REthink Wine Blog

The recent passage of HB429 by the Illinois legislature and its likely signing by the governor was the much anticipated culmination of a year of change in many states as the regulatory environment for shipping wine across state borders continues its upheaval in the wake of the 2005 Granholm decision.  Illinois is an interesting new development in the transition from reciprocity to permit status for direct to consumer wine shipments. 

That reciprocity was dropped is no surprise.  As more and more states drop reciprocity (Missouri, Oregon, West Virginia), there are fewer and fewer states to have reciprocity with—it takes two to tango.  The provision allowing out-of-state wineries to self-distribute direct to retailers is not new, as more and more states are recognizing this as an issue and addressing it through the legislative/regulatory process.  Just look at Arizona, Vermont, Washington and even Massachusetts.  That Illinois has incorporated productions caps into the statute for direct distribution by wineries producing less than 25,000 gallons is no great surprise as well.  Many states have attempted to use production caps to protect domestic wineries from the larger, predominantly California, out-of-state wineries.  This also helps wholesalers by maintaining the requirement that big wineries go through the 3-tier system.  These production caps are of questionable constitutionality and legal experts will differ over the ultimate result as they are litigated in the courts.  But they are not unique. 

No, what makes the Illinois statute interesting is the way the state deliniates between in-state retailers and out-of-state retailers.  One of the results of Granholm as evidenced by the Costco case in Washington state, is the notion that, while limited to wineries, the Granholm rationale is applicable to retailers as well.  Trade groups and free marketers argue that if the Commerce Clause prevents states from discriminating between in-state and out-of-state wineries, they should equally be prevented from discriminating between in-state retailers and out-of-state retailers as well.  The Illinois statute seems to be setting up a test of this legal theory by specifically allowing in-state retailers to ship direct to Illinois consumers while expressly prohibiting out-of-state retailers from doing the same.  This makes Illinois a battlefield state, as surely retailer trade groups will not let such a clear attempt to keep them out stand without a legal challenge.  What does this mean for the winery looking to take advantage of the new statute’s increase of the permissable amount of wine to be shipped to an Illinois consumer to 12 cases annually; or the right to self-distribute to the state’s retailers up to 5,000 gallons a year?  Most likely not much in the short term.  A lawsuit challenging the statute will most likely result in a stay of it’s implimentation as the case works its way through the courts.  A stay means nothing changes until the court renders a decision, which of course can be appealed for months and years to come.  UNLESS!  The court can impose a partial stay, freezing only the portion of the law being challenged, and allowing the implimentation of the remaining portions of the law.  This is a realistic possibility and if it happens, expect to be shipping direct to consumers and retailers (with the appropriate permit, of course) when the law takes affect sometime in mid-2008.

This entry was posted by Matthew Mann on Monday, August 13th, 2007 at 10:26 am and is filed under Compliance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.