California Wine From Texas

Jacob Sullum | January 16, 2008

This week a federal judge ruled that a Texas law prohibiting out-of-state retailers from shipping wine directly to consumers while permitting in-state retailers to do so violates the Commerce Clause by creating a discriminatory barrier to interstate trade. You may have thought that issue was settled by Granholm v. Heald, the 2005 case in which the U.S. Supreme Court said discriminating against out-of-state wineries in this manner was unconstitutional. But liquor wholesalers, who are desperate to preserve the "three-tier system" that gives them a stranglehold on the distribution of alcoholic beverages in most states, argued that retailers did not deserve the same evenhanded treatment as wineries. Although U.S. District Judge Sidney Fitzwater disagreed, he handed the wholesalers a partial victory by agreeing that Texas has a legitimate regulatory interest in maintaining the three-tier system and may therefore require that out-of-state retailers buy the wine they ship directly to Texans from wholesalers in Texas. What that means, according to the Santa Rosa, California, Press Democrat, is that "a California retailer like Wine Country Gift Baskets would have to buy wine from a Texas wholesaler, ship it back to California and repackage it in baskets, and then ship it back to Texas."

That does not sound very practical, and it leaves Texas wholesalers with the same privileges they had before, controlling nearly all the alcoholic beverages sold to Texans (except for those sold directly by wineries, which are allowed to circumvent wholesalers under state law). The Specialty Wine Retailers Association is nevertheless calling this decision an important victory, since it undermines the arguments wholesalers throughout the country have been pressing in support of protectionist laws. The ruling also may put out-of-state retailers in a better position to ask the Texas legislature to endorse a more sensible and consumer-friendly system.

[Thanks to The Wine Commonsewer for the tip.]

Comments

|1.16.08 @ 3:29PM|#

The three tier system is meant to protect children under 21 from getting alcohol, it is a good idea and should be strictly enforced.

|1.16.08 @ 3:37PM|#

How about children over 21?

|1.16.08 @ 3:38PM|#

What that means, according to the Santa Rosa, California, Press Democrat, is that "a California retailer like Wine Country Gift Baskets would have to buy wine from a Texas wholesaler, ship it back to California and repackage it in baskets, and then ship it back to Texas."

Wouldn't the Texas wholesaler have to buy the wine from CA first?

|1.16.08 @ 3:38PM|#

I know it's pie-in-the-sky dreaming, but with Bell's re-entering the Illinois market as "Kalamazoo Brewing Co." and about to get sued by the former Illinois distributor of Bell's (back story here), I'm really hoping that they get the whole three-tiered system struck down as an unconstitutional restraint on trade. More realistically, I'm hoping that they strike down the law that makes it virtually impossible for breweries to switch distributors (which they did with respect to spirits when they struck down the Wirtz Law). Well, I guess I can at least take solace in the fact that the distributors aren't actually state-owned like in some states.

|1.16.08 @ 3:39PM|#

I will use this thread to put in a plug for Texas wines. They are quite good and reasonably priced. Do not overpay for a California wine when you can get a great wine from the Texas hill country for less than half the price!!

|1.16.08 @ 3:43PM|#

You Texans must be sooo proud. I'd love to know who appointed the mentally impaired Sidney Fitzwater to the federal bench. I don't know myself, but I'll bet he was a Republican.

|1.16.08 @ 3:46PM|#

John, we produce better wine in Michigan than Texas. Not as much, but higher quality. I'm sure your average Texan wine drinker (Thunderbird, Boone's Farm, MD 20-20...) disagrees.

|1.16.08 @ 3:51PM|#

J Sub D,

Fitswater ruled the law unconstitutional as he should have. Why does that make him mentally impared? Am I just missing the joke? I have never had Michigan wine, so I can't argue with you. I will have to try some.

LarryA|1.16.08 @ 3:52PM|#

The ruling also may put out-of-state retailers in a better position to ask the Texas legislature to endorse a more sensible and consumer-friendly system.

Wow. "Sensible" and "Texas Legislature" in the same sentence.

Good luck.

|1.16.08 @ 3:55PM|#

Why does that make him mentally impared?

From the article -
Fitzwater disagreed, he handed the wholesalers a partial victory by agreeing that Texas has a legitimate regulatory interest in maintaining the three-tier system and may therefore require that out-of-state retailers buy the wine they ship directly to Texans from wholesalers in Texas. [my emphasis]

Any more questions?

|1.16.08 @ 3:56PM|#

John,

Define "quite good and reasonably priced"....then name three reds that can run with the big dogs.

For the record I'm a bit of an Aussie red fan and only drink west coast on rare occasion. Texass? Really? do tell!

|1.16.08 @ 3:57PM|#

John, I was joking while slamming Texas wine. Some of it is really good. Michigan, and of course New York, also have some excellent wineries.

|1.16.08 @ 3:58PM|#

Regarding the judges rule that out-of-state retailers must buy from a Texas wholesaler, it should be noted that currently this is illegal under both Texas and most other state's laws.

For the judicially minded among you, I'd suggest that you think about this decision in terms of the Pike v. Bruce Church precedent. Unfortunately, the Judge, though required to apply the "Pike" test in determining if such a rule the wholesalers advanced and that he accepted, was an undue burden on interstate commerce, he failed to do so. I suspect he or another court will in fact be asked to address this question.

All and all, a very positive decisions for consumers and retailers across the country as it will make discriminatory laws more difficult to defend and to advance.

Tom Wark
Specialty Wine Retailers Association

|1.16.08 @ 4:06PM|#

Thanks for the input Mr. Wark.

lunchstealer|1.16.08 @ 4:11PM|#

I have a legitimate regulatory interest in Fuck you, Texas Alcoholic Beverage Commission.

|1.16.08 @ 4:18PM|#

John,

Define "quite good and reasonably priced"....then name three reds that can run with the big dogs."

I like a Becker Vineyards makes and excellent Malbec and even better Barbara. I also like the Cab reserve and their Grenache. All for under $20 a bottle. Although it is a White, I would match their Viognier against any of the California ones.

I would also highly reccomend Fall Creek vineyard which makes something called a Meritus, which is basically a big Bourdeaux, which is awesome, although a bit pricey at $40 a bottle.

|1.16.08 @ 4:58PM|#

So let me get this straight: A California wine seller would have to send the bottles of wine to Texas where the wine is put into boxes and then ship it back to California where they put the wine back into bottles?

R C Dean|1.16.08 @ 5:07PM|#

What that means, according to the Santa Rosa, California, Press Democrat, is that "a California retailer like Wine Country Gift Baskets would have to buy wine from a Texas wholesaler, ship it back to California and repackage it in baskets, and then ship it back to Texas."

Nonsense. The wine doesn't need to leave California until its ordered by the consumer. Wine Country Gift Baskets will need to contract with a Texas wholesaler, which will hold the wine ordered from Texas for a nanosecond before it leaves teh WCGB warehouse.

Granted, the Texas wholesaler is still collecting rent under an onerous and stupid law, but it isn't as bad as they make it out.

This, of course, only works if this:

Regarding the judges rule that out-of-state retailers must buy from a Texas wholesaler, it should be noted that currently this is illegal under both Texas and most other state's laws.

goes away.

T|1.16.08 @ 5:13PM|#

I have a legitimate regulatory interest in Fuck you, Texas Alcoholic Beverage Commission.

Amen to that.

"Sensible" and "Texas Legislature" in the same sentence.

Why is that so inconceivable? Try this example: There are no sensible people in the Texas Legislature. It's worked quite well for me for years.

|1.16.08 @ 5:41PM|#

"I have a legitimate regulatory interest in Fuck you, Texas Alcoholic Beverage Commission."

In all honesty, the TABC is not the enemy when it comes to this issue. It's the Texas legislature, doing the bidding of Texas wholesalers, that have worked so hard to make consumer access to wine so difficult. The TABC is charged with carrying out those laws passed by the legislature.

The solution the judge offered (having out of state retailers buy from TX wholesalers) is not only practically impossible as well as illegal in nearly every state, it is also an unconstitutional burden on interstate commerce.

Tom Wark
Specialty Wine Retailers Associaiton

|1.16.08 @ 5:45PM|#

Here lie the boundaries of federalism.

(although I completely agree with pro-big gov/pro-federal/pro-trade stance in this case)

|1.16.08 @ 6:08PM|#

John,
Thanks for the leads...I'll see if I can't run some down and try it. Sub $20 is just the slot we enjoy for most of our weekday quaffing. A quick search shows that Becker can still ship to Ohio...for the moment...until some the same protectionist spirit and special interest dollars ruin things for those if us lost in middle America.

D

|1.16.08 @ 6:33PM|#

The TX lege comes back in Jan '09, and will doubtless continue the bought and paid for monopolies...Hmmm, I need to research contris from out of TX gambling interests who profit mightily from our ban on casinos.

miche|1.16.08 @ 6:45PM|#

I'm sure your average Texan wine drinker (Thunderbird, Boone's Farm, MD 20-20...) disagrees.

I can't compare TX an MI wines but I do take issue with the Boone's Farm comment. I've not had Boone's Farm since the night I lost my virginity more than 20 years ago. It was a bad night all around and I decided right then that everything I put in my mouth would be a quality product.

Ventifact|1.16.08 @ 7:21PM|#

All this talk of shipping and re-bottling wine back and forth to its own origin is reminding me of the proposed ADHAFY from a bit back. I suspect jokes generate karmaic backlash more effectively than sobriety, which is one reason libertarians (and the rest of the hyper-cynical folks of the world) can never get all too far.

Also, I feel it necessary to point out that the ADHAFY sounds like a valuable public service but by its nature it overlooks the urban poor living in apartments with no yards (front or back), standing as yet another example of how "public services" often end up being taxpayer subsidies for the more affluent segments of society!

The Wine Commonsewer|1.16.08 @ 7:46PM|#

Michelle you funny girl. :-) 'Tis, however, a fact, life is too short to drink bad wine.

Speaking of quality in the mouth, I had the absolutely worst Pinot (shaddup) last night. 2006 Estancia Pinot Noir. Avoid it like the plague. Doubly irritating since it isn't particularly cheap ($13.00-$20.00).

On a marginally related note, there are wineries in every state these days. And much of the wine is quite decent. If I could make google search my blog better I'd do a shameless plug and link. Big Sigh. But, since google can't find the post easily and I'm lazy.....

The Wine Commonsewer|1.16.08 @ 7:48PM|#

Jacob, thanks for the shout out. I always appreciate it.

miche|1.16.08 @ 8:53PM|#

I generally like Estancia for the money but I will avoid that one though- thanks. Even with my quality vow in place, I've been mistaken enough on both the wine and men fronts that I pay attention to clues. ;o)

The Wine Commonsewer|1.16.08 @ 9:08PM|#

I generally like Estancia for the money

And, I think you're quite right. For instance, I had a bottle of Estancia Meritage a while back that was really nice. Gratuitous self-promotion: 2004 Estancia Meritage

TrappedEastOfTheBigMuddy|1.16.08 @ 10:14PM|#

I will use this thread to put in a plug for Texas wines. They are quite good and reasonably priced. Do not overpay for a California wine when you can get a great wine from the Texas hill country for less than half the price!!

IANAWS, but I would agree that you can get some very good deals on Texican wines. Even in a tourist trap like Gruene.

Paul|1.17.08 @ 3:28PM|#

, Press Democrat, is that "a California retailer like Wine Country Gift Baskets would have to buy wine from a Texas wholesaler, ship it back to California and repackage it in baskets, and then ship it back to Texas."

Pfft, and they say all the liquor rackets died with the end of Prohibition.

My ass.

law junkie|1.17.08 @ 3:36PM|#

Having read Judge Fitzwater's decision about the requirement that retailers get their wine from Texas wholesalers, I don't think he is necessarily saying that he likes the law or thinks it's a good idea. He cites specific Supreme Court authority saying that Texas has the right to require wine to be purchased from in-state wholesalers (no matter what kind of a "burden" that would place on interstate commerce). He is simply applying Supreme Court precedent, which he is bound to do.

|1.18.08 @ 12:39AM|#

He cites specific Supreme Court authority saying that Texas has the right to require wine to be purchased from in-state wholesalers (no matter what kind of a "burden" that would place on interstate commerce). He is simply applying Supreme Court precedent, which he is bound to do."

No burden on interstate commerce, once challenged, can go without investigation, particularly one such at this that for all practical purposes puts a stop to legitimate interstate commerce. The mistake made here was the Judge's apparent refusal to employ the balancing test that is always done when the state interferes with interstate commerce.

Tom Wark
Specialty Wine Retailers Association.