New Amendment to H.R. 5034|Shipping Discrimination Bill Moves Forward

The latest developments indicate that H.R. 5034, the bill in the House of Representatives that restricts shipping wine and alcohol direct to consumers by wineries and out-of-state retailers, and provides a virtual monopoly to wholesalers, continues to move forward with a hearing scheduled for Wednesday, September 29, 2010.  This is a crucial step in getting the bill to the floor of the House of Representatives for a vote.

On September 13th, primary sponsor of the bill, Congressman William Delahunt (D – MA) introduced an Amendment to the original bill that appears to be an attempt to cloak the original intention of the bill and circumvent the Commerce Clause.

The Wine Institute and Wine America (The National Association of American Wineries) issued a joint statement in opposition of the new Amendment offered by Rep. Delahunt.  In part, the statement reads:

“Mr. Delahunt’s changes to H.R. 5034 still clearly allow wholesalers to pass
discriminatory state laws which would encourage re-litigation of decades-old Supreme
Court precedent and result in more litigation, not less. With his amendment, a state law
could be crafted to avoid the more blatant, outright, and readily apparent “facial”
discrimination against producers and replace it with more subtle forms. For example,
while a state would not be able to pass a law that allows in-state wineries to ship directly
to consumers but disallow out-of-state wineries from doing the same, under the new
language, states could still discriminate based on production levels or product type and
provide preferential tax and other advantages to in-state products with complete
immunity from Commerce Clause challenge.”

The issue of direct shipment of wine, and alcohol in general, is like a bad, long-running “Soap Opera”.  Regulations restricting the shipment of alcohol has been a political football since the repeal of Prohibition more than 75 years ago.  If H.R. 5034 is allowed to pass, it will effectively unravel over 40 years of court rulings balancing state authority with Commerce Clause protections.

Focusing strictly on wine sales and shipments, on one side are the wineries and retailers who look to provide their consumers with what they are looking for, access to wines they would otherwise have trouble finding in their area at competitive prices.

On the other side of the argument are the national distributors and wholesalers of alcoholic beverages, who not only make a powerful lobby on their own, but have often enlisted other powerful lobbying groups such as state regulators to further their cause of curtailing direct-to-consumer shipments by wineries and retailers through the three-tier system of distribution.

Congressional Bill HR 5034

The issue at hand is a new bill (H.R. 5034) introduced to Congress in April.  It would essentially give states unbridled authority to regulate shipments of alcohol, even if these regulations were in direct opposition to the Commerce Clause.  Effectively H.R. 5034 would allow states to restrict direct-to-consumer shipments of alcoholic beverages, and would seriously challenge pending lawsuits by consumers and wineries trying to reduce restrictions on direct to consumer shipments.

HR 5034 was crafted by the National Beer Wholesalers Association (NBWA).  It is designed to protect and strengthen the three-tier system, which would preserve the wholesalers’ monopoly on distribution, and strengthen the states’ control on alcohol sales.

Wineries, retailers and consumer groups were caught by surprise in April at the introduction of HR 5034, and no groups testified on their behalf at the Congressional subcommittee hearing held on March 18. Many have spoken out against the bill since then.  Since then, many groups and legislators have spoken out in opposition of H.R. 5034.

Voice Your Opinion and Contact your Representative here:
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Additional Resources

Here are some additional resources that discuss the issues surround H.R. 5034

Joint statement by the Wine Institute and Wine America – Statement in opposition of Rep. Delahunt’s new Amendment.
Tom Ark’s “Fermentation” Wine Blog – “You can’t slap a new coat of paint on an old car and call it a new car.” Tom offers up some solutions on how to bring the archaic alcohol laws into the 21st century.
Stop HR 5034 Website – The latest developments surrounding H.R. 5034
Wine Spectator – Robert Taylor’s article on H.R. 5034 in Wine Spectator

The Internet Has Changed Everything

In an era where consumers are increasingly looking for, and finding, more accessibility to goods and service, this appears to be going against a powerful trend.  The choices that consumers now enjoy enable them to find exactly what they are looking for, at competitive prices, thereby fostering competition among businesses providing those goods and services.  Creating competition will cause companies to offer better products, services, and pricing, all to the benefit of the consumer.

Restrictions to access of wine, except through the three-tier system, would effectively reduce the choices consumers have available to them, and thereby place restraints on the competitive nature of the free market system in terms of the wine industry and producers of other alcoholic beverages.

A light-hearted view of HR 5034

What People Are Saying About HR 5034

“The proposed legislation, while couched as addressing public safety and states’ rights, is merely a smoke screen for a power grab by beer wholesalers that would instead stunt competition, reverse years of long-established judicial precedent, and severely limit consumer choice.

The wholesalers are using this legislation to put their businesses out of reach of nothing less than the U.S. Constitution. No other business sector has been extended this level of immunity. This legislation would be an unprecedented shift in the balance between Federal and state authority over wine and alcohol. It would have major constitutional consequences and will be opposed by those who care about free trade and our nation’s 6,700 wineries.” —Wine Institute http://www.winebusiness.com

Congressman MikeThompson - D-CA

“For decades, wholesalers have expended great resources to protect their state-mandated distribution system in ways that have harmed wineries and breweries. These efforts have stunted competition and weakened producers, which ultimately leads to fewer choices for consumers…. States should encourage, not stifle, competition.” —Congressman Mike Thompson – D-CA

“Beer distributors aren’t concerned about direct shipping; few consumers would pay $40 to have a case of specialty beer shipped to their homes. The bill is about direct sales from producers to retailers — particularly major chains like Costco or Wal-Mart — bypassing distributors. That could have a devastating impact on distributors, who have huge political clout.” —Paul Franson, Wines and Vines

“The likelihood of the NBWA’s proposed legislation coming to pass is still slight. A hearing and an introduced bill are very different from a signed law. But the lobbying battle is just beginning.” —Robert Taylor, Wine Spectator

“The bill is a naked attempt to dominate the marketplace and change consumption patterns. It puts at risk most of the 7,000 wineries in the nation.” —Family Winemakers of California http://www.winebusiness.com

In Conclusion

Although HR 5034 has an uphill battle of passing, this tug-of-war between distributors and wholesalers, and the wineries and retailers will be with us for years to come.  The “Soap Opera” continues.  There is simply too much at stake for either side to capitulate.

Commerce via the internet is a way of life today.  It is time for our legislators to bring these archaic restrictions into the 21st century.  The trend is in favor of the consumer, but it will take consumer pressure and influence on their elected representatives to move the debate one way or the other.

With that in mind, I would encourage you to contact your Congressional Representative and voice your opinions.

Contact your Representative here: Write Your Representative!