Home Industry News Releases New Lawsuit Challenges Protectionist California Wine Distribution Law

New Lawsuit Challenges Protectionist California Wine Distribution Law

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National Association of Wine Retailers Supports End to Archaic Wine Distribution Laws Across the U.S.

December 6th – (Sacramento, CALIF)—The National Association of Wine Retailers announced its support today for a lawsuit challenging a discriminatory and protectionist California restriction on out-of-state wineries selling directly to California retailers and restaurants. The archaic law is part of a protectionist system of alcohol regulation that limits retailer access to products, consumer access to the growing national marketplace for wine, and wineries’ access to retailers.

KEY CONSTITUTIONAL PRINCIPLES VIOLATED BY MANDATED USE OF WHOLESALER

Dwinell v McCullough, filed by a Washington State winery against the California ABC, challenges the constitutionality of California law that allows licensed wineries in the state to sell wine products directly to California retailers without the burden and expense of going through a wholesaler while requiring out-of-state wineries to use a California wholesaler. The discriminatory law violates the dormant commerce clause of the U.S. Constitution as decided in the seminal 2005 Supreme Court decision Granholm v Heald, which struck down New York and Michigan laws that similarly favored in-state wineries over out-of-state wineries. 

“State laws only serving protectionist and discriminatory purposes deserve to be struck down as a matter of law and marketplace fairness,” noted Tom Wark, executive director of NAWR. “The required use of a wholesaler by out-of-state wineries but not in-state wineries is a relic of the 1930’s post-Prohibition world, stifles economic development, hampers the ability of retailers to access worthy products from out of state, denies consumers access to legal products, and unjustifiably props up the financial and political interests of California middlemen wholesalers.”

Similar laws are now being challenged in other states:

RETAILERS BENEFIT FROM MORE INVENTORY PROCUREMENT OPTIONS

Removing restrictions on the source of lawful inventory purchases is critical to wine retailers. By being able to diversify their offerings beyond what is offered by either in-state wholesalers or local producers, retailers can more easily differentiate themselves and their offerings from competitors. This is critical in the increasingly competitive wine retail marketplace. By going directly to the producer to purchase wine inventory, retailers can often obtain products at lower prices, which can be passed on to the consumer. 

SMALL ARTISAN WINERIES CUT OUT OF MARKET WITH DISCRIMINATORY CA LAW

Additionally, wine-producing regions in places like Michigan, Texas, Idaho, Arizona, Missouri, Virginia, New York, and other states have matured significantly over the past twenty years. This has increased consumer interest in their wines. Yet, few of these products are offered by California wholesalers who tend to focus their attention on distributing large production brands to the detriment of those produced in emerging wine states. Allowing California retailers to purchase directly from these out-of-state producers will result in California consumers having better access to the broad variety of fine wines produced and sold throughout the United States.

NAWR urges the California Attorney General’s office, as well as attorneys general in states where similarly protectionist laws have been challenged, to settle the case and save their citizens hundreds of thousands of dollars in unnecessary litigation costs.

About NAWR

The National Association of Wine Retailers is the leading advocate for a twenty-first-century approach to alcohol regulation that doesn’t punish consumers based on where they live and for fostering a wine marketplace in which retailers can do business unencumbered by an archaic deference to an oligopoly of politically connected middlemen wholesalers. NAWR represents licensed brick-and-mortar retailers, online retailers, wine clubs, and auction houses across the country. For more information see www.nawr.org.

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