The new Wisconsin law signed by the governor results in a major overhaul of its liquor system. The new law creates a new division inside the Wisconsin Department of Revenue dedicated to the liquor industry. The law creates a new statute that defines the power and duties of the division, as it relates to inspections and police powers.
There are some major positives in the new law, which includes full retail privileges for craft producers, and an increase in what brewpubs can produce and distribute.
However, there are also some major negative aspects of the bill, which include punishing small producers, imposing incomprehensible burdens on fulfillment houses and common carriers, and permitting Wisconsin public officials to reach outside the bounds of the state to punish licensees. Some of the new legal provisions are constitutionally suspect, but somehow this does not seem to matter.
A brew pub can manufacture 20,000 barrels on its premises up from 10,000, and self-distribute 2,000 barrels up from 1,000.
Greater privileges for producers
The new law grants “full-service retail sales” for a brewery, winery, manufacturer, or rectifier. The new division needs to create a form for use by the brewer, winery, manufacturer, or rectifier to request approval for a full−service retail outlet. However, there are restrictions on these benefits, for a distiller or rectifier to enjoy full retail privileges it must have produced 1,500 liters of intoxicating liquor in any one of the preceding three calendar years.
Depending on production levels, the manufacturer can obtain full-service retail sales for additional locations. 1,500-4,999 liters affords one retail outlet, 5,000-34,999 affords two full-service retail outlets and 35,000 plus produced affords three full-service retail outlets.
Harm to small producers
Although liter quantities are not the same, the same principle applies to wine and beer producers. A winery producing below 1,000 gallons in any one of the preceding three calendar years, will be denied full-service retail outlet privileges.
The law acts to restrict and punish small producers. Similar to a WSWA letter that wants to eliminate wineries producing below 1,000 gallons, the Wisconsin law acts to disadvantage small wineries. The WSWA letter was submitted to the Uniform Law Commission and it seems WSWA’s strategy to impose harm to small wineries made it into law.
Any subsequent changes to a license shall be made in 30 days, which is a change from the 10-day period the former law allowed.
Extraterritoriality enforcement of shippers
Problematically, the new law permits a division employee to bring a court action against a licensee that has shipped alcohol beverages to another state, if that division employee believes the licensee violated that other state’s laws. A judge in Wisconsin would render a decision according to the other state’s law and not Wisconsin’s law. The new law somehow empowers Wisconsin judges to impose sanctions for violating the laws not of Wisconsin but of another state. The integrity of the law seems highly questionable.
Attacks on common carriers and fulfilment houses
The law created a new statute requiring a common carrier and a fulfillment house to obtain permits.
The common carrier is required to file reports and guarantee that it only ships into Wisconsin product of a Wisconsin licensee. If the common carrier fails to obtain a permit, it could be subject to a $10,000 fine.
If the common carrier ships product other than wine obtained from a direct wine shipper permittee or a fulfillment house permitee, it can be subject to a $2,000 fine. If it violates the law more than one month during a calendar year, the division shall revoke its permit. Yes, Wisconsin is making threats to take away UPS and FedEx’s privileges if they make two mistakes in a year, good luck with that!
A fulfillment house is required to obtain a permit and on its shipping label, provide its permit number and the permit number of the wine shipper. The fulfillment house must file monthly reports.
A fulfillment house shipping without a permit could be subject to a $10,000 fine and similar to the common carrier, can be subject to a $2,000 fine for shipping for a winery without a permit. If it violates the law more than one month during a calendar year, the division shall revoke its permit.
Finally, failure to file a monthly report can subject the fulfillment house to a fine up to $10,000. Of course, the law does not address issues of constitutional jurisdiction and whether Wisconsin can constitutionally mandate a fulfillment house become licensed.
Wisconsin’s overhaul made sure that enforcement ruled superior over all other considerations, including promoting markets and fostering competition. The bill does not provide increased consumer access to wine and other consumer products. Instead, it utilizes constitutionally suspect provisions to enhance enforcement, where we now live in a world where a judge can take away one’s privileges for violating the laws of a state. The judge can render a decision on the laws of a state, where the judge is not qualified to be a member of the bar.
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