Wine Snobs and Suds Swillers Unite!
Legislation oozing its way up the Hill threatens open markets in beer, wine, and liquor.
The life of a wine snob is a hard one. Every bottle holds peril and promise—the thrill of a buttery finish, the agony of harsh tannins. But life may get harder still, thanks to a new bill to restrict the direct sale of alcoholic beverages to consumers. Even those of us who count ourselves among the Yellowtail-swilling and Bud-drinking masses will face higher prices and a more limited selection of wine, beer, and liquor.
Ever since the Supreme Court's 2005 Granholm v. Heald decision, which opened up sales by prohibiting states from treating out-of-state sellers differently than in-state, wine distributors have been cautiously expanding outside of traditional wholesale monopolies. Naturally, the post-Granholm years have been an anxious time for the nation's beer, wine, and liquor wholesalers. Since the repeal of Prohibition, dozens of states have required booze buyers and sellers to go through a middleman. Those middlemen keep prices high, restrict time and place of sale, and place the whole industry under tight government supervision. In 19 states, that middleman is an official state agency; in many other states, a few powerful state-backed players dominate the market. All that threatened to change when, in the wake of Granholm, states chose, by and large, to open up the direct sales option to everyone rather than cripple their own industries.
But beer and liquor wholesalers realized this liberalization wasn't likely to stop with the grape. Rather than doing the sensible thing—seeking solace at the bottom of a bottle—they decided to soothe those nerves by opening their wallets instead. Members of the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America have poured $11.55 million down on various federal campaigns over the last four years—an increase of 33 percent over the previous four years, according to the folks at Wine Spectator.
So far, that cash has bought the imperiled wholesalers over 100 co-sponsors on an presumptuous new bill which would protect their monopolies at the expense of some pretty fundamental constitutional principles. The bill is called—I am not making this up—the CARE Act. Also known as the Comprehensive Alcohol Regulatory Effectiveness Act (H.R. 5034), the legislation was introduced in April by Rep. William Delahunt (D-Mass.)
The bill has the impudence of a young beaujolais from a bad year. The legislation would privilege the 21st Amendment, which repealed Prohibition and left regulation of alcohol to the states, over the Constitution's Commerce Clause, which prohibits states from favoring in-state entities in trade. The bill would exempt state booze laws from federal limits—stuff like anti-trust rules and Food and Drug Administration requirements. It would allow states to replace uniform federal standards with their own competing standards for labeling and formulation, making it harder for out-of-state producers to comply with state laws. It would also take away recourse to the courts for sellers or buyers harmed by the new legislation. At present, the burden of proof is on the state to show that it needs to discriminate against outside competitors for a legitimate purpose, such as the health or safety of its citizens. This would be reversed, requiring anyone who wanted to challenge a state alcohol law to first prove that the law has no legitimate purpose beyond protectionism, a nearly impossible task.
The bill's advocates are leaving no rhetorical stone unturned: In June, the Wine and Spirits Wholesalers of America urged their members to write to Congress and explain why HR 5034 is a vital jobs bill. Elsewhere, the bill's supporters have argued that the protectionist legislation is necessary to prevent U.K.-style binge drinking and vomiting in the streets.
It's unlikely that this session of Congress will see significant forward motion on the legislation, but this isn't the sort of bill that goes away. The bill's primary opponent, Rep. Mike Thompson (D-Calif.), who represents California's wine-growing regions, breaks down the voting for Wine Spectator: "There's only a few of us who represent wine country, and there's only a couple who represent distilleries," explains Thompson, "but every member of Congress has two, three, four, five, maybe six distributors [in their district]." Back in April, I blogged about the surest sign that this bill—and the attendant wholesale monopoly protections—are here for the long haul: Warren Buffet recently purchased a Georgia wholesaler, Empire Distributors.
Only about 1 percent of wine sold nationally is direct to consumers. That may not sound like much, but according to a recent report from industry trade publication Wines & Vines, such business amounts to 9.1 million bottles sold last year in Napa alone. And the average price of one of those Napa bottles shipped directly to the consumer: $52.69. The passage of H.R. 5034 will translate to millions of suffering wine connoisseurs, weeping for their lost bottles, and tens of millions of ordinary drinkers stuck with more expensive booze and beer. For once, wine snobs and suds swillers alike have something to toast together: the defeat of this end-run around the Supreme Court's decision to open up alcohol markets to real competition.
Katherine Mangu-Ward is a senior editor at Reason magazine.