Michigan Alcohol and Wine Bill Uncorks Business Concerns

A recent article about Michigan's House Bill 6644 as it appeared in Crain's Business News Alcohol bill uncorks biz concern By Amy Lane and Nathan Skid
LANSING - When Ronnie Jamil looks at House Bill 6644, he sees some of his business in jeopardy. That's because the bill, which would ban retailers from shipping wine and other types of alcohol directly to customers, extends to catered events. “We are a unique wine shop in a nice neighborhood of people that like to be catered to,” said Jamil, co-owner of Bella Vino Fine Wine and Spirits in Farmington Hills. “This is a competitive edge we have over box chain stores, that we can offer delivery to residential homes and businesses. We cater food, and if someone is throwing a party and they want a few cases of beer and bottles of wine, we can do that. “This bill is trying to eliminate or disallow us to distribute this to our customers.” Jamil is emeritus director of the Associated Food & Petroleum Dealers, which along with the Michigan Retailers Association and the Michigan Restaurant Association and others have concerns about the legislation that swept through the state House last week in a 97-9 vote. Focus is now on the state Senate where, with the brief session time remaining, the bill could go to a committee or directly to the Senate floor. The Michigan Beer and Wine Wholesalers Association is backing House Bill 6644. In a statement e-mailed to Crain's on Friday, President Michael Lashbrook said “we support regulations that will help protect our ability to stop dangerous products from reaching consumers and alcohol from falling into the hands of minors, both of which are the driving force behind HB 6644.” The bill, sponsored by Reps. Barbara Farrah, D-Southgate, and Chris Ward, R-Brighton, would prohibit both in-state and out-of-state retailers from direct shipping and require all sales to go through the state's existing three-tier distribution network in which alcohol products flow from producers to wholesalers and then to retailers. The measure responds to an October federal court ruling that found unconstitutional a Michigan law that bans out-of-state retailer shipping of wine but permits in-state retailer shipping. The state has appealed the ruling and sees it as undermining Michigan's ability to control sales, but is seeking the legislation as a broader and more rapid remedy. The legislation would prohibit in-state and out-of-state retailers from directly shipping to consumers any kind of alcoholic product — beer, wine and liquor — even if the delivery is only a few blocks away. Andy Deloney, the restaurant association's vice president of public affairs, said the House version “essentially makes it all but impossible” for restaurants that hold retail beer and wine licenses to do catering that includes alcoholic beverages. He said the association is working with the Michigan Liquor Control Commission and other interests to address the catering concerns in the Senate, “while also being mindful that we're running out of time in the legislative session. “We're hopeful that we can come up with some language to address that,” Deloney said. Ken Wozniak, director of executive services at the Liquor Control Commission, said the commission is looking at ways to address some of the concerns raised about the bill. One possibility is a catering permit that would apply to in-state and out-of-state businesses. Also being looked at is retaining the ability for Michigan businesses to continue to direct ship. One way to do that might be to limit the means of delivery for all shippers, in-state and out-of-state. “It's not that we've shut off all dialogue on those issues,” said Wozniak. “Hopefully by the time this gets to a committee meeting in the Senate, we'll have something worked out, if it can be worked out at all.” Sen. Alan Sanborn, R-Richmond, would lead the bill on the Senate floor and chairs the committee that would discuss the bill. Andrew Doerr, his chief of staff, said Sanborn “is hoping that we can get something done with the legislation before the end of the year,” but with the caveat that the commission continues to work with those concerned about catering to ensure such events can continue, and not at a significantly increased cost. He said Sanborn would also like to address gift-basket shipping, which also is affected by the proposed ban, although the commission's Wozniak said that's a more complicated issue. Michigan business interests aren't the only ones who have raised concerns with the bill. Free the Grapes, a Napa, Calif.-based national grassroots coalition for wineries and consumers, has sent e-mails to its list of Michigan wine-loving individuals who in turn sent about 240 faxes to state lawmakers, as of early last week. Executive director Jeremy Benson said direct shipping is “a way for people to sample products that may not be available in their market, in many cases, and be able to purchase them the way they want to purchase them. And that's what this ultimately comes down to, and that's choice.” He said that instead of banning all direct shipping, Michigan could remedy its problem by adopting model legislation that is a basis for direct-shipping laws in other states, involving both wineries and retailers. Such a law would require shippers to obtain a state license, pay sales taxes, and abide by regulations that include package labeling and limits on amounts shipped. Michigan enacted similar legislation in 2005, creating a direct shipper license available to both in-state and out-of-state wineries. But Wozniak said the issue in Michigan goes beyond wine. Even though the current court case centered on wine shipments, it has implications for the shipping of beer and spirits, he said. The state is the wholesaler of spirits, and “if a lot of sales were being made through out-of-state retailers, that would have, we think, a very dramatic effect on state revenues,” he said. The state made about $204 million in profit on the sale of spirits in 2007. Wozniak said it's not unlikely that a future lawsuit could be filed regarding Michigan liquor shipping, because Michigan allows in-state but not out-of-state delivery. Michigan's liquor prices are significantly higher than those of other states. “Our attorneys and the commission itself feels that we've got to deal with the issue for all alcohol products,” Wozniak said. Joel Goldberg, editor and founder of MichWine, a Brighton-based consumer Web site on Michigan wines, said Wozniak's argument is “a red herring.” He said he is not aware of any challenge to spirits laws on such a basis, and said Michigan could still require an out-of-state retailer to go through the state. Amy Lane: (517) 371-5355, alane@crain.com Nathan Skid: (313) 446-1654, nskid@crain.com