Wine shipping regulations get bottled up in Congress

WASHINGTON - The battle over direct shipping of wine from producer to consumer has returned to Congress.

Last month, Rep. Bill Delahunt, D-Mass. introduced legislation pushed by beer and wine wholesalers that could make it nearly impossible for consumers to have wine shipped to their door.

Delahunt's bill would effectively overturn a U.S. Supreme Court ruling issued five years ago this month in Granholm vs. Heald, a case brought by the late Virginia vintner Juanita Swedenburg. The ruling held that states had primary responsibility for regulating the distribution of alcoholic beverages, but that they could not discriminate against out-of-state producers by allowing only their own wineries to ship to consumers.

Granholm was not the total victory that direct-shipping advocates had hoped for, but it slowly turned the tide in their favor. In 2005, 27 states allowed some form of direct-to-consumer wine sales. Today, through legislative efforts and court challenges, residents of 37 states and the District of Columbia are able to order a case of wine from a favorite winery and have it shipped to their homes. (An effort to legalize direct-to-consumer sales failed again this year in the Maryland legislature, although advocates say a deal has been reached to pass similar legislation next year.)

Simply put, the direct-shipping battle pits the 21st Amendment, which repealed Prohibition and gave the states authority to regulate alcohol distribution (a compromise that allowed some states to remain "dry"), against the Constitution's Commerce Clause, which gives Congress, not the states, authority to regulate interstate commerce and trade.

Delahunt's bill, HR 5034, declares that alcoholic beverages are not like other consumer products, that they do not fall under the Commerce Clause and that states have ultimate authority to regulate their distribution. It would also place a high burden of proof on any legal challenge to a state's distribution laws.

With this bill, opponents of direct shipping cannily enrobed their cause in three hot-button political issues: The bill would stop "deregulation" of alcohol by reinforcing "states' rights" and limiting "excessive litigation." Attorneys general from 39 states signed a letter to Congress supporting the bill.

"America's regulated three-tier system is, hands down, the best beverage alcohol distribution system in the world," said Craig Wolf, president of the Wine & Spirits Wholesalers of America, referring to the traditional distribution system of producer-to-wholesaler-to-retailer. "It is important that states retain their constitutional power to regulate the distribution of beverage alcohol and are able to fend off litigation which serves to destabilize or destroy that authority."

Wolf said the three-tier system "stimulates innovation and competition and provides consumers with unprecedented choice and variety." That, of course, is precisely what direct-shipping proponents say the system thwarts.

"Wine is produced in all 50 states, including more than 6,000 wineries: a 500 percent increase in the past 30 years," said Rep. Mike Thompson, D-Calif., who is leading the fight against H.R. 5034 in Congress. "Yet the number of wine wholesalers has decreased by more than 50 percent, creating a distribution bottleneck."

Thompson, whose district spans parts of Napa and Sonoma counties, said many wineries are dependent on self-distribution and direct-to-consumer sales to get around that bottleneck.

"We don't need a new federal law," he said. "The litigation will stop when states stop passing discriminatory laws promoted by the wholesalers."

News reports give the bill little chance of becoming law, partly because House Speaker Nancy Pelosi, D-Calif., owns a vineyard and is said to be against any measure that would hurt small wineries. But that hasn't stopped a swift groundswell of outrage. Free the Grapes, a direct-shipping advocacy organization, posted a letter to Congress on its website, and within three days more than 7,700 site visitors had used the feature to register their opposition, said Jeremy Benson, the group's executive director and the owner of a wine-marketing agency. And a Facebook page, StopHR5034, quickly gained thousands of supporters eager to write their representatives in opposition to the bill.

"This bill is a threat because it ... could have implications in many states that currently allow direct-to-consumer shipping," Benson said. "Consumers care about this issue because they see a monopolistic special interest trying to take away their ability to choose what wines to enjoy."