Wine Talk

Snooth User: GregT

US Supreme Court and wine

Posted by GregT, Jul 2.

A bit late but did anyone note that the SC made a ruling on wine sales last week?

The issue was a Tennessee requirement that if you wanted to open a retail store, you had to have lived in the state for ten years. A guy wanted to open a Total Wine franchise and was denied, so he sued.

Tennessee Wine and Spirits Retailers Association v. Russell F. Thomas

The court held that the rule violated the Commerce Clause, which gives Congress the power to regulate commerce between states. They had previously held in Granholm that laws that benefit in-state producers at the expense of out-of-state producers are illegal. So the states promptly said, "Oh. You can't discriminate against producers. OK then. We're just discriminating against retailers."

Some states after the Granholm ruling decided to kill their own wine industries to protect wholesalers (Michigan, NY). Granholm, who was the governor of Michigan at the time, rec'd $50K from the wholesalers and in return spent millions of taxpayer dollars to litigate the case for the wholesalers.

This time the Court was frustrated with the games so they said the prior ruling did not apply only to producers, but to "outside interests". That includes retailers. I expect future litigation to determine exactly who is an outside interest, but at least now we know it's both producers and retailers. So for at least some people, the act of buying wine may be a little easier.

Here's a synopsis from someone who used to post here quite often back in the beginning days:

https://www.forbes.com/sites/thomas....

 

Replies

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Reply by duncan 906, Jul 2.

So it is true that the national sport in America is litigation?

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Reply by zufrieden, Jul 2.

Interesting case.  The suspicious among us (perhaps I am of that number) would think the local lobbies - whether for producers or wholesale distributors - are the key to understanding the dispute.  This is, in fact, a very good example of why "free enterprise" is usually applied only to defend the "free" and "enterprising" of a particular private interest.  The key to solving the issue seems to me to involve a better understanding of what is supportive of enterprise generally, and consumer surplus in particular.  Regulation of "intoxicating liquors" is one thing - the determination of who procures and provides those liquors quite another.  We do not seem to see this kind of disagreement about tobacco; at least, I cannot bring a similar issue to mind regarding tobacco (and in future, similar issues could arise with cannabis). 

Any further remarks, GregT?

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Reply by GregT, Jul 2.

Don't know. I'm not sure how to answer Duncan's question but if it's not the national sport, it's a thrilling pastime for many!

Zuf - I think what happens is that you don't want your main customer to get bigger than you are. There's an interesting story I read once about a pickle company - Vlasic. They were a midwest company that made sliced and quartered and fancy cut dill pickles, sweet pickles, relish, etc. And they also made a big jar of whole dill pickles. Walmart asked what kind of a deal they could do on the whole pickles and they did some figuring and came up with a number. Walmart asked for a slightly lower number, they agreed, and Walmart gave them the biggest order they ever had.

There's not a lot of margin on whole cucumbers in a jar. But Walmart bought so many and ordered so much that within a few years they were running full time just to keep up with the orders. Orders on which they made almost no margin. They never got all the orders for the higher margin stuff they were hoping for. They almost went out of business and finally Walmart decided they didn't need all those pickles so they cut back on their orders.

I think that's what wholesalers are worried about.

Right now the wholesalers are the biggest players and the largest businesses in the wine trade. So they write the laws. But if a retailer, or a retail chain gets big enough, they'll be hard to control. That's why I think the wholesalers are so desperate.

But the wholesalers already have in place systems for fulfilling orders from diverse clients. I would think that in an e-market economy, they would be best placed to compete with the retailers if it came to that. Especially as you get your distributor's license from each state, but if you set up a sister company as a retail shop, you can ship all over the country.

Maybe that's too much work though. I really don't know.

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Reply by dmcker, Jul 4.

Good original post, Greg, and an interesting thread developing, especially with your last post just above this.

Too much thinking and writing time required to do it justice for me, now, so this is just a driveby. Hope to return and contribute something to this thread, but hope more besides me do, too.

 

Duncan, short answer is yes. And at the current high level of play in its professional leagues, the sitting president of the US is about to enter the Legal Hall of Fame as an all around threat, being one of the legal industry's greatest litigants, and also defendants.

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Reply by dvogler, Jul 4.

Happy Independence Day for those to whom it is relevant.

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Reply by zufrieden, Jul 5.

Love the story about Vlasic Pickles.  Quite instructive and just plain interesting.  However, I was probably a bit more focussed initially on the interference with the retail trade generally.  But the twist you added is a very important one; to wit, that a large pseudo-wholesaler such as Walmart which distributes such high volumes as to warrant being de-classified as a mere retailer, can take control of the market, profit thereby, and push the original supplier (the source of productive wealth in this case) to the proverbial brink...

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Reply by GregT, Jul 7.

https://www.fastcompany.com/47593/wal-mart-you-dont-know

Here's one version. I remember this as a B-school case study somehow.

But the wine shipping is BS.

Seriously.

In NY, you can only own one store. Because if you owned two, you may be able to exert pricing pressure on a wholesaler. So people open stores in the name of their spouse, brother, sister, mother, etc. And supermarkets can't sell wine because that might lead to alcoholism!!!!

In NC until recently you had to be located in the state.

There is nothing to be afraid of if they're willing to compete fairly, but they're not.

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Reply by zufrieden, Jul 7.

It is curious how we see lobbyists succeed in essentially bribing congress to follow these protectionist policies (if I may call them that) in favour of monopoly - which are in blatant restraint of trade - but cannot find ways (other lobbyists in this instance) to break up obvious monopolies as was successfully achieved during the Progressive Era.  

Here in Canada, the liquor trade is mostly regulated, and regulated carefully - if not neurotically, at times.  But as a controlled substance, most people would agree to regulation.  However, once regulation has been honed to the public purpose (so-called), the distribution and sale of product should be subject to the same laws as any other retail and wholesale enterprise.

One might be tempted to examine the sale of arms to the public and foreign powers on a similar basis, but that may be left for another time.  In this latter case, we have insufficient regulation - something like the emerging situation with cannabis in Canada.  As your experience teaches you, I'm sure, developments tend to reflect the relative distribution of power within given socieites rather than some abstration such as justic or equity.

Z.


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