The Wine Institute

Dec 3, 2004

Ending Discrimination Promoted By Wholesalers Would Be A Win For Consumers, Small Wineries, Tax Collectors And Regulators

SAN FRANCISCO - On December 7, the U.S. Supreme Court will be hearing oral arguments in cases challenging discriminatory bans on interstate, direct-to-consumer wine shipments in New York and Michigan. Both states have laws that allow in-state wineries to ship alcohol directly to adult consumers but prohibit out-of-state wineries to direct ship to those same consumers. The Supreme Court has narrowly defined and posed the following legal question: "Does a State's regulatory scheme that permits in-state wineries to ship alcohol directly to consumers but restricts the ability of out-of-state wineries to do so violate the dormant Commerce Clause in light of Section 2 of the 21st Amendment?"

"A favorable decision to end discrimination promoted by wholesalers would be good for wine consumers, regulators and tax collectors in states that pass legalized direct shipping, and a win for America's small family wineries," said Wine Institute President and CEO Robert P. Koch. "This has already occurred in 26 states and we want New York and Michigan to be numbers 27 and 28. The Wine Institute supports the three-tier producer-wholesaler-retailer distribution system, as 99 percent of wine is sold in this manner. Direct shipping augments the three-tier system by allowing small wineries with limited distribution options to do business with their adult consumers."

"The issue is all about discrimination," said Koch. Underlying the case is a battle between 3,000 small, family-owned wineries in all 50 states that cannot get national distribution and large wholesalers who oppose direct-to-consumer wine shipments because they are not involved in the transaction and, therefore, do not profit from such sales. "The case has nothing to do with the serious issue of underage drinking," he added. "This is a false argument that the wholesalers are using to protect their monopoly." The Federal Trade Commission released a study in July 2003 that concluded that direct shipping of wine gives consumers more choices and has little or no effect on underage drinking.

Wine Institute is the public policy advocacy group representing 821 California wineries and affiliated businesses. Since 1985, the Institute has worked on legislative and regulatory solutions for direct shipping, and recently submitted an amicus brief to the U.S. Supreme Court on the successful implementation of a model direct shipping bill for addressing public policy concerns.