Let’s Call a Pig a Pig – Proposed Law to Ban Direct Retail Wine Sales Makes Special Interest Groups Ripe for the Slaughter

How long will Michigan residents allow special interest groups and lobbyists to continue to glutton themselves while the state’s economy spirals downward with high jobless rates and businesses closing to move to better markets? Apparently, too long.

The latest example of our elected officials lunacy and lack of understanding of basic principles that create economic growth is a proposed law to ban all direct wine shipments by in- or out-of-state retailers to consumers. Making it more difficult for Michigan businesses engaged in retail wine sales is clearly contrary to Economics 101. What’s wrong with responding to a market and demand of a product and making it competitive with an interstate commerce just like the thousands of other products that are directly shipped to consumers in and out of the state of Michigan every day? The simple answer - the Michigan Beer and Wine Wholesalers Association would be forced to release its vice grip on revenues generated for its members under the protectionism principles that are the lynch pins of their lobbying and strong-arming tactics to obtain elected officials’ votes.

In his blog, www.michwine.com, Joel Goldberg states as follows:

“Michigan’s Beer and Wine Wholesalers have already reported political donations that exceed $700,000 during the current election cycle, according to the Detroit News. This figure doesn’t include contributions made close to Election Day.

Numbers supplied to MichWine by Rich Robinson of the Michigan Campaign Finance Network show that members of the House Regulatory Reform Committee – which just passed the Wholesaler-supported delivery ban – took over $37,000 from the MBWWA. Rep. Barbara Farrah, the bill’s sponsor and Committee chair, also got more than $3,000 in “travel expenses” to attend the last two MBWWA winter meetings.”

The impact of the legislature’s capitulance to the MBWWA’s desire is that Michigan loses valuable businesses and jobs. Goldberg further states in his November 18, 2008 blog posting:

“Given our state’s economic track record in recent years, which direction do you guess they’re taking up in Lansing? Hint: while Governor Granholm is in on an Israeli road trip, trying to import a few 21st century businesses and jobs to Michigan, her party colleagues back home in the state legislature are busy propping up Prohibition-era beverage laws guaranteed to further damage our precarious economy.

How? The prime example is Winebuys.com, an online seller of wine. It’s a high-tech internet startup – something we talk a good game about wanting to promote in Michigan. Started last year by two Detroit-area businessmen who anted up $1 million of their own money, it’s one small step along the road that might someday wean Michigan off our auto-dependence. They project $10 million in sales next year, and plan to hire a few more employees soon.

It’s a gusty move to start a new Michigan-based business in this economy. Most of their online competitors are located in places like California, a state that’s long encouraged retail wine shipping and, as a result, already houses a profusion of young, growing businesses in the sector.

But if the level-down law before Michigan’s state legislature passes, the entire legal basis for their business – selling and shipping wine to retail consumers nationwide – will be banned in Michigan. Like too many other businesses before them, the folks behind Winebuys will have two choices: go out of business or move to another state.

By the way, you may wonder where Winebuys gets all this wine it sells online. You guessed it: from the same Michigan wholesalers whose well-paid lobbyists are diligently working Lansing’s backrooms at the moment, to pass the law that will put their customer out of business.

You’d swear these guys have been taking business development lessons from the automakers.”

The MBWWA attempts to mask its gluttony by citing two arguments in support of the proposed law. The first argument is that if the law is not passed, the state would lose tax revenue. False! Michigan would tax shipments by out-of-state wineries to Michigan residents. The second argument is that the law would prevent alcohol from winding up in the hands of minors. Again, False! There is no evidence based on the past practice of wineries that direct shipments to Michigan residents that any direct shipment of wine or alcoholic beverages increases incidences of alcohol in the possession of minors.

In an economic environment where our state is highlighted in the nation bailout hearings in front of U.S. senators and congressmen, why are we allowing a powerful lobby group such as MBWWA to dictate economic policy and drive jobs from our state? The only hope is that the old adage that “pigs get fat, hogs get slaughtered” will ring true.

-Dan Penning

Wine lovers' win sours as Michigan tries again to ban direct shipping


LANSING -- Joe Chess, an orthopedic surgeon from Kalamazoo, said his passion for fine wine is deep.

Deep enough that he regularly seeks hard-to-find varieties in remote places, and deep enough to get him into a lawsuit fighting Michigan regulations stopping him from buying wine from out-of-state retailers. Two months ago, Chess won the suit when a federal judge in Detroit ruled that the state couldn't ban out-of-state retailers from shipping wine directly to customers while allowing Michigan firms to do it.

So why doesn't Chess feel like a winner?

On Nov. 11, Lansing lawmakers introduced a bill to solve the problem by banning all direct wine shipments by retailers, whether they're Michigan merchants or those in another state. The bill was approved in committee the next day and could sail through the Legislature in the lame-duck session beginning Tuesday and be on the governor's desk before Christmas.

"That's crazy," Chess said last week. "The state loses a lawsuit, and they respond by punishing consumers and retailers. It seems to me Michigan can ill afford to be hurting businesses right now."

State regulators, some legislators and the Michigan Beer and Wine Wholesalers Association, the powerful lobby for beer and wine distributors, said it's not crazy at all. All they're trying to do, they said, is preserve an orderly system that dates pretty much from the repeal of prohibition. The system was designed to keep tight control over who gets to buy and sell alcoholic beverages. Michigan Liquor Control Commission spokesman Ken Wozniak said the system actually helps some in-state business by protecting them from competition.

Opening up Michigan's consumer market to outsiders would "turn it upside-down ... wide open," Wozniak said.

Money also is a factor. The LCC is the nominal distributor of liquor in Michigan and reaps more than $200 million a year in revenue. Wozniak said the state wants to limit shipments from out of state out of "self-interest."

Attorneys for Chess dispute the notion that the government would collect less in fees and taxes by opening up the market. Michigan could impose the same rules on outsiders that are imposed on Michigan retailers, said Alex Tanford, an Indiana University law professor engaged in an effort to open up the market for alcoholic beverages around the country.

"They can pretty much engage in any regulation they want," Tanford said. "They just can't impose different regulations on out-of-staters."

The Legislature authorized shipments by in- and out-of-state wineries three years ago after losing another court case. How much traffic would be generated in an open market for direct shipment is unclear.

Chess said he believes it is relatively small, mostly confined to people like him who are interested in buying hard-to-find, high-end wine. But the attitude of the beer and wine wholesalers group suggests its members are concerned about serious erosion of market share. The group intervened in the lawsuit to defend the so-called three-tier system, which gives its members monopoly distribution rights within specific territories.

President Michael Lashbrook said last week that he believes the regulation of alcohol sales would "break down completely" if the decision by U.S. District Judge Denise Hood stands. Lashbrook said damage to Michigan retailers from passage of the legislation would be minimal because only a few use direct shipping, and it is not a major part of their business.

That's not true for Michael Solarz and Jeff Resnick, whose Ferndale-based business, winebuys.com, is based almost entirely on direct shipment to customers. Solarz said they purchased Winebuys and brought it from California to Michigan a year ago. They have six employees but hope within two years to have as many as 25 and reach $10 million in sales.

But if the ban on direct shipping is approved, Winebuys will be growing somewhere else, Solarz said.

"I find it extremely antibusiness and distressing," said Solarz. "We wanted to get into a business that wasn't dependent on the Michigan economy. Then we get hit with this?"

Click to read the entire article from The Detroit Free Press