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The State House passed legislation on Tuesday designed to bring Illinois into compliance with a 2005 U.S. Supreme Court ruling by limiting the amount of sales an Illinois winery can directly ship to a customer to 12 cases a year. The 5-4 decision in Granholm v. Heald ruled that laws in Michigan and New York permitting the direct sale and shipping of wine produced in state to customers while prohibiting out-of-state wineries from doing the same were violations of the 21st Amendment to the Constitution repealing Prohibition.
The approved bill, HB 429, is designed to bring the state in compliance with Granholm v. Heald while protecting both Illinois' growing wine industry and the three-tier distribution system that benefits wholesalers. We wrote back in January of last year that the distributors and wineries were at odds on this very issue before a meeting of the minds resulted in the compromise. However, that bill stalled in the House last year when the Illinois Retail Merchants Association raised objections to it. This time around, the IRMA is aboard, but HB 429 is facing opposition - and the threat of a lawsuit - from the Specialty Wine Retailers Association, which claims that even though HB 429 will bring Illinois in compliance with Granholm v. Heald, it's doing so to the detriment of out-of-state small acreage, boutique wineries.
Illinois is already one of eight states in the country that allows for reciprocity of wine sales. It may leave a bitter taste in some mouths, but this legislation appears on the surface to be beneficial to all involved parties, albeit just enough to say that it is. The state wine industry can still sell its wine directly to customers, the wholesalers protect their turf and still get to deal with restaurants, bars, and clubs directly while maintaining the integrity of the three-tier system, the retail merchant lobby is satisfied that both in-state and out-of-state wineries are on an equal playing field, and the state legislature is no longer in violation of the 21st Amendment. Still, the best analogy we can come up with for this is to imagine access to and from the city via the expressway system and Lake Shore Drive being reduced to one lane, both ways. It may work, but it still could be better.
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HB 429 is not quite good for everyone, particularly consumers.
Consider:
1. Consumers in Illinois may no longer buy ANY wine from out of state wine stores, something they have been able to do now for 15 years.
2. 1000s of wines will no longer be accessible to Illinois consumers because IL distributors do not provide them to in-state retailers.
HB 429 is decidedly unconstitutional and should be challenged in court the moment the governor signs it...if he does.
While it allows IN-state wineries to sell and ship wine to IL consumers, it prohibits out-of-state retailers to sell and ship wine to IL consumers.
The Granholm decision was clear: Allow me to quote:
"This Court has long held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate ‘differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter’… States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses."
Clearly, by prohibiting in-state wine stores the ability to ship to IL residents but prohibiting out-of-state retailers from doing the the same the state of IL is mandating "differential treatment of in-state and out-of-state economic interests that benefits the former and burdens latter."
Who is benefiting? The IL alcohol distributors.
IL retailers may ONLY buy wines from IL distributors. However, when a consumer purchases a wine from an out-of-state retailer that's a bottle of wine that did not go through the IL wholesalers' hands and give them a profit.
HB 429 is a blatant and cynical law that is protectionist at its core and throws IL consumers under the bus.
The General Assembly should never be trusted with liquor distribution and retailing laws, the Beer Industry Fair Dealing Act being a classic example. That said, it looks to me like this is a legitimate attempt to comply, however minimally and grudgingly, with Granholm. It's not good public policy, of course, but it might squeak by constitutionally.
HB 429 would be constitutional if it treated wineries and retailers the same whether they were in Illinois or in another state. But it allows IL retailers to ship to customers while prohibitting the same practice by out-of-state wine merchants.
“If a State chooses to allow direct shipment of wine, it must do so on evenhanded terms.”
So our state still has no budget, legislators are in overtime, our transit system is ready to start taking a nose dive if legislators don't start paying attention, and they're down their talking about wine????? I'm starting to see the light on why people love New York so much.
The guy at Fermentation: The Daily Wine Blog has explained in simple terms how this will affect Illinois consumers.
http://fermentation.typepad.com/fermentation/2007/06/the_cost_of_con.html
I've written to my state legislators, but obviously they want to take everything away from the consumers.