Editor's Note 2/4/2014: This post was originally written in March of 2012 and in part thanks to the outcry of wine lovers everywhere the 2012 legislative session expired without enacting the proposed legislation. It was reintroduced in 2013, but wasn't enacted. Like a zombie, it's back again, and it's up to all New York-area wine lovers, or anyone who buys or sells wine in this vibrant wine market, to again sound the alarm. 2014's proposed legislation is effectively identical to the 2012 (and 2013) version; read on to learn what's at stake and what you can do.
When investigating a potential new piece of legislation, follow the money, rather than the purpose that the legislation's supporters say it has been designed to achieve. That would serve you well in investigating the anti-direct shipping laws that the big wholesalers are pushing at the state and federal levels. They say it's about preventing underage access to alcohol and ensuring that states can collect the taxes they're due. Yeah, right.
No different is the "at rest" law currently being debated in the New York legislature. The law, if passed, would require that any alcoholic beverage sit in a New York warehouse for 48 hours before it could be sold [read the full text]. In a state like California, this wouldn't make much of a difference. All serious California distributors have their warehouses in California. But in New York, it would be a different story. Because New York's fine wine business is so heavily concentrated in New York City, and because New York City is so close to both New Jersey and Connecticut, many (even most) fine wine distributors have one warehouse that covers both New York and New Jersey, and often Connecticut as well. This is the case for our New York distributor -- Verity Wine Partners -- as well as an estimated 80% of wholesalers currenly doing business in New York. These warehouses are typically located in New Jersey because warehouse space is cheaper there, and New Jersey also provides easy access to the ports where wines are typically unloaded from ships. It's worth also noting that New Jersey has an "at rest" law of its own, which means that if you're going to locate a single warehouse to serve the two states, you would choose New Jersey.
This imbalance is what the law purports to fix: to "level the playing field" so that distributors who have chosen to locate their warehouse in New Jersey would have to add an additional warehouse in New York. This would supposedly spur construction of new warehouse space in New York and make it easier to be sure that the appropriate excise taxes are collected. Is there any evidence that distributors are not paying their excise taxes? No; New York is probably the cleanest state we deal with due to the rigorous price posting requirements and a willingness to prosecute violators by state Attorneys General from Eliot Spitzer's day to the present. But it provides a veneer of "fairness" for an attempt to gain a legally sanctioned competitive advantage.
A look at who is lobbying for the legislation suggests a motive. Principal backers are New York's two largest distributors, both of whom already have warehouses in New York State, and who could, with one signature, force their competitors to either invest in a new warehouse, significantly increasing their costs, or move from next-day delivery of orders to third-day delivery of orders, significantly reducing their competitiveness. Either way, they are guaranteed to increase their share of a multi-billion dollar industry. Who would be hurt? The smaller distributors, of course. But also restaurants, retailers and consumers, who would see their selection and service decline and prices rise, and the thousands of smaller wineries like Tablas Creek who are represented by these smaller distributors.
Dustups like this provide further evidence of the widsom of the founding fathers, who through the commerce clause of the US Constitution reserve for the federal government the power to regulate interstate commerce. Seeing the convoluted patchwork of legislation that has resulted from the 21st Amendment's promise to allow states control over how alcohol is regulated and sold within their borders should be evidence enough for anyone.
Meanwhile, if you are in New York, or know anyone who is, please contact your state senator this week through the interface at nysenate.gov/senators and encourage them to oppose "at rest" legislation.