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Modern Day Prohibition And How You Can Prevent It

By Chuck Sudo in Food on Jan 17, 2006 2:30PM

2006_01_baron.jpgLast May the Supreme Court ruled that states that didn't allow out-of state wineries to sell their product directly to customers (be it via phone, in person, or online) were violating laws protecting interstate commerce. The ruling invalidated laws on the books in 20 states, including Illinois. It was the correct ruling. Allowing direct wine sales to customers spurs growth in the industry. Wine consumers have a wider range of choices and prices to make decisions that best fit not just their palates, but their economic parameters. For smaller, "boutique" vineyards that don't make enough product to market it all through a distributor, the prospect of internet or direct sales is necessary to promote growth and profitability.

Unfortunately, the state's major alcohol distributors don't think that way. Lobbying with the dual arguments of lost tax revenues and the bogeyman-like fear of internet sales of alcohol to minors (an argument debunked by Illinois Liquor Control Commission Chief Legal Counsel Bill O'Donaghue), House Bill 4350 was introduced. Sponsored by State Representatives Lou Lang, Jay Hoffman, and Tim Schmitz with State Senators Terry Link and Ira Silverstein at the behest if the Associated Beer Distributors of Illinois, HB 4350 would amend the State Liquor Control Act of 1934, requiring that small wineries use distribution companies to sell their product, regardless of the customer. If passed into law, the bill would effectively allow the distributors to set the prices to customers for direct sale, with the wineries not seeing any of the markup. It would also prohibit the sale of direct, mail order, and internet sales of wine.

Now Illinois wineries are fighting back. Big time.

A bill sponsored by State Representative Mike Bost at the urging of the Illinois Wine and Grape Growers Association, House Bill 4444, was introduced as a giant raspberry to HB 4350 and the state liquor distributors. HB 4444 seeks to increase the amount of cases a winery can sell directly to a consumer to 36 cases a year (currently we can only buy 2 cases a year directly from a winery), increase the amount a winery can directly sell to a retailer or restaurant to five times their current amounts, and double the amount of wine an Illinois winery can produce. Furthermore, HB 4444 extends both the the direct-to-consumer and direct-to-retailer provisions to out-of state wineries, affording them the same protections and promises to sell their product directly to customers.

The warring parties were brought together last week to hash out their differences. Reports indicated that the initial talks weren't exactly civil. If the ABDI thought that HB4350 would go through the State Legislature with ease they grossly underestimated the IWGGA and the fury with which they would defend the right to fair business practice, both theirs and those of out-of-state wineries. It's a classic take on the old "playground bully" mentality with the IWGGA as the nebbish who's had enough of the Indian burns, swirlies, atomic wedgies, and purple nurples. Armed with the knowledge that similar favorable legislation was passed into law in Michigan last year protecting the rights of that state's wine industry for favorable economic competition, the IWGGA has vowed to stay the course until their demands are met.

The main issue here is, of course, commerce. The distributors behind HB 4350 are looking for more; it's their business. It's sort of like Oliver Twist, only we're not talking about famished street urchins here. More product means more control over how that product is sold. Which means more revenue for the distributor, therefore more profit. Smaller wineries already have their hands tied via the State Liquor Control Act over how much and to whom they can sell their product. To force these wineries to market their product directly through a distributor would cut their profits and possibly lead to the closing of some of the boutique vineyards.

HB 4350 would not only hurt the state wine industry. Larger retailers like Sam's Wine and Spirits or Binny's take phone and internet orders and ship throughout the country. HB 4350 would ban all direct mail and internet sales, including from retailers. Foor a company like Sam's which does $10 million in business a year, that's a significant amount. The bill's sponsors say that they don't want the possibility of selling wine online to minors. But they're just aping the talking point given to them by the ABDI. Had they actually talked with O'Donoghue they would realize that any empirical evidence lending credence to their claim is scant and untrustworthy. Major shipping and freight companies like UPS, Federal Express, and DHL already require a signature and valid identification from people signing for direct order liquor and wine purchases. In addition, a large portion of customers buying wine via direct order are buying specific, hard-to-find product. They aren't buying something you can find in a supermarket or large liquor warehouse like Sam's.

It may not seem like a serious issue, but competition is always good for business. Well, that and Chicagoist has been known to buy some wine online now and then. If you've read this and are concerned enough to lobby in favor of HB 4444 and against HB 4350, contact your state representative and state senator. If you don't know your state representative or senator, look them up right here. Then click the sites of the sponsors of HB 4350 and ask them to free the grapes.

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