Direct-Shipping Battle Resumes in Massachusetts and Indiana, Ramps Up in Illinois

With state legislatures back in session, the battles over direct-to-consumer shipment of wine have reignited. Currently, at least three states—Massachusetts, Indiana and Illinois—are tackling the issue. In Massachusetts, the governor has introduced a bill that would allow for more open direct shipping, while in Illinois, a set of two bills would scale back the already permitted practice. Meanwhile, Indiana is negotiating a compromise between two widely divergent bills.

The long debate in Massachusetts over direct shipping was put on hold at the end of last year when Gov. Mitt Romney vetoed a bill that allowed direct shipping from in-state and out-of-state, but only for wineries that produce less than 30,000 gallons of wine per year and are not already represented by a Massachusetts wholesaler. That bill, said Corbie Kiernan, a spokesperson for Romney, «benefited the wholesalers at the expense of the consumers. [Romney] has always favored the direct shipment of wine to Massachusetts consumers.»

His new bill allows wineries of any size to ship directly to Massachusetts consumers. The limit per household remains the same as it was in the vetoed bill (a total of 240 liters per year, roughly 26 cases), and wineries would still have to pay $100 for a shipping license. In contrast to the vetoed bill, Romney’s legislation requires the state to act on wineries’ shipping-license applications within 30 days, punishes only those who knowingly violate the law and requires that shipping wineries file annual rather than monthly reports on what they’ve sold and to whom.

«He’s confident that it will pass,» said Kiernan, even though Romney is a Republican, and the Massachusetts House of Representatives, which is overwhelmingly Democratic, had been rumored to be mulling an override of Romney’s veto. The bill was sent first to the state Senate, where Romney enjoys more support. Furthermore, said Kiernan, «It’s popular with wine consumers, and the wider audience understands that this is a more consumer-friendly approach to direct shipment.»

Nevertheless, a lobbyist close to the situation said that much negotiating remains to be done, and no action is expected for at least a couple months.

Although Illinois currently allows direct shipping from many wineries, the state is reconsidering its laws following the U.S. Supreme Court decision on the matter. The justices ruled that it is unconstitutionally discriminatory for states to allow in-state wineries to ship to residents but ban out-of-state wineries from doing so; they must either allow shipments from wineries regardless of location or ban all shipments. That did not directly affect Illinois, which has reciprocal shipping laws, meaning out-of-state wineries can ship to Illinois consumers as long as the producers’ home states likewise allow Illinois wineries to ship to their residents. But the court’s wording indicated that these laws could be discriminatory as well, since they don’t allow shipments from all states.

«In the dialogue of the opinion they made reference to [reciprocity laws], and said if this is ever before us, we’d throw them out,» explained Bill Olson, vice president of the Associated Beer Distributors of Illinois, which is supporting the new bills.

Like Massachusetts’ vetoed bill and a measure passed in Michigan last year, the Illinois bills set the limits based on winery size. Bills HB 4350 and SB 2180, filed on Jan. 3 and 4, respectively, prevent wineries producing more than 100,000 gallons per year (about 42,000 cases) from shipping directly to Illinois consumers. Instead, they must go through a distributor.

The measures also require that Illinois residents buy wine in person at the winery before they can have it shipped to them later; after the first purchase, a consumer would be able to have a maximum of two cases per winery per year shipped to them.

But Illinois wineries argue that these provisions will hurt their sales. «It would significantly cut down on our Internet orders and phone orders,» said Beth Glunz Hunt, co-owner of Grayslake-based Glunz Family Winery, one of 63 producers in the state. «It would make it difficult in a time when we’re really trying to grow.» Glunz said that the winery shipped about 100 orders between Thanksgiving and New Year’s Day, the busiest time of year. «Like most people in retail, we need December to secure us through the rest of the year,» she said.

At present, the bills are in committee, so a vote does not appear to be imminent. The legislative session ends April 7, almost two months short of its usual closing date, around Memorial Day, and Olson said that no one is sure how many bills the legislators will be able to address during this time.

The Indiana legislature has two bills in front of it, both of which were introduced at the beginning of the year, just weeks after a state judge ruled that Indiana wineries may ship wine directly to residents within the state. The wineries had been doing just that for about 30 years, although the state never had a law expressly permitting or denying the practice. The Indiana Alcohol and Tobacco Commission suddenly revoked the privilege last year in response to the U.S. Supreme Court decision, rather than opening up the market to out-of-state wineries.

Similar to Romney’s bill, Indiana HB 1036 would require that in- and out-of-state wineries pay $100 for a shipping license, as well as pay taxes on all sales and file annual reports with the state. The bill would limit wineries to shipping 24 cases per adult per year. However, the bill has not made it out of committee, while HB 1190, originally a much more restrictive bill, has.

When first introduced, HB 1190 allowed for consumers to order from wineries, but the wine would have to be sent via a wholesaler to a retailer to be picked up. «Of course, [we’re] opposed to making direct shipping go through a wholesaler—it defeats the purpose,» said Nino Ciaravino, Midwest counsel for the Wine Institute, a trade organization of California wineries that advocates direct-to-consumer shipping.

Negotiations between Indiana wineries, wholesalers and legislators have been in progress for three weeks now, with all amendments being made to bill 1190. «The issue is still a work in progress,» said Rep. Eric Koch (R), who authored HB 1036 and is involved in the negotiations. «We are hoping to amend 1190 in a way that direct shipping is once again permitted,» he said.

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