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Spirits: Alcohol bill is stirring up foes
Thursday, June 10, 2010

Bourbon distillers say it would "destroy the industry as we know it today." Boutique wine vendors call it a "nightmare." Breweries large and small call it "anti-competitive."

For such a small piece of legislation, U.S. House Resolution 5034 has engendered a large amount of hostility among the country's whiskey distillers, wine makers and beer brewers -- and the people who drink their products. They worry that the law would kill out-of-state alcohol sales and their direct-shipment businesses, and ultimately force all shipments to go through middleman retailers, rather than to the customers' front porches.

But the bill's sponsors and its two main supporters -- the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America -- say the measure would return to the state the alcohol-regulating responsibility that has been usurped by the federal government and allow states to enact their own common-sense restrictions on shipping alcohol.

Foes of HR 5034 -- also known as the Comprehensive Alcohol Regulatory Effectiveness Act -- aren't buying it.

"There are a lot of wines that just aren't available in local consumer markets," said Jeremy Benson, executive director of Free The Grapes, a wine advocacy group that seeks to knock down interstate shipping restriction. Just 17 percent of wineries have nationwide distribution. The rest of them rely on direct-to-consumer shipping to some degree or another.

Same goes for some brewers and distillers.

"They are all coming out against this," Mr. Benson said.

The clause that has created such a tumult is this one:

"The State law shall be upheld unless the party challenging the State or territorial law establishes by clear and convincing evidence that the law has no effect on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age."

In plain English, states' laws have a presumed validity, and what's more, a winery or distiller seeking to overturn a state shipping law would lose its challenge, so long as the law in question has anything to do with alcohol. The resolution, in essence, tries to circumvent challenges by telling the court in advance what constitutes a permissible challenge.

"That would make it very, very difficult to oppose or overturn any state decision," said Charlie Papazian, president of the Brewers Association, a trade group representing more than a thousand small breweries.

One real-life example: Last year, New York was pondering a law requiring all beermakers to stamp New York-specific barcodes on their bottles. Yuengling and other brewers managed to defeat the proposal, saying it was cost-prohibitive. But had that law passed, and if the CARE Act were to become law, the New York law would have been incontestable via the courts.

Proponents "say they wouldn't do anything like that. But if the law is set up that way, then there can be unintended consequences," Mr. Papazian said.

Bourbon distillers in Kentucky worry that states could also craft untouchable laws that would rewrite the definition of bourbon. Now, to be "bourbon," a whiskey must have certain ingredients, and meet federal specifications. "Individual states could establish their own formulas, labeling and bottling standards for bourbon," says the Kentucky Distillers Association. "The resulting chaos would undermine one of the commonwealth's most important economic and tourism industries."

How would the resolution, if passed, affect Pennsylvania?

Not a lot, at least initially, according to a Pennsylvania Liquor Control Board spokeswoman. It's been five years since the U.S. Supreme Court ruled that states allowing in-state wineries to ship their vintages directly to consumers must allow out-of-state wineries to do the same, but Pennsylvania still continues to forbid out-of-state wineries from shipping into the state. It is one of 13 states where direct shipping is not permissible for out-of-state wineries (although some do so anyway). The same restrictions are placed on companies that ship beer or booze.

But if the resolution passes, it could hurt all consumers by culling the number of wine, beer and spirits makers, according to HR 5034 opponents.

Its proponents say the resolution won't have such an effect.

"The CARE Act is narrowly designed [to] allow states to effectively address what the attorneys general call 'the growing threat facing our states from unprecedented legal challenges that seek to eliminate our ability to regulate alcohol," Wine & Spirits Wholesalers of America President Craig Wolf told Congress.

Bill Toland: btoland@post-gazette.com or 412-263-2625; twitter.com/Btoland_pg.
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First published on June 10, 2010 at 12:00 am
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