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June 27, 2007
Hundreds of California Winemakers Set To Lose Wine Shipping Rights to Illinois?
For several months, the Specialty Wine Retailers Association (SWRA) has been vocal in their opposition against Illinois House Bill 429. Yesterday, the organization released a new statement warning "upwards of 500 California wineries" that the legislation, if passed, would prohibit them from shipping wine directly to consumers in that state.
At issue are the rights of retailers nationwide to ship wine directly to consumers in Illinois. HB 429, while allowing for direct shipping of up to 12 cases per year per customer, bars retailers from shipping directly to consumers. The legislation does preserve the rights of wineries with annual productions of 25,000 gallons or less to ship up to 5,000 gallons of wine directly to retailers.
According to http://www.specialtywineretailers.org, California winemakers that have Type 17 and Type 20 licenses issued by the California Alcohol Beverage Control, which allows them to make wine at facilities they do not own themselves, are officially classified as "retailers" and "distributors." This puts these wineries at odds with HB 429, which stipulates that only "wineries" are permitted to ship into the state.
Wine Business has termed wineries that make wine at facilities they do not own "virtual wineries." Proprietary research indicates that there are 1,587 virtual wineries in the United States, with 1,018 in California.
"The California brands these winemakers produce range from highly boutique and coveted to being very large and well distributed, to everything in between," said Tom Wark, executive director of the Specialty Wine Retailers Association. "I suspect these winemakers will be very surprised when they are told by the state of Illinois that even though they make wine, they are prohibited now from shipping into the state they've had access to for 15 years."
Wine Institute, with its winery-focused constituency, empathizes with the retailers, but still supports the legislation. "We're disappointed that the retailers aren't in it and able to support it, but our position is that we think it's imperative that this bill go forward," said Steve Gross, director of state relations at Wine Institute. "After the Supreme Court [Granholm vs. Heald] decision, we believe that the transition of reciprocity states is necessary to protect against legislation. Illinois is one state where that needs to happen."
Although SWRA is a retailer-focused organization, Wark said he believes this legislation will ultimately hurt wineries. "Any legislation that hurts retailers' rights to ship inevitably hurts wineries whose wines will no longer be sold into Illinois by retailers that are shut out," said Wark. "In the course of thinking about the implications of HB 429 it became obvious that it was not just wine shops around the country who would be shut out, but those virtual wineries in California that act, smell and look like wineries but just don't have the right permit to satisfy the Illinois legislation."
Cameron Hughes, the owner of San Francisco's Cameron Hughes Wines, is one of hundreds of California winemakers who hold a 17/20 license combination. Hughes has thousands of customers across the country, including in Illinois.
"This kind of law is an unbelievable power grab by entrenched business interests seeking to limit consumer choice," Hughes said. "Not only is it legally dubious and in direct opposition to the Granholm Supreme Court decision, it's a big middle finger to Illinois consumers."
Specialty Wine Retailers Association is suggesting California winemakers holding a combination 17/20 license contact their customers in Illinois and urge them to tell their legislators to vote no on HB 429.
"SWRA hopes to help spread the word to Illinois Senators that consumers in Illinois simply don't want this legislation because it limits their access to wines and wineries, will likely increase the price of wine and because it prevents them from purchasing wine from retailers they've had access to for 15 years," said Wark. "As SWRA has pointed out in the past, if HB 429 is signed into law it is nearly guaranteed to be challenged in court as unconstitutional."
Gross is not sure how Granholm applies to retailers, however. "Granholm was about wineries. There is litigation that has been filed by retailers in four states, and they are speculating that this is the way the courts will rule, but that's not certain," said Gross. "They haven't gone through the entire litigation process as the wine industry has--our case is proven. If they succeed in the lawsuits elsewhere, they could challenge [these restrictions]."
HB 429 has passed the House and is currently waiting to be voted on in the Illinois Senate.
Sacramento, California–June 27, 2007
Posted by fortna at June 27, 2007 08:54 AM
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