WineAmerica Joins Industry Partners to Oppose a Wholesaler Protection Bill

By Cary M. Greene

On Monday February 14, WineAmerica joined with our producer and importer trade association partners in expressing our opposition to the wholesaler-sponsored bill known as the Comprehensive Alcohol Regulatory Enforcement Act (CARE Act) or, more appropriately, the Wholesaler Protection Act.  The purpose of our joint producer letter, available at http://www.winebusiness.com/content/file/Joint_Producer_Letter_GO_2_14_2011.pdf, is to ensure that members of Congress, particularly new members of Congress, understand the ramifications and intent of this harmful bill before it is reintroduced this year.  As we noted in our joint letter, “[t]he 2010 bill would have invited enactment of discriminatory state laws and protracted litigation.”

When the CARE Act was introduced last Congressional session it was dropped under the bill number H.R. 5034.  The bill will have a new bill number when it is reintroduced this session, but that will not stop WineAmerica from forcefully opposing the CARE Act.  

Our core arguments against the CARE Act are simple: not only does the bill seek to undermine a core Constitutional tenet—that interstate markets should be free and open—it does so through scare tactics that are fundamentally at odds with the evidence.

Wholesalers talk constantly about the threat of “state deregulation,” that any changes to the three-tier system—even thoughtful, well considered changes—will result in underage alcohol consumption and states being unable to collect alcohol excise and sales taxes.  They use these arguments consistently to push for the CARE Act and to try and establish its “necessity.”

Reading the recent Direct Wine Shipping report put out by the Maryland Comptroller’s office, http://www.comp.state.md.us/DWS_Complete.pdf, several facts become clear: (1) state regulation of direct-to-consumer shipping is effective; (2) the safety protocols written into state direct shipping laws prevent deliveries to minors; and (3) bonding and reporting requirements give states the tools for effective tax collection on wine shipments.

The arguments wholesalers use to defend the CARE Act are simply untrue, and we will be on the front lines of this fight until the bill is ultimately defeated.

WineAmerica Legislative Update

By Jennifer Montgomery

As we await the next step in the saga of the “CARE” Act, drama is not lacking on Capitol Hill as Congress and the Administration wrangle and argue over major money issues. President introduced his 2011 budget and as expected, the budget proposes some significant cuts which the Republicans feel do not go far enough. The House began debating the Continuing Resolution (CR) this week as well. The CR would provide money to operate federal agencies and programs through September. In its current proposed form it cuts 60 billion dollars from current spending levels. If it does not pass both the House and Senate, the possibility of a government shutdown becomes very real. It will be a very protracted CR debate in the House because approximately 600 amendments have been filed by members. We are still sorting out what the CR and Presidential budget cuts would mean to the programs that are important to our industry.

Going back to the “CARE” Act, WineAmerica, along with other groups that have been working together to oppose the bill, sent a letter to the Hill urging Members of Congress to refrain from co-sponsoring the bill when it resurfaces. We still have no solid intelligence that indicates when or in which chamber the bill will be re-introduced, but we know it will be resurrected and we are keeping a close watch on the Hill so that when it does show up we’ll be out in front of it.

One issue that is very important to the industry, but is still a little further down the road is the 2012 Farm Bill. But that being said, WineAmerica, as part of the Specialty Crop Farm Bill Alliance, has already begun educating the new members of Congress about the Farm Bill programs that we care about, meeting with USDA, as well as talking with other specialty crop groups about strategies for preserving these programs and their funding in what will be an incredibility tight Agriculture budget. 

FY 2012 TTB Budget to be $5 million less than proposed for FY 2011

By Michael Kaiser

Today to much fanfare the White House released the FY 2012 Budget Proposal.  This is the recommendation to Congress for the funding of the Federal government for the 2012 Fiscal Year.  There are a wide variety of spending cuts that have been proposed by the Obama Administration in the proposal.

The TTB is facing a cut of $5,000,000 from previous years.  Unlike previous budgets, there are no proposed "user fees" for TTB regulation.  In the past the Bush Administration and the Obama Administration have proposed that the industry pay to be regulated through a "user fee."  The user fee was essentially a reintroduction of the Special Occupational Tax that wineries were subject to for many years.

The TTB has been struggling with budget issues for the past two years.  Any reduction in funding would be detrimental to their ability to regulate the industry.  We hope that TTB will be able to restore their funding to previous levels in order to best serve the wine industry and the public.

WineAmerica: U.S. Wine Industry Consumer Direct Sales Survey

WineAmerica: U.S. Wine Industry Consumer Direct Sales Survey: "VinQuest™ 2011 - the U.S. wine industry's annual survey of consumer direct sales trends at the country's 3500+ bonded wineries. Qualif..."

TTB Announces Changes for COLA Submissions

By Michael Kaiser

The Alcohol Tobacco Tax  and Trade Bureau has just announced a few changes for submitting Certificate of Label Approvals (COLAs) and Formula Approvals.

As many of you probably noticed it is taking longer than normal for COLAs to be reviewed.  The current average is around 20 to 25 business days, which works out to close to six weeks.  The TTB came out with the following statement today:


COLA and formula reviews will continue to be conducted in as timely a manner as possible.  To achieve that goal, we will continue to review COLA and formula applications in the order they are received.   However, to reduce review delays on these applications, we will no longer be accepting “Expedite Requests” or "Informal Reviews,” effective immediately.  As we are experiencing considerable increases in the number of applications received, you should allow adequate time for a 90-day application review process within your business plan and anticipate that we may require you to make revisions to your labels or formulas.  

Now, this does not mean that it will take 90 days for your label submission to be approved, but what it does mean is to allow 90 days for any issues that may come up with the label.  The TTB is currently understaffed, and with the current Federal hiring freeze, they cannot hire new staff and if someone leaves the agency they are not replaced.

What is of particular concern is the suspension of "Expedite Requests".  In the past, with proper documentation, the TTB would expedite the review of a particular label(s).  Label approvals could be turned around in less than a week.   Now a winery has no recourse for an expedited label review if an unforeseen rejection occurs. 

TTB is strongly encouraging people to use the COLAs Online system.  Online applications are reviewed in half the amount of time that paper submissions are.  Because of the amount of labels submitted and the staffing issues at TTB, it is currently taking around 10 business days for COLAs to be reviewed online.

If you are a WineAmerica member and are currently using COLAs Online or want to switch to that form of COLA submission, I am always more than happy to review the label before it is submitted.

If you have any questions about this TTB announcement please contact me at mkaiser@wineamerica.org or at 202-783-2756.

To read the notice from TTB, please go here: http://www.ttb.gov/labeling/label-formula-application-adjustment.shtml

The Fourth Annual Wine Bloggers Conference is Coming to Virginia

Join wine bloggers, new media innovators, and wine industry leaders on July 22-24, 2011 in Charlottesville, Virginia for the fourth annual North American Wine Bloggers Conference - the premier conference for new media and the wine industry. This three-day symposium builds on our past successes and brings you a unique opportunity to learn about and discuss the intersection of wine with the world of new media including blogging, social media, and more.

Who Should Attend

• Citizen Bloggers who write about wine or the wine industry on their own.

• Industry Bloggers who maintain a blog to support their winery or other wine-related business.

• New Media Innovators who work in the world of blogging and social media.

• Wine Industry members who would like to learn about new media or interact with bloggers.

About the Conference

The Wine Bloggers Conference is a unique opportunity to connect with the “new media” of wine, getting your message and your product or service in front of key influencers who write about wine and the wine industry on a daily basis. Wine bloggers are more than just enthusiastic about their wine experiences. They are actively socializing their experiences by publishing their thoughts on the Internet and engaging their community of followers in conversations around their favorite topic - wine. More than 300 attendees are expected at the 2011 Wine Bloggers Conference.

2011 Wine Bloggers Conference 

Decision Threatens Winery Privileges

The following article appears in the February 2011 issue of Wines and Vines


by Cary M. Greene

 

 

The Third Circuit Court of Appeals in Philadelphia recently issued a decision, Freeman v. Corzine, which represents a substantial threat to the status quo for state winery tasting room, self-distribution, event, festival, restaurant, farmers market and other local winery privileges. As a representative of wineries in 48 states, and knowing how central these privileges are to thousands of successful businesses, I find Freeman more than a little disappointing. Whether the decision ultimately proves the law of the land will depend largely on the industry’s ability to articulate why the decision is wrong.

The decision addresses New Jersey wine laws and directly threatens the rights of wineries to have satellite tasting rooms and self-distribute their wines—or it could allow out-of-state wineries to have those privileges.

Unlike direct-to-consumer shipping, the privileges at play are not particularly discrete and don’t lend themselves to easy remedy. It’s true that tasting room, event and festival privileges are usually offered exclusively to local winery licensees, but in the vast majority of cases, this has little to do with protectionism. Mostly, it’s because the privileges aren’t functionally the same in the hands of in-state and out-of-state businesses.

When dealing with local privileges like tasting rooms, we are dealing with the raw components of agri-tourism and the buy-local movement. Satellite tasting outlets, winery events, farmers market sales and winery festivals aren’t merely offered to local wineries to sell wine. They promote local agriculture, a state’s agricultural potential and heritage, and the preservation of rural landscapes. States are right to try to keep their rural areas vital and flourishing.

The Freeman decision ignores these underlying purposes entirely. Instead it takes a cursory look at New Jersey’s law and finds that in-state wineries are “allowed to skip the first two tiers—wholesalers and retailers—while out-of-state wineries must involve both of these tiers in order for their wine to reach consumers.” While strictly true, Freeman’s analysis is flawed because it fails to wrestle with the practical realities of how tasting room, event and festival privileges function in the real world.

It’s axiomatic in Commerce Clause jurisprudence that state laws advancing a “legitimate local interest” that cannot “be served as well by available non-discriminatory means” are Constitutional. In other words, while states must attempt to level the commercial playing field for local and out-of-state wineries, the Constitution cuts them slack if the alternative would give out-of-state wineries a competitive advantage.

When operated by local wineries, tasting rooms are more or less farm stands with a more sophisticated image. Freeman’s characterization that tasting rooms allow wineries “to skip the first two tiers” is a gross simplification since agriculture is central to the operation of a tasting room.

On the other hand, “tasting rooms” operated by out-of-state wineries are wine bars with on- and off-premise sales privileges. Their natural competition is other local pubs and liquor stores. In other words, offering out-of-state wineries tasting room privileges—the available non-discriminatory alternative—does nothing to rectify the apparent discrimination identified by Freeman. It creates a market advantage for local retailers that happen to be out-of-state wineries.

The context of winery direct-to-consumer shipping is different than the context for tasting room and other local winery privileges. Unlike direct shipping, tasting room privileges are functionally different in the hands of in-state and out-of-state businesses. By followingFreeman, courts would be encouraging retailers to produce a few gallons of wine somewhere. Those few gallons would become a retailer’s ticket to lower costs of entry, broader sales privileges and mobility—without the related cultural benefits those privileges offer in the hands of local wineries.

While Freeman is important, the decision doesn’t justify rethinking long-held beliefs about the state of alcoholic beverage regulation. As a dynamic and growing industry, we need to advocate for thoughtful state policy approaches that better allow us to reach consumers. The existing distribution system doesn’t accommodate many of our products all that well. We need state legislatures to understand that adding flexibility to the three-tier and control systems is wise policy when deployed carefully.
Freeman doesn’t change everything, but it requires us to better defend the hard-fought privileges wineries have sought and won during the past four decades.
Cary M. Greene is the chief operating officer and general counsel of WineAmerica, the National Association of American Wineries. Learn more about WineAmerica atwineamerica.org.