As we approach mid term elections the issue of whether we are over or under regulated is a discussion getting a lot of attention. On the one hand regulation provides much needed protection from reckless behavior or downright greed. On the other, regulation can be overbearing, costly to implement and maintain, and simply a way to ensure some special interest group has their way.  And sometimes… its just plain stupid – it achieves just the opposite of what it is supposed to regulate.

Some of the most talked about issues include the housing market debacle and Wall Street. In both cases one could argue that the proper regulations were either not in place or simply ignored.

Great subjects to discuss, but here I prefer to talk about a different industry, one in which the regulations are outdated, overbearing and in some cases, counterproductive. I bet you know where I am heading  … yes, I am speaking about alcohol regulations specifically in the wine industry.

So let me give a couple of examples. First, a regulation that on the surface seems to make sense, but as with many good intentions, misses the mark. There is a regulation that was put in place in Rhode Island to stop the practice of offering cheap prices during happy hours in order to crack down on drunk driving and drunkeness in general. It would seem reasonable … don’t let restaurants and bars promote 1/2 price or all you can drink offers in order to bring in more business, not because it won’t bring in more business, but because it does. Offers that suggest drinking as much as you can as quickly as you can are in fact not likely in the public’s interest.

So where’s the problem? As they say, the devil is in the details: the regulation also prevents a restaurant from providing a special offer when it comes to wine while dining.

Here’s how it works. A restaurant wants to attract business on slow nights so they have a special promotion – buy two entrees and purchase one bottle of wine at half price. In one particular case, the food is good and reasonably priced. The wine list although not extensive includes a small but  nice selection of low,  medium, and medium-high priced wines (Examples -  David Bruce Petite Sirah, Craggy Range Gimblet Merlot/Cabernet Sauvignon, Chateau Ste. Michelle Indian Wells Merlot, Catena Malbec, and Provenance Cabernet Sauvignon to name a few- $32 – $70). This offer has been going on for some time – the patrons get to try a nicer, higher priced bottle of wine for less and the restaurant draws more loyal patrons (oh yes, and the restaurant will re-cork the wine and seal it for take away – so there is no pressure whatsoever in having to finish the bottle.  Actually … here an example of a very smart regulation that promotes business but helps deter one from drinking too much!)

OK … where was I? Ah, so what’s the problem? They can no longer offer the wine at a reduced cost even though you may only get the discount on one bottle and with the purchase of two entrees. Instead, they can “offer” a bottle of wine for free with the two entrees (so of course they will offer their cheapest bottle). So, help me understand how this has helped to reduce drunken driving or alcohol abuse, which I assume is the intent of the happy hour law? In truth it doesn’t.

Before you had to pay something to get any wine, now you can get it free.  It doesn’t seem like a very intelligent way to administer what would seem to be on the surface a reasonable regulation.  Yes… I can now get what amounts to a $6 bottle of wine for free, but I would much rather pay a few dollars to enjoy a mid range wine that’s worth drinking - the vast majority of  $6 wines are not worth the calories! 

OK .. let’s move on to something much more insideous,  special interest regulation…..

(Let me note here that I do not favor any political party, whether Republican, Democrat, Tea Party, Libertarian or any other. I am an independent and would love to discover any political party that seeks to enact legislation for the good of the American public ……not just the conservatives .. and not just the liberals. Common sense would be so refreshing.)

So thinking of voting for a Republican or Tea Party candidate to thwart those pesky Democrats? Well, have a read here courtesy of WineZag entitled “No Comment on Wine Freedom in H.R. 5034 Response from Massachusetts Senator Scott Brown”.  Here we have a candidate that is going to shake up Washington and get rid of the special interest. Would you like to know his position on H.R. 5034?

I have never spoken, written or otherwise conversed with Senator Brown (and I am not singularly pointing him out … there are many co-sponsors of this bill that could use a long vacation..from Washington), but I know that no intelligent individual could read that legislation and not have a sense regarding  its special interest nature. So my question: has he read the bill?

Or, has he been swayed by special interests to vote for something that is NOT in the public’s interest. In either case, the American public has another potential regulation that reaps great rewards for the wholesaler monopoly (and I assume many politicians as well who receive support from the wholesalers), but hinders job creation and makes it very difficult for small, family owned wineries. It leaves them few options.  If they cannot reach their customers directly, they must try  to place their wine in distribution, which for many wineries is much too costly  (assuming they can find a distributor to carry it at all). And PLEASE, not another bit of nonesense about how this will help reduce underage drinking or ensure alcohol taxes are paid; this bill does neither. It simply seeks to ensure no court can challenge laws that  discriminate against interstate commerce.

Now as stated many times I am not suggesting the dismantling of 3 tiered distribution. On the contrary, for high volume wine, beer and spirits producers it is a necessity. Other means of distribution would be impractical.  This system employs thousands of Americans as well.

But just as other industries have adopted new ways of doing business to augment traditional methods, here too regulation of the wine industry must modernize. Current laws established 75 years ago meant to regulate the sale and distribution of wine are not optimal in 2010. How many other products have different regulations in all 50 states? How can legitimate businesses cost effectively deal with 50 variations when it comes to wine sales and distribution? And lastly, why should any legislator support a law that in no way impinges on a states ability to regulate alcohol as long as they do not do so by discrimination in regards to  interstate commerce?

As stated in a recent New York Times article ”It’s easier to deal in guns than in wine”. Let’s free the grapes.

Let’s say its your child’s birthday and you want to purchase a special toy for him/her. You go to your local Toys R Us and they tell you that they don’t carry it in your state, but you can purchase it at a store in another state.

You go home, get on the net and look up the store. You find the toy you are looking for and put it in your shopping cart. You enter your information and hit the “buy” button. Instead of providing you a comfirmation page you get the following message:

“We are sorry but our records show that this toy represents the 13th you have purchased from us over the past year and your state only allows you to purchase one dozen yearly. Please buy from us again after (the date)”.

That’s nonsense, rediculous you say … well not so fast. This is one of the many rules in place or being put in place in many states  where you can purchase as much wine from an in state winery as you would like, but you are limited when purchasing from an out of state winery.

Sound a bit unfair? Or, perhaps do you smell private interest or influence?

Unfortunately since the repeal of Prohibition in 1933, states were given the right to setup their own rules and regulations when it comes to alcohol. Frankly, many of the restrictions made sense at that time based on the illegal activity prevalent during Prohibition and the state of distribution, licensing and administration.

I am sure you have heard the old adage “if it ain’t broke, don’t fix it”. Well here we have a situation where for the wine consumer it is often broken both in terms of cost and choice, but for those involved in distribution monopolies and/or those that have businesses that thrive on the staus quo, it is working  just fine!

One recent example is a new wine shipping law   in Tennessee (Senate Bill 166) that would allow out-of-state wineries to ship up to 3 cases per year if they obtain a $300 non-refundable application fee and then a $150 annual permit fee. Tennesee is not alone in setting fees and limitations on shipments of wine or the size of the winery.

If availability (volume) is the issue, why then isn’t there a limit on in-state purchases from wineries or retailers?

Is the limitation in place to safeguard state revenue? Nope.. Taxes can’t be an issue either since the out-of-state wineries must be licensed.

Alright .. is it access? No not really since the state can mandate that all shipments must be signed for by someone over 21. OK … so perhaps the issue is that the delivery companies don’t have trained drivers? Not likely, most drivers have families to feed and are just as likely as any clerk in a retail outlet to safeguard their jobs.

My point: states are little by little opening up to the 21st century (internet) when it comes to wine sales, but we have an awful long way to go before consumers finally have freedom of choice when it comes to wine purchases, and the “it ain’t broke” crowd are working overtime to ensure it happens as slowly as possible.

There I go .. talkin’ up the grapes again!