti-shipping coalition.

    The dirty little secret of the direct shipping wars is that it’s not about you and me buying a bottle or two of wine over the Internet. It’s about retailers dealing directly with producers. Once direct shipping in its absolute form is allowed, the biggest brands will deal directly with the biggest retailers, cutting out the distributors entirely. Why wouldn’t they? Walmart has huge distribution warehouses is the SF Bay area, and they could load palettes of KJ Chardonnay onto their train cars right alongside all those racks of menswear from Indonesia. Buying direct would save Walmart a bundle and give them the ability to sell the wine at a heavy discount.

    The distributors hate that because it eliminates most of their revenue; the neo-prohibitionists hate it because it means Kendall-Jackson Chardonnay will be lots cheaper; the regulators hate it because it makes auditing and policing the system incredibly hard. (Harder still when thousands of retailers all over the country are suddenly selling in all 50 states.)

    Maryland’s law limits the amount of alcohol an individual can direct-ship. The 18-case annual limit is more than enough for the vast majority of wine collectors and drinkers, but not enough to be a threat to distributors, neo-prohibitionists or regulators. The beer distributors are(reluctantly)in favor of the law, and other distribution lobbies are staying more-or-less on the sidelines. They don’t particularly like it, but it doesn’t threaten their business. The neo-prohibitionists don’t care because it doesn’t decrease prices. The regulators don’t mind because they continue to be able to efficiently police those areas of the alcohol trade that are the established purview of the 21st Amendment — an orderly market, collection of taxes, promotion of temperance.

    Maryland is the model, and I’ll bet you right now that Mr. Wark — who is paid to represent the interests of retailers, not consumers — finds the limits on personal importation a vast, intolerable injustice, because retailers are cut out of the deal. In the abstract, he’s absolutely right. We should all be able to buy and sell whatever we want.

    But I don’t live in the abstract; I live in the real world. Completely unfettered I probably wouldn’t order more than a few cases a year anyway, so I’d cut this deal in a second and celebrate the dawn of a new era of consumer choice. It isn’t perfect; political results almost never are. But it’s a huge improvement.

    Maryland is the solution to direct shipping. Lawsuits and legislation at the federal level are a waste of time.

    Politics is the art of the possible, and I simply do not believe that the wide-open, national market Wark envisions is possible. So maybe we ought to put our energy into something that will make the system better, even if it doesn’t make it perfect.

  53. Tom:

    After Granholm, the vast majority of state “leveled up” and let shipping happen. Those places it didn’t happen was where there was no real local winery industry.

    The same will be the case with retailers if there is ever a Granholm like result. In those states where there are retail shippers who want to stay retail shippers, you will see a leveling up, not a leveling down. For example: NY, IL, NY, CA, WA, MO, etc..

    You write: “The dirty little secret of the direct shipping wars is that it’s not about you and me buying a bottle or two of wine over the Internet. It’s about retailers dealing directly with producers.”

    This issue has nothing to do with the case that I and SWRA is making vis a vis. retailer shipping. You are referring to “self distribution” by wineries. It is already fairly well understood that if in-state wineries can sell direct to in-state retailers, then out of state must be able to also. We’ve had a number of federal court decisions determining this already. A retailer supreme court decision has nothing to do with this.

    You write:
    “Maryland is the solution to direct shipping. Lawsuits and legislation at the federal level are a waste of time.”

    There would be very limited direct shipping in America without federal lawsuits, particularly Granholm. Granholm was the key that allowed most consumers to buy from domestic producers. Your recommendation that unconstitutional laws not be met with the exact tool invented to address them (federal lawsuits) makes no sense. Why not use the specific tool meant to deal with a specific problem?

  54. “Maryland is the solution to direct shipping.”-Tom J

    Tom J

    The Maryland law does not allow for consumers to receive wine shipments from out of state retailers.

    Is that the solution?

    I see you now.

  55. […] From the Dr. Vino website. […]

  56. […] these members would presumably be stalwarts in supporting wine consumers and opposing the nefarious HR 1161 if that well-financed bill should ever see the light of day in the chamber. Sadly both responded to […]

  57. […] HR 1161, which we have discussed previously, would limit judicial challenges to state laws on the interstate shipping of wine (and beer and spirits). If this bill were to pass, it could impact wine shipments negatively and irrevocably. Consumer choice could be reduced; many small wineries depend on the wider margins of direct sales to keep in business. HR 1161 was written by beer distributors. […]

  58. […] within the US? New Jersey indicates a limited yes but the biggest unknown is what will happen with HR 1161 in the unpredictable lame duck Congress in November and […]

  59. Every-time I go to napa I order wine all the time and have it shipped. Never had any issues with it other than paying out the arse for the packaging.

    Custom IDX Solutions

  60. […] relief. And we are dialing the official HR 1161 threat level back to neck level! (See backgrounder here and here). We were concerned that in the “lame duck” session when oh-so-much wheeling […]


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