The Supreme Court back in 2005 settled the winery shipping issue in Granholm, when it held that a law permitting in-state wineries to ship to in-state consumers but not affording this same privilege to out-of-state wineries violated the Commerce Clause’s Non-Discrimination Principle.
Although the issue seems settled, wine wholesalers never gave up the fight to restrict direct-to-consumer (DTC) access.
In Wisconsin the liquor wholesalers worked their legislative magic to create a strong potential for a back door ban on winery shipping. The new law as written makes it nearly impossible for common carriers to ship wine on behalf of out-of-state wineries.
Under the law the common carrier is required to maintain a common carrier shipping permit with Wisconsin. The law mandates that if a common carrier ships on behalf of an entity without a license, the first offense is a $2,000 fine against its permit, the second offense subjects the common carrier’s permit to revocation. The law reads:
“Any common carrier that ships alcohol beverages other than wine obtained from a direct wine shipper permittee under s. 125.535 or from a fulfillment house permittee under s. 125.23 is subject to a forfeiture of not more than $2,000. The division shall revoke the permit of any common carrier that violates this prohibition in more than one month during a calendar year.” 125.22(3)(b).
What does this mean in reality? There are probably over a 10s of thousands of wine shipments into Wisconsin each year. The only common carriers traditionally serving DTC shipping markets are FedEx and UPS. The law makes FedEx and UPS the police with no margin for error.
Suppose both are handling thousands of shipments and are required to ensure that the shipper is licensed. And suppose out of these thousands of shipments, FedEx or UPS did not obtain a shipping permit for two wineries. Or suppose the common carrier obtained permits from two wineries and subsequently those wineries did not timely renew their permits and the permits lapsed for a short period of time, technically they are not a valid wine shipper permittee under the law.
If these two offenses happen in separate months, the common carrier is liable for sanction under the law and faces revocation. I don’t think the irony should be lost on anyone that the government, a traditionally inefficient model for running anything, starts imposing such an exacting standard on private industry.
But I digress, the most important fact is two small mistakes would prohibit FedEx or UPS from servicing the market. That is what the letter of the statute reads, it is not my opinion.
Since there is large likelihood that out of 10s of thousands of packages two errors maybe made, this law was written with the effect of banning the two most important common carriers from the market.
Now what I don’t know is what happens to UPS and FedEx if their liquor permits get revoked, how does it impact generally their ability to do business in the state? Could this law have a reach beyond liquor? But what we do know is if FedEx and UPS common carrier permits for shipping wine are revoked, a winery DTC market does not exists in Wisconsin.
Wisconsin overhauled their liquor system but it didn’t move forward and modernize, it achieved the exact opposite. Sometimes a well-oiled lobbying machine can sell legislators on a policy that makes no sense. Wineries and Wisconsin consumers wanting greater access to a diverse array of wine took it on the chin.
Wisconsin’s political class stepped into a time machine to a time where DTC shipping did not exist and the Wisconsin market was shut off from the rest of the country, the residents of Wisconsin deserve better!