Florida the Latest Battleground for Interstate Shipping

Source: https://www.wine-searcher.com/, By Liza B. Zimmerman
Tuesday, 27-Nov-2018

Midwestern attorney Robert Epstein is on a mission to open up as many states as possible to interstate shipping.

“We have pending cases in Missouri, Illinois and Michigan, which is now on appeal,” one of the Indianapolis-based founders of Epstein, Cohen, Seif & Flora shares. He has next set his sights on Florida, where he has requested a declaratory statement from the state’s Division of Alcoholic Beverages and Tobacco (ABT), requesting that the state permit out-of-state retailers to ship wine into Florida.

Jim Arnold, the owner of Kahn’s Fine Wine & Spirits in Indianapolis, is the plaintiff for the case and there is no defendant or lawsuit in this case. In response to Epstein’s declaration in Florida a foursome of wholesale and retail organizations in the state have filed an appeal against Epstein in order to have the ABT further examine the case.

“The request for a declaration in Florida was also prompted by an overall effort to allow remote shipping by retailers,” says Epstein. If it goes through, “Florida consumers would have access to any specialty retailer and receive wine by common carrier. I understand there is an effort to get the carriers to do so as we speak. The case is on appeal and is not set for trial. I have no idea when it will be heard.”

“Ever since Granholm, retailers are looking to get the same rights,” according to the Napa-based Jon Moramarco, a partner in number-crunching firm of Gomberg & Fredrikson, referring to the historic 2005 Supreme Court case that legally permitted wineries to ship into most states.

Epstein adds that part of the overall legal plan with the Florida case is to continue “to open up various other states for [interstate] shipping.” Since the Michigan case was ruled in Epstein’s favor he intends to make legal moves into a handful of other states, which he declined to name.

The Tallahassee-based (ABT) initially said yes to Epstein’s declaration. However the current state of the petition is up for debate as the four wholesale organizations have appealed. Epstein says that a decision will need to be made in nine months to a year.

The long-term picture

Epstein’s plan – if successful – is likely to broaden the availability in both Florida, and other markets, to older, unusual wines and those found through the auction market. Lesser-expensive, commercial wines are not likely to be a big factor in future Florida purchases, unlike the less-expensive, over-the-state line purchases that have influenced the Chicago and Maine markets, where taxes are much lower in both neighboring Indiana and New Hampshire.

If this petition passes in Florida, “it is going to be an example that Florida can permit activity that is friendly to its consumers”, says lawyer John Hinman. He also suggests that in moving forward the state may also want to implement a permit system that will allow its authorities to tax the incoming wines in order to be able to profit from their sale.

Interstate shipping has long been an area of contention but consumers are increasingly beginning to expect more and better choice.© Wally’s Wine | Interstate shipping has long been an area of contention but consumers are increasingly beginning to expect more and better choice.

Market snapshot

The move to open up the state for other retailers to ship into Florida is not likely to affect existing independent and chain retailers at all, said Hinman. Large chains like Total Wine & More have their “customer base that is looking for bargains and wines for dinner”.

Local retailers also don’t seem to be terribly concerned about the market opening to out-of-state shipping. “I do not think this affects our customers. We are able to satisfy their needs with our selection which consists of more allocated and small producers,” says Veronica Litton, the general manager and partner of the one-location Virginia Philip Wine, Spirits & Academy in Palm Beach Florida.

However she would prefer to keep the market as is and adds that as the “Florida market is a very important market for fine wines ranking 2nd, 3rd or 4th every year. . We should not need to compete with other retailers in other parts of the US.”

The auction market has remained vibrant regardless of the laws and declarations on the books, says Maureen Downey, the founder of the San Francisco-based Chai Consulting, who used to work for Zachy’s New York auction business. “We have plenty of ways around these laws and can get the wine to clients no matter where they are.” She adds that “FedEx and UPS are the only bodies enforcing these shipping laws”.

Wholesaler response

Since no specific defendant was cited in the case, and it is not a lawsuit, it was relatively easy for Epstein to file the declaratory statement. In reaction to it a range of wholesale groups have stepped up to the fray to oppose interstate shipping. They include three wholesale groups and one retailer including the Florida Beer Wholesalers Association, the Wine & Spirits Distributors of Florida, the Beer Industry of Florida and the Florida Independent Spirits Association, according to Mitch Rubin, the executive director of the Tallahassee-based Beer Wholesalers Association.

Rubin notes that the groups have appealed the declaration statement as an “improper statement”. He shares the group’s belief that Epstein’s request does not meet the state’s requirements as he only submitted a one-paragraph letter. Rubin adds that “the whole thing is a procedural debacle”.

Wholesale pushback to change is in their nature, said Hinman. He adds Florida wholesaler earnings and market access would not be damaged in the least by allowing interstate shipping in Florida. “The market is so vibrant and has so many products, that trying to control it is difficult.” However, he notes, that this is same thing that Tennessee retailers are striving to do to protect themselves from Total Wine encroaching on their retail territory in Tennessee.

If the declaratory statement passes, Hinman adds: “We will see more esoteric imports and the development of more craft markets, as well as a bigger auction market.” He goes to note that the American craft spirit market is really the one that stands to benefit most, noting recent laws that have been passed in Kentucky to open up the market to ship Bourbons and other spirits out of the state. “Perhaps the real fear of wholesalers is that the spirits market will break open.”

Downey concludes: “Sadly – these laws are about protecting the overreaching control of big distributors. The only people that will get busted for violating them are those that distributors want to target, which is more likely to be the producers they represent than a secondary market seller.”

The outcome in Florida is strongly tied to how the Supreme Court rules on Tennessee vs Byrd case, which is likely to be heard in January. “Byrd will determine the effect on other states,” concurs Sean O’Leary, the Chicago-based Irish Liquor Lawyer and president of the O’Leary Legal and Policy Group about the Florida situation. The rest of the retail, wholesale and winery community will just have to wait with bated breath for the outcome.

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