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Glass Half Full or Half Empty?

The Wine Battle Isn’t Over, It’s Just Moving to the States

You might think that with the U.S. Supreme Court weighing in Monday on the issue of shipping wine directly to customers, the long-running matter will no longer be of interest to lobbyists.

But you’d be wrong.

The groups on all sides of the issue say they plan to continue — and in some cases even step up — their advocacy efforts, at least in the state capitals.

“This process is not going to take months, but years, to resolve,” said David Sloane, president of the winery trade association WineAmerica, which has declared the court decision a victory for its side. “Some of these states aren’t going to be in a position to address these things until next year. It’s going to be a bloody fight in some states.”

Juanita Duggan, president and chief executive for the Wine and Spirits Wholesalers of America, maintained that the decision was not a loss for her members, either, simply shifting the debate from the courts to the state capitals. Duggan called the decision “almost like a draw” for both sides.

“It’s a technical victory for them, but I was expecting this. … It’s now a policy debate at the state level, which is where it should be,” she said.

The Supreme Court ruled that states that permit local wineries to ship to in-state customers must also allow out-of-state wineries to sell in the state. But if states ban in-state wineries from selling to their citizens, the high court said, they can also ban out-of-state bottles.

“This decision is very, very narrow,” Duggan said. “What the wineries were trying to achieve was complete deregulation, and they didn’t get anything close to that. The policy has to be made at the state level.”

Duggan said the Wine and Spirits Wholesalers group plans “to be far more active at the state level, because that’s where the debate is going to be now.”

In some cases, the wholesalers groups have worked with organizations that worry about alcohol consumption, including conservative Christian groups and Mothers Against Drunk Driving.

Rep. George Radanovich (R-Calif.), a former winery owner and co-chairman of the Congressional Wine Caucus, called the Supreme Court’s May 16 decision “a big victory” for fellow vintners and oenophiles alike.

But, he added, “there’s still a lot of work that states have to do.”

Radanovich said the wholesalers’ lobby “was very effective in putting up the underage drinking issue” and making arguments that shipping wine across state lines could lead to tax evasion. But he said the Supreme Court didn’t buy into that argument.

Constance Campanella — who runs the state-focused lobbying firm Stateside Associates but who doesn’t have a client involved in the wine skirmish — said she too expects to see the issue now spill into the states.

“I think people are going to analyze it and try to figure out what the new rules mean and then craft different approaches to take back to the states,” she said. “It will continue to be an active lobbying issue in the states. But now the dominant question will be how to regulate direct shipping.”

New Jersey, Duggan said, recently chose to ban all shipments from in-state and out-of-state wineries. That’s the ideal outcome for Duggan’s group, which represents companies that distribute wine and spirits to retail stores.

“The face-to-face transaction by a licensed retailer is the only way alcohol should be sold,” she said, “because everything else is unaccountable, can’t be tracked, can’t be sure the taxes are collected and can’t be sure it’s not being ordered by minors.”

But Sloane said the wholesalers are simply sticking to a message that doesn’t hold up.

“We’ve seen over the years [that] wholesalers have had a field day with anecdotal information,” he said. “The risk of underage access based on these shipment laws is so minuscule. … It’s a whole lot easier to get your 21-year-old friend to buy your six pack.”

Jeremy Benson, executive director of the Napa, Calif.-based group Free the Grapes, said “the road sort of leads back to the state capitals.” His group is pushing for all states to enact “model direct shipping” bills, which he said contain language developed by the wine industry.

That legislation would issue a license to an out-of-state winery that would permit it to sell a limited quantity of wine to consumers in a given state. But it would also require, among other things, that the winery pay excise and sales taxes and the signature of someone 21 years or older upon delivery.

But what happened in New Jersey, Benson said, “is a concern.”

Sloane, whose trade association represents 800 wineries, said states will get lobbied from both sides — by local wineries and wholesalers.

“What it’s now going to do is force the state legislatures to make the tough choices,” Sloane said. “Wholesalers are very powerful. They give a lot of political contributions. They are very active and powerful at the state level.”

He added, “I think the fights are going to be tougher than they think.”

At the federal level, Duggan said, her group will continue to work with Congress, but, she said, “We don’t see there’s an action item for the Congress. [The court decision] didn’t raise issues for the Congress to correct or fix.”

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