They are always doing something stupid...

[boone]

http://www.courier-journal.com/apps/pbcs.dll/article?AID=20105240372

[CorvallisCracker]

Is this the accursed HR 5034?

[dean_martin]

I'm assuming without reading this bill (dangerous, I know) that the effect on distillers is not intended and that it should/could be cleaned up a bit.

I'm assuming (again) that it has more to do with states prohibiting their residents from buying beer and wine directly from out-of-state wineries and brewers. Don't tell anyone, but I had to open a UPS Store mailbox in another state to order wine directly from some of our favorite wineries. If the bill allows someone in a state like mine to order wine or beer directly from an out-of-state producer then I'm for it. If that's not the effect, then I have no opinion without further study.

[CorvallisCracker]

If the bill allows someone in a state like mine to order wine or beer directly from an out-of-state producer then I'm for it.

No, I think it's just the opposite.

The reason I think it's HR 5034 is because that bill is supposedly an accommodating response to the "letter from 38 state attorneys general", which is referenced in both this article about HR 5034 and in the article to which Bettye Jo linked.

Although the concept of giving the states greater regulatory power may appeal to ideologues, in this case it's nothing more than a gambit by the alcoholic beverage distributors and their congressional lackeys.

[dean_martin]

No, I think it's just the opposite.

The reason I think it's HR 5034 is because that bill is supposedly an accommodating response to the "letter from 38 state attorneys general", which is referenced in both this article about HR 5034 and in the article to which Bettye Jo linked.

Although the concept of giving the states greater regulatory power may appeal to ideologues, in this case it's nothing more than a gambit by the alcoholic beverage distributors and their congressional lackeys.

Ok, I got ya. This thing doesn't do a damn thing for consumer choice then and keeping my out-of-state mailbox will be a waste of money. I guess it's a reaction to rather than a codification of the 2005 Supreme Court ruling that struck down Mich and NY laws restricting direct shipping from out-of-state wineries and the "without justification" language would probably make it easier for states to justify such restrictions, e.g., can't regulate sales to minors, collect taxes, etc.

I have a hard enough time getting good American craft beer as it is. We've made strides on the law in my state, but still have a ways to go. And in my closest neighboring state which doesn't have such draconian laws, it seems like the distributors (who distance themselves from consumers) have more control over what's available than the retailers.

[DeanSheen]

seems like the distributors (who distance themselves from consumers) have more control over what's available than the retailers.

Exactly, this is all about the distributors, especially the beer distributors, further strengthening their position at the expense of the consumer.

[StraightBoston]

Scott's got it right -- this is an anti-consumer-choice bill for the benefit of the MA distribution cabal (I get my *legal* shipments sent to a friend in next-door NH). Interesting KY/TN take on it, though -- I agree that regulating the product itself probably wasn't the intent.

[CorvallisCracker]

Scott's got it right -- this is an anti-consumer-choice bill for the benefit of the MA distribution cabal (I get my *legal* shipments sent to a friend in next-door NH). Interesting KY/TN take on it, though -- I agree that regulating the product itself probably wasn't the intent.

[cowdery]

It is HR 5034, aka the Wholesaler Monopoly Protection Act. The unintended consequencs are potentially disasterous because they are unintended. The place to start is that this law benefits no one except distributors.

The 21st Amendment to the Constitution has three short sections. This is section two (emphasis mine).

Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

This statement creates an exception to the Commerce Clause of the Constitution (Article I, Section 8, Clause 3), which normally requires a national market and allows the federal government to appropriate for itself virtually any type of product or service regulation that it believes should be standardized across the whole United States. The 21st Amendment explicitly says that right stays with the states. HR 5034 aims to reinforce that authority. Many people say it's simply unnecessary--the 21st Amendment itself is all you need--and many others say it could cause a lot of mischief for no benefit to anyone except the entrenched self-interest of the distributors.

Producers are against it mainly because they favor going in the other direction, restoring the normal working of the Commerce Clause and breaking up the three-tier system so they can sell directly to national chain retailers like Wal-Mart.

[OscarV]

It is very important that this bill fails.

Should we write and/or call our House Reps and/or Senators?

[CorvallisCracker]

It is very important that this bill fails.

Should we write and/or call our House Reps and/or Senators?

Couldn't hurt.

Contact your representative:

https://writerep.house.gov/writerep/welcome.shtml

Contact your senators:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

[TNbourbon]

First of all (because I have priorities, however 'straight' or 'unstraight' they may be), it's always good to see Bettye Jo back on the forum. Miss ya, gal!:kiss:

Unsurprisingly, her point is cogent and direct: this law would damage the bourbon industry.

Ironically, in a state like Tennessee (which, granted, is perhaps like few others!), what is good for the beer distributors is likely bad for the liquor distributors, who are quite separate -- deliberately so, so that they don't compete with one another. This could foster such competition, no?

And, if you screw up the rules for bourbon, what do you imagine you do for the 'un-Bourbon', Jack Daniel's (pace, George Dickel), which essentially has no codified rules to begin with?

Are we going to start having 'international agreements' between Massachusetts and Tennessee? Was Alexander "States Rights" Stephens right?

(Sometimes I really miss a 'tongue-in-cheek' 'smilie'!:grin:)

[craigthom]

Producers are against it mainly because they favor going in the other direction, restoring the normal working of the Commerce Clause and breaking up the three-tier system so they can sell directly to national chain retailers like Wal-Mart.

I don't think I want them selling directly to Wal-Mart. The next thing you know bourbons will get younger to meet the wholesale prices dictated by Bentonville.

[jburlowski]

I agree with the sentiment of the post.

And, I agree that it's good to see Bettye Jo back here again!

[SBOmarc]

For what it is worth I contacted Senators Feinstein and Boxer to voice my hope that they would not support this bill.

I have done so before for other bills and have not been very successful, but when it comes to my drinking...

[CorvallisCracker]

I'd contacted both my district rep and our senators, and learned that all three were already against it. Oregon wineries do not want to lose their ability to ship out of state and have emphatically made their feelings known.

[cowdery]

Any state with a significant producer community has to be against it.

[cowdery]

This has to be a first, me recommending an Issue Analysis from the Freedom Works Foundation (Dick Armey's outfit), but this paper about HR 5034 is right on.

The title's a dud but the paper is pretty good.

"No Wine Shall Be Served Before Its Time—At Least Not Without Wholesalers Taking a Cut."

He flubbed the old Paul Masson slogan. It was, "we shall sell no wine before its time," but his fact-checking is solid otherwise.

It is a libertarian argument and one that I endorse. The way alcohol is regulated in this country is a good example of government using its power to protect the private profits of favored clients. If passed, HR 5034 will only make it worse.

[mrviognier]

Having been a producer and a wholesaler I think I understand both arguments pretty well. I have no issue with the sale of alcohol across state lines...provided that applicable taxes are paid, and that the products are delivered in a manner to ensure they are received by someone 21 years of age or older.

I DO think it's silly that this issue has some thinking wholesalers are an unnecessary, lecherous segment of the industry. The fact is is that the three-tier system works. It's the most-efficient way to get alcoholic beverages distributed in this country, and anyone who thinks things would be better if producers had unfettered access to sell everything direct to consumers (or retailers or restaurateurs) does not truly understand the issues/costs involved.

That said, I think it's equally silly for wholesalers to feel that to provide producers the ability to sell direct to consumers/restaurants/retailers in states where it's legal to do so would spell an end to their industry.

Two weeks ago I attended a conference in Chicago hosted by WSWA. One of the seminars brought in the owner of Binny's (retailer) and head buyer for Lettuce Entertain You (restaurant). I nearly laughed out loud when both espoused a disdain for wholesalers...and a desire to buy direct from the producers. While I can appreciate their dreams of a perceived higher profit margin, they really hadn't thought the logistical and financial issues of self-wholesaling through.

The overwhelming majority of producers are good at one thing: production. They're not in the business of warehousing, transport, delivery, etc. Conversely wholesalers aren't producers, and retailers/restaurateurs aren't distributors. The three tier system, while by no means perfect, works.

[ILLfarmboy]

.. The way alcohol is regulated in this country is a good example of government using its power to protect the private profits of favored clients. If passed, HR 5034 will only make it worse.

[callmeox]

Two weeks ago I attended a conference in Chicago hosted by WSWA. One of the seminars brought in the owner of Binny's (retailer) and head buyer for Lettuce Entertain You (restaurant). I nearly laughed out loud when both espoused a disdain for wholesalers...and a desire to buy direct from the producers. While I can appreciate their dreams of a perceived higher profit margin, they really hadn't thought the logistical and financial issues of self-wholesaling through.

The overwhelming majority of producers are good at one thing: production. They're not in the business of warehousing, transport, delivery, etc. Conversely wholesalers aren't producers, and retailers/restaurateurs aren't distributors. The three tier system, while by no means perfect, works.

What makes you think that the business owners had not thought of the logistics and financial issues? At the risk of the appeal to authority fallacy, Binny's didn't get to be a 24 store chain by fiat, luck or governmental interference. Give the guy some credit for being a businessman and knowing his business.

Producers produce, wholesalers wholesale, etc because the law says that things have to be that way. Assuming that producers are too ignorant to build their own distribution and warehousing networks without the help of wholesalers is nuts. (that's the nicest thing I could think to say)

Why would a producer of beverage alcohol products be any worse at logistics than a company who makes duct tape or cotton swabs?

The three tier system is a necessary evil because the law says so. Without the protection of the law, my non-industry consumer opinion says that I doubt that it would survive.

[TomH]

Mat,

If your position that wholesalers serve a value added role, it should be able to be upheld by competition in the marketplace, rather than being dictated by regulations (frequently made by legislators receiving sizable contributions from the industry).

Tom

[cowdery]

There is nothing wrong with a three tier system. A distribution tier exists in many other industries. The difference is that only in alcohol is it mandatory. The legitimate interests of the state, in tax collection, promotion of temperance, and prevention of underage sales, could all accomplished without a state franchise system that limits market access and consumer choice, and makes products more expensive than necessary.

You honestly mean to tell me you don't think Walmart could efficiently buy directly from Diageo, Beam Global, Bacardi, Brown-Forman, et. al., and distribute that merchandise effectively to their stores? The wholesalers aren't fighting for their legitimate interest and they certainly aren't fighting for the public interest. They're fighting to protect a very lucrative and unnecessary monopoly.

Wholesalers are correct in their analysis that small wineries selling directly to consumers is the nose under the tent to Diageo selling directly to Walmart. I don't want to eliminate wholesalers, I want them to compete in the marketplace and not hide behind their government protectors.

[mrviognier]

Perhaps I wasn't clear, so let me say this: I have no qualms with producers being able to sell direct...as long as taxes are collected and the underaged aren't served. It won't do away with wholesalers, and it won't be the answer for producers.

[mrviognier]

Chuck. There IS a difference in selling a bottle of ketchup and a bottle of Bourbon. The system in place does not limit market access nor does it stifle consumer choice. If there's a market for an alcoholic product, it will be sold in that market.

And if you think wholesalers are the ones getting fat on excessive profit, you're mistaken. The average U.S. retailer works on margins of 30% to 50% or more, the producer around 100%. Wholesalers average 15%-20%.

Hmmm. That's some lucrative monopoly we have.