Free the Grapes!: Massachusetts Ruling Could Thwart Wholesaler Campaign to Ban Legal, Regulated Wine Direct Shipping.

NAPA, Calif. -- Since the 2005 U.S. Supreme Court ruling in Granholm v. Heald, wine wholesalers have sought legislative barriers that sidestep the high court's ruling in order to prevent legal, regulated wine direct shipping, according to Free the Grapes, a national coalition of thousands of wineries and 300,000 wine lovers. (www.freethegrapes.org) 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.

Subject to possible further appeals and clarification of the rules allowing common carriers to deliver wine into the state, the ruling paves the way for consumers to purchase and enjoy wines from any winery in the United States.

The Massachusetts' law struck down by the Court is so complex as to effectively ban all direct-to-consumer wine shipments. Technically speaking, the statute does allow any winery producing less than 30,000 gallons to ship with a state-issued, direct shipping permit. And wineries producing more than 30,000 gallons, but without wholesaler representation in Massachusetts during the past six months, can also get a direct shippers permit. But wineries producing more than 30,000 gallons and who retain a Massachusetts wholesaler are prohibited from all direct shipping. These excluded wineries account for over 95% of all of the wine produced in the US each year. Today's ruling enjoins the ABC from enforcing any of these provisions, as well as other provisions that worked to exclude direct shipments.

National Wholesaler Strategy Based on Misguided Assumption

The wine wholesalers pursue two strategies. First, to punish successful wineries by prohibiting winery-to-consumer shipments based merely on a winery's production capacity, according to Free the Grapes. As was the case in Massachusetts, "caps" simply replace one form of discrimination (i.e., based on winery location) that was ruled unconstitutional in Granholm v. Heald, with another (i.e., winery production capacity) that has now been ruled unconstitutional in Family Winemakers of California v. Jenkins.

Second, wholesalers pursue laws that require consumers to visit wineries before any future winery-to-consumer orders are accepted and shipped. This archaic provision imposes a ridiculous burden on consumers, does not reflect the proven effectiveness of state alcohol regulators in establishing shipping regulations or the track record of winery compliance. No winery has had its licensed revoked for a violation of a state's direct shipping laws.

Both strategies are flawed because they assume a 'zero sum game' for wine enjoyment. But winery anecdotal evidence clearly shows that a bottle of wine that is shipped directly does not replace a bottle purchased at a favorite restaurant or from a wine merchant. Legal winery-to-consumer shipments help to build awareness of wines and their sales through traditional sales channels. In fact, state legislators recognized this by starting to pass direct shipment laws in the 1980s.

The results of the wholesaler's national campaign have been uneven for the powerful middlemen:

* Florida. Wholesaler efforts to replace the current, open shipping system with a "cap" bill were defeated in 2006, 2007 and again in 2008. The proposed bills would have prevented shipments from wineries producing more than 250,000 gallons.

* Georgia: The best example of a state with previously unworkable regulations, Georgia replaced its overly complex law with the model direct shipping bill (effective 2008).

* Colorado: Colorado removed its on-site provision when wineries, wholesalers and the state worked together and implemented the model direct shipping bill (effective 2006).

* Massachusetts: With today's ruling, discriminatory regulations based on winery production size were ruled unconstitutional.

On the other hand:

* Arizona: State law bans winery shipments to Arizona consumers unless they have visited the winery in the previous calendar year (law effective 2003), and bans shipments from wineries producing more than 20,000 gallons (effective 2006). Litigation is pending.

* Kentucky: No common carriers have approved the state for shipping, pending the outcome of litigation. State law technically allows shipments from wineries producing less than 50,000 gallons.

* Ohio: State law bans winery shipments to Ohio consumers from wineries producing more than 250,000 gallons (effective 2008).

Massachusetts Background

In 2005 Massachusetts House Bill 4498 was introduced and passed both House and Senate. The bill was condemned for seeking to place conditions on out-of-state wineries that did not exist for Massachusetts' wineries. No in-state wineries produced more than the 30,000 gallons, and they could sell directly to Massachusetts consumers as well as through state wholesalers. Out-of-state wineries over the 30,000 gallon cap would not have this option - they would have to either sell directly to consumers or through a Massachusetts wholesaler, if a wholesaler chose to represent them. Wineries that retained a Massachusetts wholesaler and produced more than 30,000 gallons were prohibited from direct-to-consumer shipping.

Governor Mitt Romney vetoed HB 4498 in November 2005 - commenting on its "anti-consumer effect, as well as its dubious constitutionality" - but the veto was overridden. In January 2006, Governor Romney introduced, but failed to pass, a separate bill similar to legislation working successfully in many other states, commenting that "It's time we end the monopoly that wholesalers have over wine salesO"

HB 4498 became law in 2006. On September 18, 2006, Family Winemakers of California v. Jenkins was filed, stating that current Massachusetts law violated the nondiscrimination principle of the Commerce Clause, which prohibits "laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses." (U.S. Supreme Court, Granholm v. Heald, May 2005)

Massachusetts is the seventh largest wine consumption state in the U.S. (source: Adams Wine Handbook, 2007, figures from 2006 data). Thirty-five states allow legal, regulated winery-to-consumer wine shipments. For more information, visit www.freethegrapes.org and www.familywinemakers.org.