House bill worries Calif. wineries

5:32 PM, Sep 29, 2011   |    comments
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Gannett Washington Bureau

WASHINGTON - Wholesalers want legislation to affirm state control over alcoholic beverage sales, but wineries in California and nationwide say it's an attempt to limit direct sales to consumers, a rapidly growing segment of the wine market.

HR 1161, the Community Alcohol Regulatory Effectiveness Act, introduced by Rep. Jason Chaffetz, R-Utah, has 109 cosponsors, plus staunch support from groups such as the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America. It's been assigned to the Subcommittee on Courts, Commercial and Administrative Law of the House Judiciary Committee.

The beer wholesalers, in a statement, depict it as an attempt to rescue state and local control over alcohol sales from "some online alcohol sellers, big box retailers, international alcohol suppliers and professional plaintiffs" that want federal courts to allow them to sell ever-larger volumes of alcohol at low or below-cost prices. They see the trend as leading to social ills such as more underage drinking.

Wineries are livid. They see the bill as a disguised attempt to undermine their constitutional rights to engage in interstate commerce, especially direct sales to consumers across state lines. They also see it contradicting a 2005 Supreme Court decision, Granholm vs. Heald, that further bolstered protections for such sales.

No state has more at stake than California, whose wines accounted for 61 percent of sales in the U.S. market in 2010 and had a retail value of $18.5 billion.

And such totals were registered as the United States surpassed France last year as the world leader in wine consumption, according to the San Francisco-based Wine Institute.

Robert P. Koch, president of the institute, calls the legislation "the wholesaler monopoly protection bill." In a statement, he warned it would lead to states discriminating against out-of-state wines.

"If this bill became law, it would make it much harder for vintners to get their wines to market. Wineries are being established all over the country and in this time of needed job growth, this legislation would be job-killing. We do not believe Congress should spend valuable time wading into an intra-industry squabble to protect the monopoly distribution system of the wholesaler-middlemen," he added.

Rep. Sam Farr, D-Carmel, stands ready to fight it as representative of one of the state's prime wine-producing areas.

"The Central Coast is home to some of the finest wineries in the world, with a demand to match. HR 1161 would severely hurt the ability of our local growers and vintners to get their products to the marketplace, as well as limit consumer access to the wide array of wine available locally and across the country," he said in a statement.

Among other members of the California delegation, the office of Rep. Mary Bono Mack, R-Palm Springs, said she also opposes the bill.

The office of Rep. Jerry Lewis, R-Redlands, said he has not taken a position yet.

Riverside County, like Monterey County, has a number of wineries, mostly near Temecula.

Consumer-direct sales from domestic wineries grew 12 percent in 2010 from the previous year, reaching $3.4 billion. Continued double-digit increases are expected, according to VinterActive LLC, an industry research firm. Those direct sales made online grew 38 percent in 2010.

The Chaffetz bill states "alcohol is different from other consumer products and... should continue to be regulated by the states.

And the beer wholesalers emphasize that the 21st Amendment, which ended Prohibition, "gave rise to a state-based system of regulation that effectively balances community attitudes about alcohol with health marketplace competition and vast consumer choice."

But groups representing wineries say a section of the bill significantly amends the 1890 Wilson Act that requires states to treat out-of-state and in-state alcohol beverages the same.

The changes would make it possible for wholesalers, seen as especially politically powerful at the grassroots, to push for changes in state laws to protect their "virtual monopoly" over sales, the industry publication Wines & Vines said.

Wholesalers already handle 98 percent of U.S. wine sales.

"This misguided legislation sets a bad precedent for fair and equal access to the marketplace. From the vineyards that have harvested for generations to a new small venture, every winery should have the same access and competitive advantage," Farr said.

Gannett Washington Bureau

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