The story was originally published by the Philadelphia Inquirer on December 17, 2004.
Court case on direct sales invigorates wine-lovers
Wine case is unlikely to affect the State Store system in Pa.
Author: Larry Fish
Local wine aficionados love to grouse, often with good reason, about how state regulations can sometimes stand between them and that coveted vintage.
But they are divided over whether a favorable decision in a case pending before the U.S. Supreme Court would do much to make more varieties available, or cheaper, in Pennsylvania and New Jersey. The court is being asked to decide whether states can limit direct, winery-to-wine-lover sales.
Keith Wallace, president of the Wine School in Philadelphia, had 53 phone messages the day after the Supreme Court heard arguments, and knows that oenophiles are watching the case.
Wallace spends $30,000 a year on wine. He said that recent innovations by the Liquor Control Board mean that “you have an enormous selection available.
“The problem is that the price point is often 10 to 30 percent higher than anywhere else,” he said.
The best-case scenario, he said, would be a Supreme Court decision that dealt a mortal blow to the state-store system.
But the odds are that Pennsylvania’s unique system, criticized for decades but politically resilient, will survive relatively unchanged.
Laywer Mark F. Flaherty of Pittsburgh, whose nationwide practice includes liquor-control issues, said Pennsylvania wine drinkers could wind up with access to some more vintages. But the impact is likely to be limited to serious wine buyers, not the occasional state-store patron.
The case before the Supreme Court concerns wine sales in New York and in Michigan. No decision is expected for months. There are thousands of U.S. wineries, many producing small amounts aimed at a small number of consumers. These small wineries cannot or will not get a local wholesaler to handle their bottles to get it onto local shelves.
That is why many wineries – including the 99 members of the Pennsylvania Wine Association – want the right to sell directly to consumers. Their customers could go to a Web site or call a toll-free number, order the wine, and wait for the delivery.
The U.S. Constitution’s interstate commerce clause says that states cannot discriminate against businesses in other states.
But the Constitution’s 21st Amendment, which repealed Prohibition, gave states the right to regulate how alcohol is brought in. The Supreme Court will have to decide which part of the Constitution trumps the other.
For New Jersey wine drinkers, the decision could have no impact at all. About six months ago, state law was changed and now no direct delivery is allowed, said David Bregenzer, counsel to the director of the Department of Alcoholic Beverage Control.
If New Jerseyans go to the wineries themselves, they can make a purchase, Bregenzer said, but otherwise local wines are treated no differently from out-of-state wines.
Pennsylvania does allow in-state wineries to deliver directly. All other sales have to be through the state store system. Under Liquor Control Board chairman Jonathan Newman, the state stores have dramatically widened the availability of wine, at least in theory.
Newman said that 4,300 wines are in stock in at least some of the state stores. A total of 11,000 labels, he said, can be ordered through any state store.
The primary difference between special orders and direct delivery is that the consumer has to go to the state store to pick up the order. The customer may also pay the state’s usual 30 percent retail mark-up on top of the winery’s price, already set at retail.
On the surface, it would seem that Pennsylvania’s special-order, or permit, system, goes a long way to making out-of-state wines available here. Often the price is higher than elsewhere, but sometimes it can result in real bargains, too.
But Mark E. Squires, a Philadelphia lawyer and wine educator with a widely-read Internet bulletin board, calls the state system a “fig leaf” that seems to make all wines available, but is actually ineffective.
“If you talk to a lot of consumers, they will tell you that the Pennsylvania permits are a joke,” Squires said. “Nobody is going to use them,” because they are too time-consuming and expensive.
Stuart M. Niemtzow, a Haverford lawyer with a serious Burgundy collection, takes heart in the fact that Supreme Court Justice Sandra Day O’Connor is known to share his passion. But Niemtzow, who actively tried to get rid of Pennsylvania’s peculiar institution in the 1980s as head of Pennsylvanians Resolved to End the State Store System, said he isn’t getting his hopes too high.
In the end, he said, what is at stake in the Supreme Court case is simply whether out-of-state wineries have to be treated the same as locals. “It’s not going to be as far-reaching a decision as people want it to be,” he said. “It won’t fundamentally change the state-store system as we know it.”