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US Court ruling: wholesalers prepare to do battle

Winery associations and wholesalers are consolidating their political forces and developing lobbying strategies in preparation for battles over interstate shipping in state capitals across America.

Legislative warfare is expected following the 16 May ruling by the Supreme Court that states whose vintners ship directly to consumers – by-passing wholesalers – can no longer prevent out-of-state wineries from doing the same. States must decide whether direct shipping is to be wholly interstate or banned completely, the court declared.

Although the Court’s decision dealt only with New York and Michigan laws, laws in 22 other states are affected by it.

In influential New York State, editorials in The New York Times, The Wall Street Journal and The Albany Times-Union have urged free-market reforms. The New York Times wrote on Saturday, ‘There are now nearly 4,000 family vineyards, some in every state, including Alaska. It makes no sense to hobble these wineries with arcane shipping rules.’

Governor George E. Pataki of New York last week introduced a bill that would permit out-of-state wineries to ship no more than two cases of wine a month to New Yorkers. Another bill in the Legislature’s two houses in Albany would allow interstate commerce but without limits.

In endorsing full-scale interstate shipments, New York wineries are gambling on gaining sales through consumers who visited their tasting rooms and liked their wines, but possibly losing sales to internet users who might prefer, for example, Washington State Merlots to Long Island’s.

Faced with the threat of internet sales, however, wholesalers and distributors fear losing their power over the market, and a reduction in profits, as do some liquor and wine store owners. Other retailers, such as Sherry-Lehmann, perhaps Manhattan’s best-known wine emporium, are championing free trade.

In Michigan, the Beer and Wine Wholesalers Association, which contributes heavily to legislators’ election campaigns, has stated that another option is available.

‘The Court is not declaring that wine lovers have a blank cheque to purchase from out-of-state wine producers. The key operative words in the decision are “if a state chooses to allow direct shipping,” which clearly means that a state may choose not to allow direct shipping,’ it said in a letter to the legislators.

Wineries nationwide expect strong lobbying against liberalised interstate commerce by the Wine and Spirits Wholesalers of America, a powerful Washington-based industry lobby. The group, which opposed the wineries in the Supreme Court, is committed to preserving the middleman’s legalised privileges. The keystone is the three-tier system, under which wine producers must sell to wholesalers, who then sell on to merchants and restaurateurs.

Written by Howard G Goldberg in New York

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