Wine distribution laws within the state and nation are changing rapidly. States are reviewing wine shipment laws for compliance with the recent U.S. Supreme Court ruling that struck down laws in New York and Michigan prohibiting out-of-state wineries from shipping directly to consumers.
Distribution laws are in flux right now due to the court ruling, according to Tim Hightower, president of the Washington Wine Institute. States are in the process of changing their rules to ensure that all wineries-both in and out of state-are treated equally.
The court ruled last May that New York and Michigan’s laws are discriminatory and anticompetitive and that outside wineries must be treated the same as in-state wineries. Michigan and New York prohibit outside wineries from shipping to their consumers; however, in-state wineries were allowed to ship directly to residents. Some 22 states have laws similar to those in New York and Michigan that were challenged.
The Washington State Liquor Control Board is proposing a bill in the upcoming legislative session to allow Washingtonians to buy wine directly from out-of-state wineries. Current law allows this, but only if the state has reciprocating laws.
The institute is working with the Liquor Control Board in drafting the proposal in hopes that the legislation can serve as a model for other states.
Hightower also noted that change could occur due to Costco Wholesale Corporation’s legal challenge to Washington’s three-tier regulatory system for alcohol distribution.
Costco filed suit against the Washington State Liquor Control Board, claiming that distribution regulations are a restraint of trade and prevent the company from buying wine directly from out-of-state wineries.
Self-distribution laws allow wineries in the state to bypass the three-tier system, enabling Costco to buy directly from wineries. But outside wineries, with the exception of shipping directly to consumers, must work through a licensed distributor to sell wine in Washington.
Wineries, by law, must sell to a distributor at a markup of at least 10 percent. The distributors must mark up the alcohol another 10 percent. Costco argues that it could offer beer and wine at better prices to consumers if it could purchase wines directly from the winery or brewery.
The institute is worried that the lawsuit could jeopardize current self-distribution rights, an important issue to boutique wineries too small to attract the attention of distributors. The institute filed a brief to the Costco challenge, encouraging the preservation of winery rights to self-distribute.
The institute is preparing legislation to preserve the right of self distribution, a measure that would only be necessary if the court sides with Costco. The legal challenge is not expected to be resolved quickly and could go to trial later this year.
In late December, a federal judge considering the Costco case concluded that the same privileges given to in-state wineries must be extended to out-of-state wineries regarding direct sales. The judge left the decision on direct sales to the state legislature, delaying judgement on the issue until April 14 to give the legislature time to resolve the issue.
The institute will be actively involved in the issue, supporting legislation to preserve the right of self-distribution, which is now in jeopardy from the court conclusion.