BILL ANALYSIS �
AJR 11
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Date of Hearing: June 22, 2011
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
AJR 11 (Chesbro) - As Introduced: May 16, 2011
SUBJECT : California wines: sales.
SUMMARY : Urges the United States Congress to defeat House
Resolution (H.R.) 1161 in order to protect and preserve the
ability of California wineries, and all wineries in the United
States, 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 H.R. 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 H.R. 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 production, sales, and tax revenue.
5) States that H.R. 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 H.R. 1161.
EXISTING LAW :
1) Establishes the Department of Alcoholic Beverage Control
(ABC) and grants it exclusive authority to administer the
provisions of the Act in accordance with laws enacted by the
Legislature.
AJR 11
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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.
FISCAL EFFECT : Unknown.
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.
H.R. 1161, the Community Alcohol Regulatory Effectiveness Act of
2011, was introduced into the House of Representatives on March
17, 2011. H.R. 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
AJR 11
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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 impede
the direct shipment of wine to out-of-state consumers.
In Support : According to the Family Winemakers of California
(FWC), "AJR 11 is an important response to H.R. 1161, which has
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.
Prior/Related Legislation : SJR 34 (Padilla), Resolution Chapter
71, Statutes of 2010, urges the United States Congress to defeat
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House Resolution (HR) 5034 in order to protect and preserve the
ability of California wineries, and all wineries in the United
States, 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
United States 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.
REGISTERED SUPPORT / OPPOSITION :
Support
Family Winemakers of California
Wine Institute
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531