| 3/8/2006 3:00:00 PM | Email this article • Print this article | New legislation could put squeeze on wineries
Donovan Estridge
Courier Staff Writer
Recent legislation in Indianapolis has left state wineries with an uncertain future. A House bill killed by Senate Pro Tem Robert Garton, R-Columbus, has resurfaced in another bill.
A provision called the “poison pill provision” by local winemakers was added to Senate Bill 27 late last week. If passed, the provision will strengthen the state’s three-tier system of alcohol distribution.
The three-tier system was enacted following Prohibition to regulate the distribution of alcohol sales. The system mandates alcohol must pass through three hands: the brewer, wholesaler and retailer before the consumer can make a purchase. Small wineries in Indiana have been permitted to operate outside the system. Freedom from the three-tier system may end if the provision passes.
The “poison pill provision” says that if an exception to the three-tier system is deemed unconstitutional or invalid, then the state will limit rather than expand exceptions to the method. Simply put, if the state determines a winery or brewery is not following the three-tier system, then it will enhance the three-tier-system, and make regulations barring wineries from selling their products without the use of a wholesaler. The provision also could apply to wine tasting rooms in wineries.
If the provision passes, small wineries would be affected because wine tasting rooms would not fall within the parameters of the three-tier system.
According to Linda Jackson, a publicist for Indiana wineries, the “poison pill provision” would kill small Indiana wineries.
The addition of the “poison pill provision” is what Steve Thomas, owner of Thomas Family Winery calls “strip and insert” legislation. Lawmakers added the provision to SB 27 in hopes of getting regulatory legislation through the Statehouse.
“Wholesalers are fighting for their lives,” Thomas said. “They see all the court cases working against them and are making small wineries collateral damage.”
The apparent attack on small wineries stems from a recent U.S. Supreme Court decision on direct shipping. Prior to the court’s decision, Indiana had banned out-of-state wineries from directly shipping to consumers in Indiana. At the same time, Indiana wineries were allowed to ship directly to consumers. The court’s ruling said that this practice was unconstitutional and forced the state to allow out-of-state wine shipping. In the months following the court’s decision, wholesalers across the state have attempted to regulate wine shipping.
Wholesalers say the bill is to protect their economic interests.
“The next step is Gallo selling to Wal-Mart without wholesalers,” Jim Purucker, executive director of the Wine and Sprits Wholesalers of Indiana, said. “It won’t be long until Anheuser-Busch challenges us in court and beer is next.”
Purucker uses the term “alcohol anarchy” for the potential fallout from wineries directly shipping to consumers and retailers.
Wholesalers and local vintners went to the Indiana Statehouse in February to plead their case to lawmakers. During a Senate Commerce and Transportation Committee hearing, an 11th- hour deal was struck between wholesalers and winery owners that allowed wineries to continue their business without radical changes.
The next day, Garton killed the bill because of pending federal court case. He said that he didn’t want government to interfere with court cases. To counter the litigation, wholesalers and lawmakers have scrambled to reintroduce winery shipping legislation. The flurry is in the wake of a court case pending in federal court challenging the three-tier system.
“There are two ways the court can come down,” Purucker said. “They can create alcohol anarchy and become the wild, wild west because there is no regulation and the same thing can go for all 3,500 wineries across the nation. That goes against our interest. Or the courts can regulate wineries across the state.”
A vote on SB 27 is expected as early as Tuesday, March 14.
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