Sacramento Bee, December 15, 2004

Court should open the wine market

A problem long fermenting in the U.S. wine market finally is out of the vat. Twenty-six states allow their residents to buy wine from out-of-state wineries and have it shipped directly to their homes.

Twenty-four don't. Some allow their in-state wineries to ship directly to consumers, but not out-of-state wineries.

California, which produces 67 percent of the nation's wine, has taken the lead in championing an open national market - though large winegrowers have stayed on the sidelines.

The issue has come to the U.S. Supreme Court, which will have to clarify and stabilize the wine market.

Discriminatory state bans are a clear violation of the U.S. Constitution and should be overturned. As Justice Robert Jackson wrote in a 1949 decision, the Commerce Clause guarantees that "every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation..." The 21st Amendment to the Constitution, which overturned Prohibition in 1933, allows states to ban all alcohol sales within their own borders, but it does not allow states to favor in-state firms over out-of-state firms.

Here's an example of the problem as presented to the court: Domaine Alfred winery owned by Terry Speizer in San Luis Obispo produces only 3,000 cases of wine a year. Because of this limited production, wholesalers aren't interested in distributing his wine. He has to sell his wine directly to consumers in tasting rooms, by telephone and the Internet - or not at all. He has received requests for wine from Michigan residents but cannot fill them because of the state's discriminatory law.

Michigan allows in-state wineries to ship directly to consumers, but not out-of-state wineries.

Michigan claims it discriminates against out-of-state shipments because it is concerned about under-age drinking.

If you're a 17-year-old looking for wine, are you going to incur the expense and delay of an out-of-state wine shipment or go to the corner store? Direct shipment of wine generally involves high-end, expensive wines (i.e., $20 per bottle and up). You have to pay with a credit card and then wait two or three days for the wine to arrive. If Michigan truly is worried about this, why does it allow its in-state wineries to ship wine direct to consumers? This is all about powerful wholesalers who benefit from a system that prevents direct sales to consumers.

Of 2,700 wineries in the United States, only 350 produce more than 10,000 cases a year. Those are the wines you see in the store, because they're the wines wholesalers buy. Small wineries that produce small amounts rely on direct sales. A July 2003 study by the Federal Trade Commission found that Internet sales offer consumers lower prices and more choices in the wine market.

No wonder the wholesalers want to shut it down.

A basic principle is at stake: Under our Constitution neither states nor Congress can give preference to one state over another in commerce. The Supreme Court should remove discriminatory barriers to direct wine shipments in the United States

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