Fermentation: The Daily Wine Blog

H.R. 5034: Its History and Meaning Explained

THE HISTORICAL BACKGROUND
For decades the state-mandated 3-tier system of alcohol distribution worked. This is the system of sale and distribution of alcohol that nearly every state mandated at the end of Prohibition. It ordered that only licensed in-state wholesalers buy wine from producers around the country, that only wholesalers then sell to restaurants and retailers, who in turn sell wine to consumers. The market for wine from the 1930s through the 1970s was such that this system worked well for all.

Then something happened in the late 1970s. Americans began to become interested in fine wine and the market responded with a substantial growth in wine producers. This growth in drinkers and producers continued unabated and continues today. The flourishing of the American wine market found wineries cropping up in every state. Today, more than 7,000 wineries exist in the United States, most of them making very small amounts of artisan wines.

At the same time the number of wineries was expanding, the number of wholesalers was being diminished, primarily as a result of buyouts and consolidation. Today, 6 wholesalers control over 50% of wine distribution in America.

The increased number of wineries combined with the decreased number of distributors meant that the three tier system of distribution was unable to satisfy all the wineries that wanted to expanded from selling in their home state to other states. Wholesalers simply could not handle all the brands.

Small and medium sized wineries took to marketing direct to the consumer using mailing lists, tasting rooms and other methods of selling direct and bypassing wholesalers and retailers. The margins were better by 100% and their customers tended to be very loyal.

By the early 1990s wholesalers across the country, used to having a monopoly on wine sales, began to take a dim view of the practice of wineries selling direct to consumers and shipping the wine to them via common carrier. Using the enormous political power they had accumulated over the years in their home states, wholesalers began sponsoring and seeing passed laws that banned out-of-state wineries from shipping direct to the consumers. Some states passed felony laws, putting the shipment of wine on par with rape. In many cases, these state laws facially discriminated against out of state wineries by allowing their own in-state wineries to continue to ship to state residents.

ORIGINAL LITIGATION
Frustrated by the wholesalers, the lost sales and by the growing number of consumers that wanted their wines but could not be serviced, producers went to the courts knowing that the wholesalers controlled the legislatures. Lawsuits were filed in a number of states including Indiana, Texas, New York and Michigan. Each lawsuit claimed the discriminatory bans set in place by the states violated the Dormant Commerce Clause that gave the Federal government the right to regulate interstate commerce. Wholesalers and states claimed that section 2 of the 21^st Amendment gave them broad powers to regulate wine coming into their state, including banning it all together from being shipped to consumers.

Eventually two of these cases wound up in the Supreme Court. In 2005, in the case of Granholm v. Heald, the Supreme Court rule in a 5-4 decision that the 21^st Amendment did not take precedent over the Commerce Clause where wine sales and shipping were concerned and the discriminatory bans on out-of-state shipping were overturned.

This led to a number of states passing “Permit Laws” that allowed out of state wineries to obtain permits to ship wine into the state with the provision that they pay state sales tax, report shipments to the states and assure that all deliveries were signed for by an adult. In every case these laws were opposed by wholesalers who, though they claimed they were concerned minors would use the direct sales channel and states would not be able to collect taxes and the three tier systems would come crashing down, pretty clearly were just trying to protect their long held monopoly on wine sales.

Though legislators were nearly always persuaded by Wholesaler campaign contributions, they were unable to vote against their small, family owned in-state wineries who themselves would have to be banned from selling direct to their state’s residents if a ban against out-of-state wineries was to be viewed as non-discriminatory and constitutional.

SECOND WAVE LITIGATION
Following the Granholm decision, some states attempted to erect direct shipping laws that only allowed very small wineries to ship wine, assuring wholesalers biggest clients could not do so. Others passed winery shipping permit legislation while banning out of state wine stores from shipping wine. This set off a new wave of litigation to knock down these laws.

In addition, the 9^th Circuit Court of appeals used the Granholm legal reasoning to declare in Washington State that since Washington wineries were allowed to sell wine directly to retailers and restaurants (“Self Distribution”), bypassing wholesalers, out of state wineries must be allowed to do so also. This development struck at the heart of the alcohol wholesalers’ monopoly and represented the kind of reform the three-tier system that not only demonstrated one logistics and the wine market had changed, but also that wholesalers could, in many cases, be dismissed as unnecessary. This did not sit well with wholesalers.

For five years following the Granholm decisions, wholesalers seemed to be loosing more and more of their state-mandated protection. Though they continued to fight all openings of the wine market, they tended to lose those battles.

This is not to say they have not been successful at all. For example, there is still no clear judicial backing for retailers, as opposed to wineries, being able to ship wine across state lines using the same legal justification that was laid out in Granholm. That issue remains in litigation with wholesalers leading the fight.

ENTER H.R. 5034
In April 2010, The National Beer Wholesalers Association used their enormous political power to have H.R. 5034 introduced into Congress. If it becomes law, it will effectively overturn the principles set down in the Granholm decision and give states the ability to pass discriminatory wine shipping bans that would effectively be unchallengeable in Federal Court. The Beer Wholesalers, supported by the Wine & Spirit Wholesalers Association, are swinging for the fences by trying to change the rules in the middle of the game because they don’t like the umpire’s calls.

HOW H.R. 5034 WORKS
The Granholm court provided a simple and fair test for analyzing state laws that appeared to violate the Commerce Clause: For a state’s discriminatory ban on wine shipping to be upheld, the state must show that the goals if its ban cannot be achieved by any other less discriminatory means. The goals of all state alcohol regulations and of their bans on shipping always amounted to the same thing: 1) Maintain an orderly market in alcohol sales, 2) Promote Temperance, 3) The efficient collection of state alcohol taxes.

The Granholm court found that state could easily achieve these goals without resorting to banning the direct shipment of wine. So, those shipping bans were overturned as unconstitutional.

H.R. 5034 would modify these rules for analyzing state alcohol laws in significant ways. In amending the Webb-Kenyon Act, which describes the way Congress intends the states to wield their 21^st Amendment powers to regulate alcohol, H.R. 5034 states the following:

State or territorial regulations may not facially discriminate, without justification, against out-of-state producers of alcoholic beverages in favor of in-state producers.

The key to this legislation is the use of the term “without justification”. Further down in the bill, that phrase is explained:

Notwithstanding that the State or territorial law may burden interstate commerce or may be inconsistent with an Act of the Congress, the State law shall be upheld unless the party challenging the State or territorial law establishes by clear and convincing evidence that the law has no effect on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.

“…shall be upheld unless the party challenging the state…law establishes by clear and convincing evidence that the law has no effect on the promotion of temperance…”

The burden of proving that a ban on shipping has NO EFFECT on the promotion of temperance or any other legitimate state goal is INSURMOUNTABLE.

H.R. 5034 means states may pass bans on direct shipping that, if challenged in court, would have no chance of being overturned—no matter how discriminatory, no matter how much they violate the principle fo the Commerce Clause.  State alcohol laws are being taken outside the orbit of the Commerce Clause and the Constitution.

THE EFFECT OF H.R. 5034
Numerous states across the country enacted direct shipping legislation grudgingly. The power of the wholesalers in certain states is enormous. And certain states continue to fight direct shipment on behalf of wholesalers despite an outspoken consumer base that wants the ability to have wine shipped to them.

Unquestionably, upon passage of H.R. 5034 a number of state legislatures will follow the directive of their wholesaler benefactors and rescind their direct shipping laws and impose bans against out-of-state wineries shipping into the state.

Furthermore, given the enormous power wielded by wholesalers at the state level, H.R. 5034 will make it near impossible to push for any reform to the three tier system, a state mandated set of laws put into place to govern a 1930s market for wine.

Consumers in states that ban shipments of wines will see their choices in wine diminished severely.

Many wineries will lose significant revenue, leading to their collapse.

Retailers will find it impossible to operate efficient, 21^st century business that serve the growing national market for fine imported and domestic wines.

JUSTIFICATION FOR H.R. 5034
Wholesalers claim that states are threatened with deregulation and the inability to control the flow of alcohol as a result of too many lawsuits. They claim that alcohol laws ought to be made in the state legislatures and not by judges.

The fact is, since Granholm, enormous amounts of new state alcohol regulations have been put in place and now successfully govern and control direct shipment of wine and assure the collection of taxes.

It should be noted too that wholesalers are not so opposed to the courts making the laws when the law favors them. No wholesaler was upset when Southern Wine & Spirits, the largest wholesaler in America, sued the state of Texas to overturn a ban on granting licenses to non-residents. Furthermore, Southern used the Court’s reasoning in Granholm to defeat the state of Texas in that lawsuit.

BOTTOM LINE
H.R. 5034 is anti-free trade, anti-consumer, special interest legislation of the worst sort. It is a job killer that will diminish the vibrancy of the American wine industry, dissuade entrepreneurs from getting in to the wine industry, and stifle competition.

7 Questions To Ask Wholesalers About H.R. 5034 at Hearings

In a teleconference today with Journalists and industry types, Representative Mike Thompson (D)-CA made clear his absolute opposition to H.R. 5034 and the efforts he is making to defeat it. There is no question that Representative Thompson is the champion of wineries, retailers and consumers on this issue.

Among the items Thompson addressed was the disposition of Speaker Nancy Pelosi and the rest of the House leadership. Representative Thompson noted that Speaker Pelosi and the rest of the House leadership stand opposed to H.R. 5034, likely a testament to Thompson's powers of persuasiveness. In any case, this is good news for those who would be in opposition to H.R. 5034, the alcohol wholesalers bill that would essentially take state shipping laws outside the orbit of the U.S. Constitution's Commerce Clause and allow states to pass discriminatory alcohol laws that had no chance of being challenged in courts.

Representative Thompson was not able to say what the chances were that H.R. 5034 would have a hearing in the Judiciary Committee. He noted that the National Beer Wholesalers Association, the originators of the bill, continued to lobby very hard on Capital Hill and were putting great amounts of pressure on congresspeople.

If there are hearings in the House Judiciary Committee it will be very important that certain issues related to this bill be brought out in the open. This can happen via testimony, but it is much more effective to force wholesalers to answer the questions directly. Toward that end...

THE QUESTIONS ALCOHOL WHOLESALERS SHOULD BE ASKED AT A HEARING CONGRESSIONAL H.R 5034

1. What specific forms of deregulation have hit the states since Granholm that have been harmful to consumers? To States?

2. Is there any evidence that law enforcement has had a problem with wine getting into the hands of minors via direct shipment?

3. Under the provisions of H.R. 5034, could a state pass a law that allowed its own wineries to ship wine to its residents but discriminated against out-of-state wineries by banning shipments of their wines to residents?

4. There are now over 7000 wineries in the United States. Is it possible for wholesalers in any given state to represent all of them and, if not, how would wineries access that market without direct shipment of wine?

5. Is it true that under H.R. 5034, the only thing a state would have to do to defend a discriminatory ban on direct shipping from out of state wineries or retailers would be to simply state in the law that it is meant to uphold the three tier system?

6. What happens to the winery that once shipped wine directly to consumers in a state, but no longer can under laws made possible by H.R. 5034 and who also can't find a distributor to take them on?

7. I've heard numerous accounts from small wineries who have been told by retailers in another state that they would buy multiple cases of their wine, but that they must go through a wholesaler. But when the wineries asked a wholesaler to represent them and help them get the wine to the retailer, the wholesaler refused. Is there any other recourse that winery might have in order to sell it's goods? What would be the problem with allowing the winery to simply ship the wine directly to the retailer who wants it?

Alcohol Wholesalers Like Lawsuits When They Suit Them

H.R. 5034 would “take the federal judge out of making alcohol laws...the only people who should be concerned about this legislation are the people who had planned to go to federal court and sue."
Paul Pisano,Vice President, Industry Affairs and Counsel at National Beer Wholesalers Association, in the Naples News, April 27, 2010.

Paul Pisano was on the inside when the H.R. 5034, the bill that would lead to the end of direct shipping of wine in several states, severely harm wineries and kill consumer access to wine, was written. He tells us he's concerned with all these lawsuits that challenge state regulations on alcohol and that they need to be stopped so that the regulation of alcohol can be left where it should be, in the hands of state legislators and not in the hands of Judges.

But where was Paul Pisano when Southern Wine and Spirits, a wholesaler, challenged Texas law in federal court? Where was his outcry for local control then? Where was is call for a need to stop lawsuits in Federal court when Southern Wine & Spirits sued the state of Texas (Southern Wine & Spirits v. Steen, 2007) because they couldn't get a wholesaler license because Texas law prohibited non-residents from immediately getting such a license?

Of course he was silent. That's what two-faced hypocrites are when they like something that helps them, even though they don't like the same thing when it doesn't help them.

Beer Wholesalers--Little Boys With Skinned Knees

"The law [H.R. 5034] will reinforce a 2005 Supreme Court decision, which said states can’t discriminate between in-state and out-of-state wineries in matters of direct to consumer shipping."
Paul Pisano,Vice President, Industry Affairs and Counsel at National Beer Wholesalers Association in The Naples News, April 27, 2010.

"...WITHOUT JUSTIFICATION"

Paul Pisano, who was as responsible as any single individual for writing the text of H.R. 5034—the bill that will lead to the end of direct shipment in many states—forgot to mention two little words in his attempt to mislead readers of the Naples News. He forgot to say that H.R. 5034 won't allow states to discriminate against wine shippers "WITHOUT JUSTIFICATION".

Here's what H.R. 5034 says:

"State or territorial regulations may not facially discriminate, without justification, against out-of-state producers of alcoholic beverages in favor of in-state producers."

So, guess what H.R. 5034 does? It allows states to pass discriminatory bans on direct shipping and justify them by the simple act of declaring, "we think this will help stop minors from obtaining wine". And under H.R. 5034 they don't have to defend their justifications like they were forced to when the Supreme Court of the United States slapped states and folks like Paul Pisano across the face for not being able to defend their ludicrous justifications for banning direct shipping.

So, why doesn't Pisano mention the importance of these two important words in the text of H.R. 5034? It's  simple: Pisano is unable to look consumers and wineries and retailers and congresspeople in the face and say what he knows: H.R. 5034 gives states the right to pass any kind of direct shipping legislation they want and it doesn't have to adhere to the simple constitutional principles that the Supreme Court said they must.

Put another way...Paul Pisano, liked a little boy with a skinned knee, is a cry baby who wants to change the the rules in the middle of the game so he and his wholesalers win...no matter how they screw consumers, producers, retailers or the vitality of the American wine market.

Alcohol Wholesalers Must Be Desperate...The Lies Begin.

Are we really to believe the wholesalers when they tell us that they want to protect wine shipping rights for wineries and consumers? After they've have spent 20 years doing everything they can to stop consumers and wineries from using the direct to consumer channel?

Craig Wolf of the Wine & Spirit Wholesalers Association wants you to believe he's just out to protect shipping rights.

In a statement today, the WSWA said:

"The CARE Act does not overturn state laws allowing the direct shipment of wine by wineries or retailers. No provision of the CARE Act will change the laws on the books that allow for direct shipment of wines from wineries or retailers. Nor is there any provision in the bill that serves to restrict such legal shipments. In fact, direct shipping laws are afforded more protection from legal challenge under the CARE Act because the burden of proof is now on the entity challenging the law."

Only one of three things can explain this out and out fabrication:

1. He's lying on purpose
2. He's being obtuse
3. He doesn't understand the law.

Today, if a state wants to pass a discriminatory ban on out of state shipping, and if it is challenged in court, the state must show that there are no other less discriminatory ways to achieve the goals sought by a ban on shipping by out of state wineries or retailers.

Under H.R. 5034, the state would merely have to DECLARE the ban has been put in place in order to achieve the states goals. They would no longer have to prove there are less discriminatory ways to achieve their goals.

The first thing that would happen upon passage of H.R. 5034 would the be introduction of legislation in a number of wholesaler-controlled states of legislation rescinding direct shipping. You can bet that Texas, Florida, Michigan, and Illinois would the first. AND ONCE PASSED, THERE WOULD BE NOTHING THAT CONSUMERS, WINERIES, RETAILERS, FREE THE GRAPES OR ANYONE ELSE COULD DO ABOUT IT.

Simply put, H.R. 5034 would result in the beginning of the end to direct shipment. Wineries and retailers can forever forget about the prospects of opening up more states for Self Distribution. And millions of consumers would need to get prepared to only have access to the wines that wholesalers want them to have access to.

H.R. 5034 is the most anti-consumer bill passed by congress since the 18th Amendment.

Why Craig Wolf and the Wine & Spirit Wholesalers Association would be so blatantly self serving and disingenuous in this recent statement of theirs is something to contemplate. But what you can be sure of is this:

Craig Wolf and America's alcohol wholesalers never have, do not now, and never will have the interests of the wineries, retailers, consumers or the American wine market foremost in their minds or behind their actions.

A Peak Inside World Wine Federation Headquarters

More ingenious, tech savvy wine lovers providing their take on the meaning of the alcohol wholesalers' moves to turn back the clock and put wine in the shadows.

In this installment of "STOP HR 5034" the good folks at Gramercy Cellars in Walla Walla give us a peak inside "World Wine Federation Headquarters" and a better understanding of the death and destruction our wholesaler friends believe is visited upon the youth of America by direct shipping.

Wine Wholesalers Push For Deregulation With H.R. 5034

As the three tier system's traditional structures failed to address a growing consumer demand for fine and artisan wines, one of the most important points wineries and retailers regularly made is that they would willingly accept significantly increased levels of state regulation. Wineries and retailers who sought to expand their markets and get wines to collections of enthusiastic consumers across the country that wholesalers chose not to serve knew that significantly increased regulatory oversight by states would be necessary to assure the developing direct sales market benefited the state and met community standards for safeguarding minors.

Given this, it should be no surprise that since the Granholm v. Heald Supreme Court Decision that served to overturn the "reciprocity wine shipping agreements" between states and open up direct shipping in many states, there has been a significant increase in the amount of wine and alcohol regulations across the country.

What is surprising is the effort now under way by alcohol wholesalers to tear down a remarkably successful regulatory system that has been put in place and worked well for years.

H.R. 5034, the bill crafted by the National Beer Wholesalers Association and enthusiastically supported  by the Wine and Spirit Wholesalers Association, would lead to the demolishing of a regulatory framework that assures state taxes are collected, minors don't obtain alcohol and that producers and retailers produce a paper trail for every bottle of wine the moves through the national marketplace via direct shipment.

What's notable about the significant amounts of new regulation that came into being post-Granholm is that the wineries and retailers actively lobbied for it and still do. The Model Direct Shippers Bill, sample legislation designed by wineries and retailers, has been promoted by shippers in nearly every state they've worked to obtain shipping rights. This legislation calls on all taxes to be paid to the state, a licensing fee, regular reporting to the state, requirements that adult signatures be obtained before delivery of any wine, and that all shippers submit themselves to the legal and regulatory jurisdiction of the state.

To get an idea of the amount of new regulations that have been put in place since Granholm, consider the changes noted at the Wine Institute's long-standing wine shipping website.

The Internet Archive page of the Wine Institute's direct shipping page for January 1, 2004 (a year and a half before the Granholm Supreme Court decision) shows that only 10 states had a permit/regulatory structure in place for direct shipment of wine. Today, 35 states have in place a permit/regulatory structure for direct shipping. In fact, in order to manage the three fold increase in alcohol regulations across the country that wine shippers have asked for and obtained, an entirely new compliance industry has grown up around the direct shipping market.

Here's the punchline:

"It is important that states retain their constitutional power to regulate the distribution of beverage alcohol and are able to fend off litigation, which serves to destabilize or destroy that authority."
Craig Wolf, Wine & Spirit Wholesalers Association, applauding H.R. 5034

And this...

"The CARE Act aims to clarify congressional intent that states have primary authority to regulate alcohol; prevent the additional erosion of state-based alcohol regulation through the expansion of the Granholm v. Heald decision."
Craig Purser, President, National Beer Wholesalers Association, applauding H.R. 5034

As states respond to the successful passage of H.R. 5034 by banning direct shipping of wine (and as this is the goal of the legislation it most certainly will happen) we will see a tearing down of state based alcohol regulatory structures. This will be followed by a wild west freeforall as consumers go to all lengths to continue to get the wine they once were able to purchase, but will be denied after the passage of laws banning direct shipment.

That the alcohol wholesalers who are pushing and supporting H.R. 5034 are deceiving congress, regulators, the media and consumers when they say there has been deregulation since the Granholm decision is pretty shameful. But there's something worse.

Alcohol Wholesalers are pursuing conditions that will ultimately turn consumers into felons and force state alcohol regulators to fight a battle they cannot win and that will cost the state and state-based alcohol regulatory agencies hundreds of thousands of dollars they can't afford to waste on protecting wholesalers from competition.

Wine Marketing Rule #3: Talk To Your Customer

Recently in Washington State at TASTE Washington I gave a talk on ""THE TEN THINGS EVERY SMALL WINERY MUST KNOW TO MARKET IN TODAY'S WINE MARKETING UNIVERSE."

That talk was summarized in an earlier blog post here at FERMENTATION. This is the third post in a series that expands on that earlier post.

RULE # 3: Talk To Your Customer
In large part, good marketing amounts to meeting the expectations of your customers. Today, there is no question that your customers expect to be addressed directly by you, the owner, the principle, the winemaker. They expect to know you and understand you. They want to be as close to you as possible. So talk to them.

One of the most important reasons your customers expect this is for the simple reason that the technology exists now to make it happen. Twenty years ago wine lovers may have wanted to be closer to the wine producers or wine retailers, but they did not insist upon it because the existing communication technology made regular communications and regular one on one communications difficult.

Whether you like Social Networks like Facebook and Twitter and blogs, that’s where your customers are gathering, that's where they are looking for you and that's where they expect you to be. Use these tools to talk to them. Use Twitter to carry on a conversation with them. Use Facebook to engage them. Use a blog to communicate more substantial ideas if you can maintain it regularly. Send them emails that look like personal emails instead of marketing-speak. Carry on one-on-one email conversations with your better customers. Find ways to ask your customers for input on decisions. But above all talk to them.

One thing we know from efforts made in the area of email marketing is that segmenting a customer data base and then sending different messages to different slices of that database always has a higher return on your investment. Apply this knowledge to all your interactions with customers and POTENTIAL Customers. Try to get a sense of what your Facebook Fans and Twitter followers tend to be willing to talk about then give then that. Avoid the temptation to try to move them to a different kind of topic.

And remember that as these conversations become more familiar, you'll be tempted to digress and speak to other issues besides wine and wine related topics. Unless those topics are related to wine, consider avoiding them. Consider staying way from discussions of politics, religion, money. Perhaps it's best to think of your followers and fans who want to get to know you as family. The same rules apply.

Unless you are Coca Cola, Gallo or Fedex, "mass marketing" is a thing of the past. The conversation is not one way and it's not defined by the general demographics of a TV show or magazine. The conversation today surrounds dialogues. Sometimes it's between you and one other. Other times it's between you and your 500 fans on facebook.

Above all, remember what is expected of you and that to be a good marketer, you need to meet the expectation today that you are available for a conversation.

The Video That Explains H.R. 5034's Danger For Wine Lovers

Do you have a blog? Do you have a web site? Do you have any digital venue where this video, produced by Vintuba TV, can be linked to? Are you a wine lover too? And do you despair the consequences of H.R. 5034, a bill now in congress that will lead to the elimination of your ability to buy wine direct and sell wine direct?

Then either link to the YouTube page that holds this video or embed this video at your digital outlet. Let the word ring out.

Don't forget to Join the STOP HR 5034 Facebook Page

Legal Analysis of Wholesalers Shameful Bill To Stop Wine Shipping

The alcohol wholesalers recent success in getting H.R. 5034 introduced in the House of Representatives is a straightforward effort to turn back the clock on a well-regulated, problem-free direct shipment of wine and to completely exclude all wine shipments across state lines by wineries and wine retailers. In fact, the entire, shameful bill is directed against the 2005 Granholm v. Heald Supreme Court decision that helped open the door to consumer access to wine and that allowed smaller, artisan wineries to flourish.

WHAT DID GRANHOLM V. HEALD SAY?
In the Granholm decision, the Supreme Court made clear that a state law that discriminated against out-of-state wine shippers was a violation of the Commerce Clause and the U.S. Constitution if there existed less discriminatory means of achieving the state's goals of temperance, an orderly market in alcohol and and tax collection:

"the [Supreme] Court has held that state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause. When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry....Our determination that the Michigan and New York direct-shipment laws are not authorized by the Twenty-first Amendment does not end the inquiry. We still must consider whether either State regime “advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.”

To put it more simply, if a state wants to pass discriminatory legislation against out-of-state wine shippers, it must demonstrate that there are no non-discriminatory ways to achieve its goals of temperance, an orderly market and tax collection. The court, in fact, found that there were many other non-discriminatory means of achieving these goals.

HOW DOES H.R. 5034 OVERTURN THE GRANHOLM DECISION?
H.R. 5034 would tell the court, via amendment of the Web-Kenyon Act, that it is the policy of the U.S. Congress that states may enact discriminatory wine shipping laws and, if challenged in court, do not have to show that there are no other non-discriminatory means available to achieve their goals of temperance, an orderly market and tax collection. H.R. 5034 says:

"Notwithstanding that the State or territorial law may burden interstate commerce or may be inconsistent with an Act of the Congress, the State law shall be upheld unless the party challenging the State or territorial law establishes by clear and convincing evidence that the law has no effect on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age."

Put more simply, if a state passes a ban on out of state wine shipping, while allowing its own in-state wineries to ship wine, all the state must do if the law is challenged in court is show that the law would have some effect on promoting temperance, collecting taxes, creating an orderly market, preventing minor access or upholding the states alcohol regulatory structure. How would they demonstrate this? The law would merely have to say this is the intention of the law. That's all...That's it.

H.R. 5034's BIG LIE
Some have claimed that certain language in H.R. 5034 would prevent the passage of discriminatory laws that keep out of state shippers from sending wine to consumers. They point to this language in the proposed bill:

"(b) Construction of Congressional Silence- Silence on the part of Congress shall not be construed to impose any barrier under clause 3 of section 8 of article I of the Constitution (commonly referred to as the `Commerce Clause') to the regulation by a State or territory of alcoholic beverages. However, State or territorial regulations may not facially discriminate, without justification, against out-of-state producers of alcoholic beverages in favor of in-state producers."

But even this language is pointed directly at the Granholm v. Heald decision with the goal of completely overturning that decision. In this Supreme Court decision, the court looked closely at the reasons the states gave for wanting discriminatory laws against out of state shippers and found all the justifications wanting:

"In summary, the States provide little concrete evidence for the sweeping assertion that they cannot police direct shipments by out-of-state wineries. Our Commerce Clause cases demand more than mere speculation to support discrimination against out-of-state goods. The burden is on the State to show that ‘the discrimination is demonstrably justified."

What's important to note about the above language in H.R 5034 is that it does not say the state may not "facially discriminate against out-of-state producers". It says the state "may not facially discriminate, WITHOUT JUSTIFICATION..." And as we saw above, this new law would provide a state with the ability to simply announce that the discriminatory law is meant to protect minors or assure tax collection...NOT THAT the discrimination is the only way of protecting minors or assuring tax collection. This is important. It gives states free reign to do what they like and renders the bill's "may not facially discriminate" language meaningless.

To put it more simply, under H.R. 5034, the states need only offer "mere speculation" in order to support and make constitutional discriminatory laws that will most definitely be introduced into state legislatures if the bill passes through Congress.

The National Beer Wholesalers Association, who wrote this bill, and the Wine & Spirit Wholesalers of America, who also support the bill, have produced an extraordinarily cynical and deceptive bill in H.R. 5034. They have done so by carefully deconstructing the key holdings and principles of the 2005 Granholm v. Heald Supreme Court Decision.

CONGRATULATING THEMSELVES ON THEIR DECEPTION
In the National Beer Wholesalers Association's press release congratulating themselves, they come right out and attempt to pass off deception as a truth:

"The CARE Act aims to clarify congressional intent that states have primary authority to regulate alcohol; prevent the additional erosion of state-based alcohol regulation through the expansion of the Granholm v. Heald decision, but not allow facial discrimination against out-of-state alcohol producers."

This is shameful. But what's worse is that the beer wholesalers know it's shameful yet they do it nonetheless.