IWA's Thoughts of Current Legislation

chicagotribune.com Editorial October 8, 2007

Corking the wine trade

When the Supreme Court struck down state laws barring individuals from buying wine directly from out-of-state wineries, one lawyer called it "the best day for wine lovers since the invention of the corkscrew."
The 2005 decision was a victory for consumers, an advance for open trade and a boon to vineyards with something special to sell. It turns out, though, that the celebrations may have been just a bit premature.
You see, one of the states that imposed limits on interstate wine sales was Illinois -- and it turns out some people here are not that keen on all-out, interstate competition. So they joined together to place new shackles on the wine trade. Last week, Gov. Rod Blagojevich signed a bill that limits significantly the freedom to buy and sell pinot noirs and chardonnays.
The bill allows all winemakers to ship directly to consumers who are of legal age. In the past, in-state vineyards could sell unlimited supplies to residents, but out-of-state competitors could ship no more than two cases per year to any one person. Now, the limit will be 12 cases, regardless of where the company is located.
That may not sound so bad, but there are worse provisions. Though they enjoy a new liberty to buy from out-of-state vineyards, Illinois oenophiles will no longer be able to order directly from out-of-state wine shops and other retail merchants -- something they have been doing for the last 16 years.
It looks as though about 500 California vineyards that are not officially registered as wineries won't be able to sell to individual buyers here either.
Meanwhile, Illinois' largest vineyards, unlike their smaller counterparts, won't be able to sell directly to stores and restaurants: They will have to go through wholesale distributors. That rule is bound to increase the price of a drink.
What gives? The governor's office proclaims that the bill "represents an agreement between Illinois wineries and liquor distributors." State Sen. Ira Silverstein (D-Chicago), a sponsor, boasted that it will "advance our growing wine industry."
Notice anything missing from those pronouncements? Only the needs of ordinary wine drinkers. The clear intent is to protect the profits of favored businesses -- and never mind if consumers, and the state's most successful wine producers, lose out.
Even some of the retailers who are being protected from out-of-state competition have spoken out against the new barriers, fearing they will provoke retaliation from other states.
"Bills like these are bad for consumers," Brian Rosen, the president and CEO of Chicago-based Sam's Wines & Spirits, told Crain's Chicago Business. "If every state's borders were open to wine sales, we could sell $50 million in wine a year outside Illinois."
For years, Illinois laws have interfered with the wine market in ways that do nothing to benefit the average tippler. It's time for the state to get out of the way and let buyers and sellers work out the arrangements that suit them best.

Copyright © 2007, Chicago Tribune
Illinois Winemaker’s Alliance Reply to be Posted in October 13, 2007 Tribune:

On behalf of Illinois winemakers, I would like to thank the Tribune editors for recognizing the untold story and inequities of the bill recently signed by Governor Blagojevich, limiting the direct shipment of wine by winemakers to consumers in Illinois. (“Corking the Wine Trade,” October 8, 2007)

What is lost here, in addition to the right of the consumer to purchase the wines of his choice and have them shipped direct to him, is the right most successful wineries in the state to provide a wanted and needed service to that consumer and to profit from that transaction, and the right of all Illinois winemakers to continue to grow without being penalized by a law that unreasonably limits their profit margins.

Under the terms of this bill, Illinois wineries that produce more than 25,000 gallons of wine must conduct all wine shipments through a distributor. What this means is that, not only can they not ship direct to their customers, but they are also restrained from shipping to their own satellite retail outlets. The result is an additional cost to the consumer of up to 20% on all wine purchases—a penalty to both producer and consumer that benefits only the middleman!

The Illinois Winemakers Alliance is a coalition of wineries whose legislative mission is to eliminate this penalty for the state’s most successful winemakers, for those winemakers who will soon achieve production levels that will earn this penalty for them, and for the Illinois wine consumer who bears the ultimate cost of this unfair legislation.