BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AJR 11|
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THIRD READING
Bill No: AJR 11
Author: Chesbro (D), et al.
Amended: As introduced
Vote: 21
ASSEMBLY FLOOR : 78-0, 6/28/11 (Consent) - See last page
for vote
SUBJECT : California wines: sales
SOURCE : California Association of Winegrape Growers
Family Winemakers of California
Wine Institute
DIGEST : This resolution urges the United States Congress
to defeat House Resolution 1161 in order to protect and
preserve the ability of California wineries, and all
wineries in the U.S., to ship wine directly to consumers
without discrimination or unnecessary limitation between
in-state and out-of-state wine producers.
ANALYSIS :
Existing law:
1. Establishes the Department of Alcoholic Beverage Control
and grants it exclusive authority to administer the
provisions of the Alcoholic Beverage Control Act in
accordance with laws enacted by the Legislature.
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2. Provides that a licensed winegrower, who obtains a wine
direct shipper permit, as described, may sell and ship
wine directly to a California resident, for personal
use, under specific conditions. Knowing violation of
these provisions is a misdemeanor.
3. Existing law, known as the "tied-house" law, separates
the alcoholic beverage industry into three component
parts of manufacturer, wholesaler, and retailer. The
original policy rationale for this body of law was to
prohibit the vertical integration of the alcohol
industry and to protect the public from predatory
marketing practices. Generally, other than exemptions
granted by the Legislature, the holder of one type of
license is not permitted to do business as another type
of licensee within the "three-tier" system.
4. Existing federal law allows direct interstate shipment
of wine to adult consumers in conformance with any state
requirements. Granholm v. Heald (2005) 544 U.S. 460
reaffirmed that states cannot discriminate in setting
alcohol policy that affects interstate commerce.
This resolution urges the U.S. Congress to defeat House
Resolution (HR) 1161 in order to protect and preserve the
ability of California wineries, and all wineries in the
U.S., to ship wine directly to consumers without
discrimination or unnecessary limitation between in-state
and out-of-state wine producers. Specifically, this
resolution:
1. Urges Congress to defeat HR 1161.
2. Provides findings highlighting the importance of the
wine industry to California.
3. Provides findings about current law already ensuring
appropriate permitting and regulation of wine
distribution.
4. Provides that HR 1161 would reverse decades of
long-established jurisprudence that has balanced
interstate commerce concerns with state regulatory
authority and fostered a dramatic growth in wine
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production, sales, and tax revenue.
5. States that HR 1161 would severely limit consumer choice
in California wine throughout the nation; and would
imperil market access for California wineries that
cannot secure effective wholesale distribution; and
would stunt competition among the nation's wine
producers as markets would be artificially constrained
and access limited.
6. Makes other related findings and declarations urging the
defeat of HR 1161.
Comments
Currently, 37 states and the District of Columbia allow
direct shipping of wine from winegrowers to consumers. To
reach consumers in other states, many California wineries
use direct marketing and shipping of their wines throughout
the country. In California and across the nation these
sales are appropriately regulated by laws that comply with
Granholm v. Heald . This 2005 landmark U.S. Supreme Court
case reaffirmed states' rights under the 21st Amendment to
the U.S. Constitution to regulate wine as long as they do
not discriminate between in-state producers and
out-of-state producers, and ruled that these rights do not
supersede other provisions of the Constitution.
HR 1161, the Community Alcohol Regulatory Effectiveness Act
of 2011, was introduced into the House of Representatives
on March 17, 2011. HR 1161 restricts legal challenges to
state laws governing the interstate shipment of wine,
severely limit consumer choice of California wine
throughout the nation and imperil market access for
California wineries that cannot secure wholesale
distribution.
Existing federal law allows direct interstate shipment of
wine to adult consumers in conformance with any state
requirements. Granholm v. Heald reaffirmed that states
cannot discriminate in setting alcohol policy that affects
interstate commerce.
According to the author's office, HR 1161 would likely
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impede the direct shipment of wine to out-of-state
consumers.
Prior/Related Legislation
SJR 34 (Padilla), Resolution Chapter 71, Statutes of 2010,
urges the U.S. Congress to defeat HR 5034 in order to
protect and preserve the ability of California wineries,
and all wineries in the U.S., to ship wine directly to
consumers without discrimination between in-state and
out-of-state wine producers.
SJR 30 (Chesbro), Resolution Chapter 79, Statutes of 2006,
encourages the Governors and Legislatures of each state in
the U.S. to enact legislation that provides for uniform
direct-to-consumer wine sales between the states that
minimizing the expense and complexity of shipping wine from
wineries directly to consumers.
SB 118 (Chesbro), Chapter 157, Statutes of 2005, modifies
California law to comply with the recent Supreme Court
decision which struck down Michigan and New York state laws
that restricted direct sales across state lines by wineries
to consumers.
AB 611 (Cortese), Chapter 394, Statutes of 1994, encourages
the adoption of reciprocal wine shipping privileges in
other states and to improve fairness and equity for small,
family vintners and winegrowers of California by
authorizing this formula for the direct shipment of wine to
an individual in this state.
FISCAL EFFECT : Fiscal Com.: No
SUPPORT : (Verified 7/5/11)
California Association of Winegrape Growers (co-source)
Family Winemakers of California (co-source)
Wine Institute (co-source)
ARGUMENTS IN SUPPORT : According to the Family Winemakers
of California (FWC):
"AJR 11 is an important response to H.R. 1161, which has
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been introduced in the wake of litigation to overturn
facially neutral, but discriminatory wine shipping laws
enacted by states after the Granholm v. Heald decision in
2005. Promoted by the National Beer Wholesalers
Association with support from the Wine and Spirits
Wholesalers of America, H.R. 1161 sets the stage for
another round of state legislative wars that could foster
economic protectionism by setting different rules for
out-of-state producers. It strengthens the wholesale
tier to the detriment of producers and, more importantly,
consumers in California and across the country.
"If enacted H.R. 1161 also slams the door shut on legal
challenges to discriminatory statutes by creating new
justifications for states to utilize and shifts the
burden of proof to the plaintiff. The bill drastically
alters the legal landscape of dormant Commerce Clause and
21st Amendment jurisprudence. FWC recently prevailed in
its challenge to a Massachusetts statute that arbitrarily
set a production cap to control access to the state's
wine market. H.R. 1161 would have made our challenge
unwinnable.
"California is the largest wine market in the country and
has promoted more consumer choice in wine. The state saw
the wisdom of opening its borders to any winery in the
United States with passage and enactment of SB 118
(Chesbro) in 2005. AJR 11 urges Congress to preserve the
increased consumer choice and wine commerce that has
developed since Granholm. Most wine producers in America
are small, work on tight margins, and do not want to see
new markets closed or made uncompetitive due to
discriminatory legislation."
ASSEMBLY FLOOR : 78-0, 6/28/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
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Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Brownley, Gorell
PQ:kc 7/5/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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