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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.
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.
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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
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-ofstate 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
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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 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