Six months after the Supreme Court struck down its protectionist wine laws, the state of Michigan has passed new legislation allowing direct shipping to consumers. The law includes a few hurdles, such as a $100 licensing fee, a requirement that wineries receive a faxed copy of the purchaser’s drivers license, and a limit of 1,500 cases per year for each winery, but it’s a significant improvement over prohibiting all direct shipping from out of state.
The bad news is that the fight is far from over. Aspects of the new law are designed to benefit the state wholesalers’ cartel. While out of state wineries can ship directly to consumers, they must still go through the wholesalers to get to retailers and restaurants. This is a blatant concession to special interests without even the veneer of plausible justification that the old ban on direct shipping carried. (Michigan and New York claimed their bans were to prevent minors from buying alcohol, which might have made sense had not the bans exempted in-state wineries.)
Since the new law treats in-state and out of state wineries differentially by allowing only the former to sell directly to restaurants and retailers, a judicial challenge is sure to arise. The situation is almost identical to that of Virginia, where that state’s preferential retailing laws are being successfully challenged in Brooks v Danielsen.
The saddest part of the Michigan law is that it reportedly contains a provision that will outlaw all direct sales to retailers and restaurants if it is ever declared unconstitutional. This cements the wholesalers’ cartel position while screwing over the local wineries, who will suddenly find themselves deprived of their largest market. That’s exactly what is happening to Virginia wineries while they wait for the state legislature to pass laws that will withstand constitutional scrutiny.
The obvious solution is to have free trade in wine, allowing any winery to sell to any retailer. Alas, the obvious solution becomes almost impossible to implement once special interests become entrenched. The three tier distribution system that initially protected local wineries has now become the single greatest threat to their survival. At a time when the Supreme Court, FedEx, and Internet retailing should have made wine liberalization a fait accompli, they suffer in a public choice nightmare.
Tom Wark has more commentary that is, as usual, right on target.