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Justices wade into wine sales.

Byline: Sherri Buri McDonald The Register-Guard

Doug LaVelle, owner of Elmira-based LaVelle Vineyards, says his winery and customers would benefit tremendously if he could ship wine directly to consumers in all 50 states.

That's why LaVelle and many other vintners across the nation are closely watching several appeals now before the U.S. Supreme Court.

The appeals challenge state laws in New York and Michigan that allow wineries in each state - but not those out-of-state - to ship their products directly to state residents.

The dispute pits regulators and wholesalers against out-of-state wineries that want to sell alcohol to consumers, mostly over the Internet or by phone.

The Supreme Court heard arguments on Tuesday and is expected to rule on the appeals by July.

The court's decision could lead to sweeping changes in how wine - and possibly other alcoholic beverages and commodities - are regulated and sold.

Twenty-four states have laws that ban out-of-state suppliers from shipping wine directly to residents of their states.

In general, outside wineries must sell their products through licensed wholesalers in those states. Michigan and New York allow in-state Internet or telephone sales of alcoholic beverages. Some other states allow such sales; others do not.

At the heart of the Michigan and New York appeals is a constitutional clash between the 21st Amendment, which repealed Prohibition in 1933 and authorizes states to regulate the sale of alcohol within their borders, and the Constitution's ban on state discrimination against interstate commerce.

The stakes are high in the $21.6 billion wine industry. States collect millions of dollars in alcohol taxes and claim that the established system helps stem fraud and underage drinking. They argue they have less enforcement power over out-of-state sellers who aren't licensed.

``Allowing Internet sales of a highly dangerous and highly regulated product, such as alcohol or tobacco, is a genuine concern for state regulators,'' attorneys general from Ohio and 32 other states argued in a friend-of-the-court brief backing Michigan.

Small vintners across the country, however, argue that the so-called "three tier" system in use in many states, which requires producers to sell only to licensed wholesalers, who in turn sell only to licensed retailers, restricts their ability to distribute their products nationally.

Since 1980, the number of wineries has quadrupled nationally to more than 3,700 this year, and their survival depends on state laws that give them a fair shake, the National Association of American Wineries argued in a friend-of-the-court filing.

In Oregon, home to many small wineries, freer interstate trade is the state Wine Advisory Board's No. 1 legislative priority, said executive director Ted Farthing.

"It's awfully tough for small vintners to get quality distribution," he said.

"Allowing wineries to ship directly to consumers levels the playing field and really lets small, family run businesses survive."

When Doug LaVelle opened his winery in Elmira almost a decade ago, his marketing strategy was to sell as much wine as possible directly to consumers.

Being able to ship directly to customers in other states "is such a potentially significant part of our business," he said.

Today, about half of LaVelle's annual sales is made through distributors and half is made by the winery itself, LaVelle said.

Three-quarters of LaVelle's sales are in Oregon, mostly through two tasting rooms - one in Elmira and one in Fifth Street Public Market in Eugene, and through the LaVelle wine club, LaVelle said. He declined to disclose the winery's annual sales.

The existing patchwork of state laws makes it complicated when a tourist walks into a LaVelle tasting room and wants to send some wine home. It's no problem for the residents of some states, but it simply can't be done for residents of others, he said.

"Sometimes it's hard to explain the nuances of the whole issue," LaVelle said.

Oregon's larger wineries aren't as dependent on direct sales, but still would benefit if the Supreme Court allowed direct shipments of wine to consumers in more states, said Doyal Eubank, controller at King Estate, Lane County's largest winery.

King Estate sells 95 percent of its wine through distributors, Eubank said.

The Associated Press contributed to this report.

CAPTION(S):

Customers occasionally ask Tiffany Ambiel of LaVelle Vineyards to ship their purchases to their home states. The vineyard then must explain a complex set of state laws that can prevent the practice. Many are looking to the Supreme Court to clear confusion. S u p r e m e C o u r t
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Title Annotation:Courts; Local wineries are watching for a decision that could ease a patchwork of state laws that often keep them from getting the beverage to buyers
Publication:The Register-Guard (Eugene, OR)
Date:Dec 8, 2004
Words:744
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