Relief for a Prohibition-era hangover?

by Heather Hayes
Virignia Business
August 2005

The 21st amendment may have made drinking alcohol legal —but not shipping it across state lines. Since 1933, the fight has been on to open up interstate commerce to include alcoholic beverages.

In late May, the Supreme Court cracked the door with a ruling that requires states, which allow their wineries to sell directly to consumers, to grant the same privilege to out-of-state wineries. The Virginia wine industry welcomed the decision. Winery owners say their long-term success is partially dependent on being free to sell to repeat and far-flung customers.
“It was a vital first step in the long-term battle to open up our borders and develop mechanisms that allow the free flow of legal products, including wine,” says Gordon Murchie, president of the Vinifera Wine Grower’s Association and a consultant to the Virginia Wineries Association.

The ruling doesn’t mean that states have to allow interstate wine sales, just that they must make the playing field level for in-state and out-of-state wineries. The court decision actually allows for the opposite of interstate trade: States that don’t allow direct wine sales from out of state must also bar them within the state. Almost immediately after the ruling, Michigan lawmakers moved to do just that, introducing two bills that would remove intrastate direct shipping by the state’s 40 wineries. Lawmakers say they’re concerned about a possible increase in alcohol sales to minors.

By contrast, New York’s legislature passed a bill in late June that permits both in-state and out-of-state wineries to ship directly to adult residents.
For its part, Virginia’s wine industry will ask the state legislature to retool the Farm Winery Act. The law now allows Virginia wineries — but not those in other states — to bypass the system of wholesalers and retailers and ship directly to consumers. “As it stands right now, that law is unconstitutional,” Murchie says. He adds that, in recent years, wineries have been able to do some out-of-state shipping as a result of reciprocal agreements made between states. That is the current situation between California and Virginia.

Virginia is likely to review the Farm Winery Act and come up with a solution in its next legislative session, but for Virginia’s wineries to enjoy lucrative cross-border shipping, other states will have to do likewise. “Winery associations in each state with restrictive laws will have to go back to their state legislature and find some solution,” Murchie says. “And that’s not easy.”

Virginia wineries are already hard at work touting the potential new sales. The Oasis Winery in Hume, for example, recently held a joint press reception with California’s Blue Rock Vineyards to celebrate and raise awareness of the Supreme Court decision. Tareq Salahi, owner of Oasis, believes that, ultimately, the ruling will significantly boost retail and wholesale options for American wineries.