Tuesday, February 5, 2008

News release--sure

Today we have a press release lesson, as well as a lesson in the law.


The sad news is that stringent alcohol control laws in Washington State have been upheld by its 9th Circuit Court. Costco was the challenger.

Now, I’m no fan of big chain stores—I don’t shop in them. Never been in a Costco or a Wal-Mart. But I wanted Costco to win this case for one reason: it would have been a potential step in the right direction against the pitfalls handed to us by the 21st Amendment to the U.S. Constitution, the one that gave states the right to take money from alcohol lobbyists—wait a minute, that’s not it; the amendment gave states the right to suppress alcohol sales—wait a minute, that’s not it; what did it give the states? Ah yes, the right to control alcohol commerce.

Costco’s case was not built on the 21st Amendment. Instead, it claimed that Washington’s laws violate the Sherman Antitrust Act of 1890, which prohibits the state from establishing unfair hurdles to business. Costco specifically claimed that alcohol controls in Washington limits competition by mandating a minimum mark up on wholesale prices, preventing volume discounting, preventing retailers from buying wine on credit, preventing retailers from storing wine in a warehouse, and forcing posted wholesale prices to remain static for a minimum of 30 days.

The court told Costco that it had a case only against the 30-day price-posting rule.

Sometimes you may think you are reading a reported news story but what you are really reading is a press release or, as the spinmasters like to call it, a news release. Usually, the news release issued by an interested party, is to news what standing in the ring and chest pounding is to wrestling. So let’s look at The Wine and Sprits Wholesalers of America (WSWA) news release about the Costco issue.

WSWA loved the court’s ruling, and why not? In alcohol distribution, you open a business and the state guarantees your markup! Who wouldn’t fight to keep that bennie?

Here’s the first paragraph of WSWA’s release:

“The Wine & Spirits Wholesalers of America (WSWA) on Tuesday hailed a federal appeals court decision which delivered a stunning victory to states in their bid to maintain prudent regulatory control over alcohol distribution.”

Notice the words “stunning victory” and “prudent.” That’s to have us believe that the Yahoos at WSWA are protectors of our liberty.

Here’s a great sentence in the release.

“Costco argued on the basis of its own bottom line in this case,” WSWA President and CEO Craig Wolf said.”

That’s to make you think that WSWA has no bottom line interest by donating to state legislators across the country.

Here’s a sentence that I consider a slip on the part of WSWA.

“…the 9th Circuit Court of Appeals upheld eight out of nine provisions in Washington’s regulatory scheme designed to discourage abuse of alcohol...”

So, Washington State purposely made its alcohol laws to impede citizens from gaining access to a bottle of wine. How telling that is, and why would WSWA members want to impede access to the products they sell? Strange logic.

This next part made me laugh aloud.

“Among the key Washington alcohol regulations affirmed by the court: the requirement of a minimum markup, designed to ensure that products are not sold too cheaply or below cost…”

If read carefully, this seems to imply the ridiculous and insulting notion that the state is looking out for our interest by making sure that we are not charged too little for our wine. What’s worse, however, is that the state is looking out for WSWA, guaranteeing a minimum mark up for its members.

The chest pounding gets louder.

“…the appellate court invoked the language of the landmark 2005 Granholm v. Heald Supreme Court decision, which describes as “unquestionably legitimate” the three-tier system which ensures the safe flow of beverage alcohol from supplier to wholesaler to retailer.”

Ah yes, the famous Granholm decision that so many in the wine business (but not I) thought was going to revolutionize the United States wine distribution system.

And now, WSWA’s Mr. Wolf becomes the Constitutional authority.

“Said Wolf: “This opinion gives major credence to a key point we have argued all along, which is that the authority the Twenty-first Amendment grants to the people—not judges—must be given deference and respect.”

First, WSWA is quoting in its news release a WSWA representative as if it were an interview—get it?

Second, I seriously doubt the 21st Amendment gave any rights to the people, but it certainly gave some moral and financial leeway to some people.

In a story, reported by a real news organization, this is a quote that truly rings my chimes.

"They got a dose of old-time religion from the judge," said Corbin Houchins, a Seattle attorney who specializes in alcoholic-beverage law.”

The 9th Circuit Court actually said that by separating Washington’s regulations they found that individually only one out of the group was anti-competitive, the one about forcing prices to hold for 30 days. To that issue, Mr. Houshins pointed out that:

“The judge never said in his 40-plus-page opinion, however, that the other laws are particularly good laws since they do in fact result in higher prices for consumers, just that they don’t facilitate collusion when viewed separately.”

Costco pointed out exactly that the state's distribution laws, which are created to keep prices high, are put together as a package.

According to Costco’s legal counsel, John Sullivan, the state said during the trial that “We intended to have these anticompetitive laws that raise prices so everyone will drink less, and everyone who abuses alcohol will drink less as well. That is our game plan. The former chair of the LCB even said that you can't look at any component by itself, you have to look at the whole system."

Well, Mr. Sullivan, apparently the 9th Circuit Court feels that you don’t have to look at the whole thing, not if you don’t want to, and WSWA is ever so happy about that.

Sherman Act News

This entry’s wine:

It smelled like juniper berries to me; it was clean, crisp, and slightly grapefruity in the taste. How come there was no cat pee, no asparagus, none of the over-the-top stuff that Savignon Blanc can offer? Because this was no ordinary Sauvignon Blanc; this was Quincy.

Quincy is neighbor to that other marvelous place in the Loire for the SB grape, Sancerre. I have never gotten the outer reaches of SB from either of these two wine locales.

I like these wines with vegetables and so, I prepared a heavily vegetable dish to go with this one and it worked perfectly: potatoes and egg fritattta with fennel, onions, garlic, chopped broccoli rape, and Tabasco sauce.

Domaine Mardon 2006 Quincy

12.5% Alcohol by volume $16/bottle before volume discount

Imported by Michael Skurnik Wines, NY

Copyright, Thomas Pellechia
January 2008. All rights reserved.


  1. Thomas,

    Your linguistic analysis here sheds considerable light. Bravo !

  2. The current fight for who controls what in the State of Washington is only part of the problem, the other nasty element is one that no one is addressing. The Liquor Control Board employs and promotes the basically unrestricted use of thugs as liquor agents. It has gotten so ridiculous trying to figure out all the potentials for fines that I have placed a jar on my checkout counter for them to deposit fines and warnings. As it stands with relevance to our little Mom and Pop wine shop:

    If a child walks in with her mother and touches the pretty label, that can be construed as possession by a minor.

    Agents are not required to identify themselves before entering... and never do.

    I am not permitted to taste a wine prior to purchase from a vendor while running the cash register... we have no employees.

    We cannot sip wine with the doors locked, the open sign off, and after posted open hours within the confines of our shop.We cannot deny access to agents if they suspect we are doing that.

    I cannot "give" a bottle of wine I purchased for my shelves to a good client to sample at home with his family to see if he would want more.

    The list goes on.

    The "Captain" of the region says we can fight any perceived wrong through the courts at our expense, but that the agent in the field gets to make the call as to what is a violation.

    Had we known the State was this fascist, we would not have opened here. Our lease is up in two years and we are seriously thinking the process is not worth it.

  3. Well-done, Thomas. Between you and Tom Wark, perhaps a few people will see the light and grant American wine consumers the right to buy the wines they like when and where they want to buy them.

  4. Yes, well, it's quite clear that Washington's legislators created the rules to restrict access. But it's like that all over the country.

    The idea in Congress with the 21st Amendment was to give states local control so as to extend the Prohibition that the country did not want. It was a case of the moral minority gaining Constitutional preference. States created laws specifically to hinder access.

    Of course, the states also learned during Prohibition that people will pay for alcohol. So in beautiful hypocritical fashion, they slapped all kinds of fees and fines so that they reap the reward while they appease the Prohibitionists. Al Capone could not have asked for a better deal.

  5. After reading your outstanding explanation of the whole legislative fruits, I found soon after I needed a drink. Will this problem ever get resolved ?

  6. Resolved?

    Not until two things happen: the 21st Amendment is found unconstitutional by the Supremes; and American political culture drops the moral hypocrisy.

    Wanna place any bets??? ;)

  7. There's alot of money (literally billions USD) to be made by the state-controlled liquor monopolies. Who *wouldn't* do everything in their power to manipulate the system when you're talking about that kind of cash?

    I've been blogging about this topic lately, with a focus on my home state of PA -
    http://1winedude.blogspot.com/search/label/wine%20shipping .

    I don't expect the situation to change anytime soon. However, I regularly get hits on these posts from the PA state government, so I know *somebody's* paying attention (or maybe this is just the way they select people to audit come tax time... whoops)...

  8. Joe,

    Just don't apply for a permit to sell wine...

    Incidentally, the SLA looks at my stuff, too. I wouldn't be surprised if there's a knock on the door from Homeland Secur...oh, hey, wait a minute, sorry, gotta go!

  9. The current wine wholesale system is corrupt and inefficient--with consumers, retailers, restaurants and producers all paying the price to keep an unnecessary wholesale structure intact.

    On average, wine wholesalers mark up their product more than 50% on their laid on costs. By comparison, food wholesalers generally take a mark up of less than 20%. Why? The food wholesalers are restrained by a competitive market. If they get too greedy, the producers and retailers will find a way to bypass them. Wine wholesalers are free from this competition and are thus free to take ridiculously high profit margins.