July 11, 2014
Direct-to-Consumer Wine Shipping Law:
Discrimination and Aggregate Quantity Limit Removed
Today, Massachusetts Governor Deval Patrick signed the state's budget conference report that includes Direct-to-Consumer (DTC) wine shipping language, opening the door to DTC shipping in the state next year. The move brings to a close years of effort by Wine Institute and Free the Grapes to reconcile the state's DTC shipping statutes with court rulings on FWC v. Jenkins.
The FWC v. Jenkins case contended that the DTC shipping statutes in Massachusetts had capacity cap provisions that discriminated against "larger wineries." The statutes only allowed wineries producing 30,000 gallons of wine or less to obtain a permit to sell wines in Massachusetts in three ways: by shipping directly to consumers, through wholesaler distribution, and through retail distribution. "Larger wineries" had to choose between using wholesaler distribution or obtaining a "large winery" permit to direct ship to Massachusetts consumers—they could not use both methods. They also could not sell wines directly to retailers. All of Massachusetts wineries are "small" and the law effectively prevented shipments of 98 percent of the wine produced out of state.
In the FWC v. Jenkins case, these statutes were declared unconstitutional by the U.S. District Court in 2008 and by the U.S 1st Circuit Court of Appeals in 2010 because they violated the Commerce Clause of the U.S. Constitution.
In addition, the newly signed law removes the unworkable 'consumer aggregate' quantity limit that had been preventing even smaller wineries from making shipments. Previously, each household could be shipped a quantity limit of 26 cases annually from all sources, which prevented wineries from shipping because they could not confirm a consumer’s aggregate quantity limit. The new regulations have a 'per winery – per consumer' quantity limit of 12 cases annually with which the wineries can easily track and comply.
Wine Institute's long-running support of the effort included on-the-ground legislative advocacy by Northeastern Counsel Carol Martel and local lobbyist Bob Rodophele under the leadership of Wine Institute's Vice President of State Relations Steve Gross. Wine Institute also provided financial resources and filed an amicus brief because of the important precedents being set dealing with discriminatory capacity caps and exclusions for wineries using wholesalers. Jeremy Benson and the team at FreeTheGrapes brought essential consumer and media engagement to the issue in Massachusetts, the nation's seventh largest market for wine. The success was also aided by the personal engagement of Drew Bledsoe, former New England Patriots quarterback and now owner of Doubleback winery in Washington state, who urged Massachusetts lawmakers to end the ban on direct shipments. State Representative John Scibak was instrumental in shepherding the DTC issue through the budget process.
Under the new provisions of the bill, a winery holding a federal basic permit may obtain a DTC shipping permit for an initial fee of $300, with subsequent renewals costing $150 annually. DTC licensees may ship up to 12 cases of wine annually to each adult resident of Massachusetts. Annual reporting is required, as is payment of all applicable taxes. The new statute becomes effective on January 1, 2015, bringing the number of U.S. states that allow some form of direct-to-consumer shipping to 42 plus the District of Columbia. Wine Institute will continue to keep members informed on developments.
Wine Institute President and CEO
To initiate and advocate public policy that enhances the ability to responsibly produce, promote and enjoy wine.