Cross-posted from Seeing the World Through the Bottom of a Wine Glass.
What happens when consumers' and producers' interest, and modern technology, conflict with an entrenched interest with lots of lobbying power? Let's take a trip around the country and find out, shall we? First stop, Tennessee.
Tennessee has what is commonly known as the "three tier" system of wine sales - producer to wholesaler, wholesaler to retailer, and retailer to consumer. That has been the system in almost every state (except the ones that took over the industry themselves, e.g. Pennsylvania) since Prohibition. Funny thing, though, the wine industry is changing. Lots of little wineries are shipping direct-to-consumer. Wineries use wine clubs to market their product, offering two to four wines a quarter, and if people like them they order cases. When wine goes from winery to consumer, though, the wholesaler doesn't get their cut. And they don't like that. Not even a little bit.
Such laws are under scrutiny in Tennessee's statehouse and legislatures across the nation. At least 11 states, including Tennessee, have pending legislation that would loosen regulations on interstate wine shipping.
Supporters say it will be difficult to pass the legislation, given the clout of the alcohol industry, which strongly opposes changes to the law.
The debate has pitted small vineyards, wine collectors and specialty retailers against large distributors that have dominated wine distribution since Prohibition.
Henry Hildebrand, a lobbyist for the Wine and Spirit Wholesalers of Tennessee, said in an e-mailed statement that the group opposes direct shipments of wine because it could put alcohol in the hands of minors and would cut state revenues.
The biggest barrier to changing Tennessee's laws, according to critics, is the lobbying clout of alcohol wholesalers. Wholesalers donated some $50 million to state political campaigns between 2000 and 2006; more than $800,000 was spent in Tennessee, said Tom Wark, the executive director of the Specialty Wine Retailers Association.
"If I was a wholesaler, I'd be concerned about maintaining a monopoly, too," Wark said.
The excuse they use is "the children," as in, "the children can order wine on line and get alcohol without an ID check." Ummm, yeah, right. Somehow, I don't see sixteen year olds buying Wine.com runs a sting operationMuir-Hanna Valley Estate Pinot Noir at $280 a case, or my namesake Honig "Bartolucci Vineyards" Cabernet Sauvignon at $900 a case, much less signing up and waiting years to get on the mailing list for a BOTTLE of Screaming Eagle for a mere $3,250.00. My guess is if they that kind of scratch they'd give a homeless guy a $20 to buy them a 12-pack of Bud, and spend the rest on a Camaro. And nobody believes it, either. But it gives politicians the cover they need to thank the wholesalers for hookers and cash.
An interesting addendum to this conversation has to do with a company called Wine.com. Wine consumers had some hope for Wine.com, a nation-wide company taking wine orders on the internet. But Wine.com had its own business model - it set up warehouses in states with no-shipping laws. But then it did something else, something that shows you, again, how far an entrenched entity will go to protect its interests. You see, first they set up their business plan, then they went after everybody ELSE, including the little guys, and I mean the REALLY little guys (for example, last time I ordered from Muir-Hanna I had to talk loud because the lady answering the phone was giving her three-year-old a bath). They ran their own sting, then ratting retailers out to local law enforcement. The wholesalers loved it, following up with a press releaseto the state legislatures.
It's not just Tennessee, either. The same fight is going on this month in Maryland, and again the argument is "protect the children." The advocate for changing the law was eloquent:
The bill comes from direct support of Senator Raskin of the 20th district. His opening remarks were right on, citing Adam Smith’s 1776 book Wealth of Nations that describes the importance of the free market and denounces monopolies and state control. He also sited Madison’s Federalist #10, which guards against factions. His points were well received and it seemed the senate committee enjoyed his references.
The opponents were less so:
A highlight of the opponents argument was the gentleman who was on the Baltimore liquor board and expressed concern that college kids in Towson would be excited to hear about this bill as they could begin acquiring wine underage. He even noted that "he could just see UPS trucks lining up on campuses as kids order their wine underage." COME ON! What college kid drinks high end wine, wants to wait 3-5 days for shipments, and doesn’t already have access to friends or fake IDs providing them beer and other liquors.
The result? Nothing. No vote on the law. Wholesalers kept their monopoly.
How important is this in the grand scheme of things? Not very. It's wine. But it is a very simple example of what happens when the livelihood of the powers that be gets challenged. If they can do it with wine, a tiny little luxury piece of the economy, what will they do when people start talking about coal, or health care, or oil?