Tuesday, February 27, 2024

New Lawsuit Challenges California’s Protectionist Wine Distribution Law

The National Association of Wine Retailers announced its support today for a lawsuit challenging a discriminatory and protectionist California ban on out-of-state wineries selling directly to California retailers and restaurants. The old law was part of a protectionist system of alcohol regulation that limited retailers’ access to products, consumers’ access to the growing national market for wine, and wineries’ access. to retailers.

ESSENTIAL PRINCIPLES OF THE CONSTITUTION VIOLATED BY THE WHOLESALER’S MANDATED USE

Dwinell v. McCullough, filed by a Washington State winery against California ABC, challenged the constitutionality of a California law that allows state-licensed wineries to sell wine products directly to retailers in California without the burden and cost of going through a wholesaler while requiring out-of-state wineries to use a California wholesaler. The discriminatory law violates the dormant commerce clause of the US Constitution, as decided in the seminal 2005 Supreme Court decision Granholm v. Heald, which struck down New York and Michigan laws that equally favored state wineries over state wineries. out of state.

“State laws that serve only protectionist and discriminatory purposes should be repealed as a matter of law and market fairness,” said Tom Wark, executive director of NAWR. “Requiring a wholesaler to use out-of-state wineries but not in-state wineries is a relic of the 1930’s post-Prohibition world, stifling economic growth, hindering the ability of retailers to access eligible products from out-of-state, denying consumers access to legal products, and unjustifiably promoting the financial and political interests of wholesale middlemen in California.

Similar laws are now being challenged in other states:

RETAILERS CAN BENEFIT FROM MORE INVENTORY RETURN OPTIONS

Removing source restrictions on legal inventory purchases is important to wine retailers. By diversifying their offerings beyond what state wholesalers or local producers offer, retailers can more easily differentiate themselves and their offerings from competitors. This is critical in the increasingly competitive wine retail market. By going directly to the producer to purchase wine inventory, retailers often get products at lower prices, which can be passed on to the consumer.

SMALL ARTISAN WINERIES ARE CUT OFF THE MARKET WITH DISCRIMINATORY CA LAW

Additionally, wine-producing regions in places like Michigan, Texas, Idaho, Arizona, Missouri, Virginia, New York, and other states have matured significantly over the past twenty years. This has increased consumer interest in their wines. However, few of these products are offered by wholesalers in California, who often focus their attention on the distribution of large production brands to the detriment of those produced in new wine states. Allowing California retailers to buy directly from these out-of-state producers will result in California consumers having better access to a wide variety of fine wines produced and sold throughout the United States.

NAWR is urging the California Attorney General’s office, as well as attorneys general in states where similar protectionist laws are being challenged, to settle the case and save their citizens hundreds of thousands of dollars in unnecessary litigation costs.

About NAWR

The National Association of Wine Retailers is the leading advocate for a 21st century approach to alcohol regulation that does not penalize consumers based on where they live and for the development of a wine market where the retailers can do business unhindered by an old respect for an oligopoly of wholesale middlemen who are politically connected. NAWR represents licensed brick-and-mortar retailers, online retailers, wine clubs, and auction houses nationwide. For more information, see www.nawr.org.

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