This bill was recently introduced in Congress to safeguard the status quo regarding the three-tiered system of alcohol distribution and ensure it remains without challenge even in those cases where the Supreme Court has ruled related state laws are discriminatory.

There are several sites providing a good amount of detail  including Tom Wark’s Fermentation, WineIndustryInsight, Decanter and WineHarlots, to name a few.

As a wine lover I find this attempt by the Wholesale lobby incredibly disturbing at the least . At a time when this country is simply fed up with special interest group legislation, this lobby wants to have their cake eat it too so no one is able to legally challenge them in the future.

To me this is a clear case of self interest and greed; this group wants to make sure that no one can challenge their monopoly. They are getting the support of several State Attorney Generals with the argument that the current justified litigation is too costly – states should not have to put up with it (boy, imagine if the health insurance industry came up with a similar bill and argument: “we should not be bothered with what we consider to be frivolous lawsuits if we unjustly deny coverage to sick people.. it costs too much and takes too much time”!)

Why do I suggest this is absurd?

First, no one is trying to do away with the three-tiered distribution system. From a logistical viewpoint, there are many large wineries that need the current system just to get their product to market. So even after 70 years there is still a place for the system itself.

Secondly, the current challenges in the courts are not based on anyone challenging the state’s right to regulate alcohol, they are challenging the state’s rights to implement laws that clearly discriminate between in and out of state wineries and retailers. Yes… they are reeling against anyone that might challenge them from implementing self interest laws that are clearly in conflict with laws regulating interstate commerce.

So what are the salient arguments?

My interpretation:

“The three-tiered distribution system has served us well since the repeal of Prohibition in 1933. If this system is circumvented it will lead to underage drinking, more alcoholism, loss of taxes and loss of jobs. Further, the cost of defending current laws is becoming expensive and the States should not be burdened with such lawsuits.”

Let’s take these one at a time:
1. The three-tiered system has served the industry well in terms of an orderly transition for a decimated industry at the end of Prohibition. With that said, so has regulations regarding telephone service, television, radio, and many other technologies and processes. However, most all of these have gone through their own transitions based on changing needs and demand. Imagine what things would be like if everyone still only had only land lines to work with, or needed to use cash for all transations. The bottom line is that needs change and most industries and businesses change with it. Actually, the three-tiered system has changed. It now includes a much smaller number (albeit much larger size) of distributors, many who control vast amounts of the industry – from the vineyards, to the wineries to distribution. So there is now a lot on the line for these mega distribution companies (hence… lot of money being spent at the State level to keep these laws in tact).
2. I would like someone to point out to me how the current system has fully curbed underage drinking or alcoholism. This lauded system still has many cracks in it. I would also like someone to prove that direct shipment would drastically increase either of these. If that were the case, every state in which direct shipment is available would have drastically higher rates of underage drinking and alcoholism, which is not the case. (I am not saying there are no alcohol issues as that would be naive. What I am saying is that allowing direct shipment does not translate into either of these assuming well identified safeguards are implemented.)
3. Direct shipment states collect taxes and fees from wineries that wish to ship into their state. Tax collection is not an issue.
4. The next one is loss of jobs. I look at this issue much the same as under age drinking. There is no basis for there being a loss of jobs. The three-tiered distribution system will still have plenty to sell. The issue here is simply allowing those that want access to wines that are not currently offered to be accessible. These are not the high volume wines currently in mass distribution, but rather, small volume winereies that often can’t get representation in the current system. This saves jobs not the way around.
5.Lastly, let’s look at the absurd argument that States should not be bothered with lawsuits to refute laws that clearly discriminate between in state and out of state wineries. Again, this is akin to saying after the most recent catastrophe in West Virginia that mining companies should not be held accountable for safety because the cost of litigation is too expensive. If its wrong its wrong.

My advice to States:  Don’t draft discriminatory laws and you won’t have to deal with related lawsuits!
In my opinion, this is clearly a bill that should not see the light of day. It serves one purpose only – to safe guard a monopoly initially implemented 70 years ago. Time we updated our laws to reflect the demands, capabilities and promise of the 21st Century.

If you feel the same way I do, I encourage everyone to write to their representatives to reject this well crafted, special interest bill that is an affront to all wine lovers. Here’s a link to help you make your voice heard (courtesy of Free the Grapes)

As Tom suggests: Kill bill – HR 5034.