Out-of-state wine importers criticize California's distribution laws

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As we have previously discussed, the United States has been taking action that is likely to increase drink prices. This is relevant not only at the national, but also at the state level. The debate has reached California, where Orion Wine Imports is unhappy with California's interstate shipping rules:

In California, importers and wholesalers based outside the state must first sell to an importer or wholesaler in California, even though in-state importers don't have to. Orion argues that adds distribution costs to out-of-state importers that in-state ones don't face, which violates the Commerce Clause and the Privileges and Immunities Clause, per the complaint.

Orion claims the laws could prevent it from selling and delivering some of its wine in California altogether "if the demand is so small or the wine is so new and unknown that no wholesaler will agree to carry it." Moreover, they have no plans to open a facility in California and "cannot afford to do so..."

Read the entire article here

Amazon Starts Delivering Booze in Texas

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As mentioned previously on DrinksReform, Amazon is disrupting the booze industry. This time, they are making a splash in Texas. They are now allowed to deliver beer and wine:

Amazon previously had not applied for a permit to sell alcohol in Texas, said Texas Alcoholic Beverage Commission spokesman Chris Porter. But recently it obtained "wine only package store" permits  and "beer off premise" licenses for five of its warehouses in Texas. 

The permits allow Amazon Logistics, which holds a TABC "carrier's permit" to deliver beer, ale, and wine to consumers within the counties where their warehouses are located — in this case, Bexar, Dallas, Harris, Tarrant and Travis. The drivers are trained to check for IDs and to collect an adult's signature before delivering the alcohol, Porter said.

Other online delivery services that operate in Texas had to partner with a retailer in order to deliver beer and wine. Amazon is now a retailer in Texas, from the standpoint of beer and wine sales, Porter said...

Read the whole piece here.

Protectionism Upheld in Missouri

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The three-tier alcohol system often works to prevent dynamic delivery models, including shipping alcohol to consumers via mail. A court in Missouri recently dismissed a lawsuit seeking to allowing out-of-state retailers to ship to Missouri consumers, citing the state's current alcohol distribution system: 

Wine & Spirits Wholesalers of America (WSWA) today applauded a Missouri judge’s decision to dismiss a lawsuit that attempted to compel Missouri to let out-of-state retailers ship alcohol directly to Missouri residents, circumventing the state’s distribution system (Sarasota Wine Market v. Parson). The ruling reinforced the legitimacy and importance of the state’s system of beverage alcohol distribution and sale...

The ruling also noted that, 'to allow out-of-state retailers to ship directly to Missouri residents would not only burden in-state retailers, who would have to operate within the . . . system while out-of-state retailers could circumvent the Missouri regulatory system entirely, it would also violate the Twenty-first Amendment by undermining Missouri’s ‘unquestionably legitimate’ system.'"

Read the entire article here.

Wisconsin Supreme Court Decides Against Protecting Wine Distributors

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Most states use so-called Franchise Laws or other legal mechanisms to effectively lock alcohol producers into contracts with distributors. But the Wisconsin Supreme Court recently handed down a decision involving the state's Fair Dealership Law, which protects alcohol distributors by making distributor contracts harder to terminate. In its ruling, WisBar News reports that the court held Wisconsin wine distributors were not protected under this system:

In an unusual certification from the U.S. Court of Appeals for the Seventh Circuit, the Wisconsin Supreme Court has ruled (4-3) that “dealerships” with wine distributors are not protected by the Wisconsin Fair Dealership Law (WFDL).

Capitol-Husting Co. Inc. and another wine distributor argued that importer Winebow Inc. could not unilaterally terminate their business relationship under the WFDL, Wis. Stat. chapter 135, which says dealership agreements cannot be cancelled unless the grantor shows good cause to cancel the agreement.

But Winebow argued that showing good cause was not needed because the wine distributors are not protected by the WFDL. Specifically, Winebow argued that the WFDL protects “intoxicating liquor” dealerships, which doesn’t include wine.

The Seventh Circuit Court of Appeals certified the case to the state Supreme Court to ask whether the definition of a “dealership” includes wine grantor-dealer relationships...

Read more about the ruling here.

Send Us Your (Least) Favorite Dumb Alcohol Laws!

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As we all know, crazy, nonsensical, and downright dumb alcohol laws are abundant from coast to coast. While we have discussed a lot of these here on DrinksReform, we want your input. Are there any laws that you find especially dumb that we might not be familiar with? We're planning a cool project based around them, so send us your favorite examples!

DM us on Twitter @RSI, or email Daniel or Jarrett at ddiloreto@rstreet.org or Jarrett at jdieterle@rstreet.org.

We'd love your input!

TTB Ramps Up Enforcement Efforts

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As we have discussed previously, the three tier alcohol distribution system continues to be an area of contention in the alcohol industry. According to Wine Searcher, the Alcohol and Tobacco Tax and Trade Bureau (TTB) appears to be stepping up its enforcement efforts when it comes to alcohol distribution:

It's been a big year already for federal agencies when it comes to dishing out fines – and a painful one for the recipients.

In the past year, US enforcement agencies – such as the Washington DC-based Alcohol Tobacco Tax and Trade Bureau (TTB) – have had a field day tracking down and fining major suppliers and importers that have violated the well-entrenched laws of the American three-tier, drinks sales system.

The agency's renewed focus is thanks to additional funding and the TTB's continued desire to root out illegal activity. In the past few years some major suppliers have been fined for a variety of illegal activity. One of the biggest busts included a $1.9 million payment received from six industry members – including Bacardi, Diageo, Gallo, Future Brands, Moët Hennessy and Pernod Ricard – for a multi-level, pay-to-play arrangement with Harrah's, a Las Vegas casino in 2011.

Read more about the TTB's tax levies here.

 

Aluminum Tariffs Threaten to Sour American Whiskey (and more)

 

As we've previously discussed on DrinksReform, tariffs are going to hurt the USA's drinks industry. Despite claims that they will protect business, American brewers are bracing for increased productions costs. Reuters provides brewer Adam Spiegel's situation as a case study:

U.S. President Donald Trump on June 1 imposed tariffs for aluminum imports from Mexico, Canada and the European Union. As a result, Spiegel expects his bill for recently-ordered steel fermentation tanks, worth several hundred thousand dollars, to be $50,000 to $60,000 higher.

Spiegel will also get squeezed by the tariffs the EU announced in retaliation on U.S. goods, including whiskey, earlier this week. They could put his roughly 58 pounds ($77.83) per bottle of Sonoma Rye and West of Kentucky Bourbon out of reach for some European drinkers unless he swallows some of the cost.

With nearly a quarter of his sales coming in Europe, lowering his prices enough to offset the entire tariff would be too stiff a drink for Spiegel given total revenue only amounts to a few million dollars a year.

Find the entire article here. The threat is also looming in other industries. For some details about how that will affect beer, check this article out. For more about retaliatory tariffs, follow this link.

New York Bills Could Grant Monopoly Power

As seen on DrinksReform before, New York already has laws restricting wine purchases. Grubstreet explains that two bills being discussed could further this restriction, especially concerning shops looking for older wines:

"The new rules would give any one, and only one, wholesaler control of any label, so individual winemakers, or 'any single brand,' becomes an exclusive part of the wholesaler’s portfolio. It’s effectively a monopoly, so anyone who isn’t concerned about the prospect of fewer lip-smacking Jura reds might be worried about steep price hikes that could result from a newly homogenized market.

A second implication that has wine drinkers reeling concerns the often-extraordinary impact that wine shops will have to compete and stand out by selling interesting, older bottles. Current rules allow certain merchants to buy wine directly from sources beyond wholesalers, including the cellars of private collectors. Several of the best wine shops do this; it’s what keeps the city’s wine scene diverse and interesting. And as writers like Jason Wilson have argued, the ability of merchants to specialize and sell wines made from more obscure grapes (or from far-flung regions) conveys the added benefit of biodiversity and environmental stewardship, a good remedy against the tide of industrial bottles.

The proposed legislation limits the meaning of “private collection.” Collectors would have to be “non-licensed” individuals, only selling wine that originated at a retail store or at auction, and transactions would require the original proof of purchase. Finally, if the wine is white or rosé, all bottles would have to be at least five years old; if the wine is red, port, or sparkling, that number goes up to ten..."

Check out the entire article here.

 

Pennsylvania Further Restricting Spirit Sales

 

While we have discussed that Pennsylvania may be rolling back some of its drinks laws, not all reports point in this direction. Jdsupra explains that some Pennsylvania distilleries may be restricted on their spirits sales:

"Limited distilleries and distilleries licensed in Pennsylvania are now restricted to selling up to 50,000 gallons of distilled spirits annually to Pa.L.C.B. licensees and permit holders. This does not restrict the amount of distilled spirits that a limited distillery or distillery may sell to consumers or the Pa.L.C.B., just the amount that may be sold to Pa.L.C.B. licensees through self-distribution.  This restriction will be combined for all limited distilleries or distilleries with common ownership, either directly or through a wholly-owned subsidiary.  Thus, if a person owns two limited distilleries, the two would be permitted to have combined sales of 50,000 gallons to Pa.L.C.B. licensees.  Upon reaching that 50,000-gallon limitation, all sales to Pa.L.C.B. licensees must be purchased by the respective licensee through the Pa.L.C.B., assuming such products are offered for sale by the limited distillery or distillery through the Pa.L.C.B..."

Check out the entire article here.

Why Can’t Native Americans Make Whiskey?

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Image courtesy of New York Times

R Street's Jarrett Dieterle and Kevin Kosar took to the pages of the New York Times this week to explain why Native Americans are still not allowed to distill on tribal lands. The reason traces back to an antiquated 1834 federal law, which they argue its far past time to repeal:

In 2016, the Confederated Tribes of the Chehalis Reservation, in southeastern Washington State, began selling craft spirits and beer at a restaurant in their Lucky Eagle casino. But when the Chehalis wanted to start making their own hooch, the federal government said no.

The Bureau of Indian Affairs informed the tribe that federal law prohibits the building of a distillery on tribal grounds. The Chehalis would have to continue to purchase spirits from producers off the reservation.

Small-scale distilling is a booming business, providing much-needed jobs and revenue for state and local governments. So why are Indian tribes legally prevented from joining in? ...

Read the whole piece here.