ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
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The Uncertain Legal Future of Wine Direct Shipping by the Retail Tier

by | Feb 17, 2017 | ,

The Supreme Court of the United States’ 2005 decision in Granholm v. Heald, which required states allowing their own wineries to direct-ship to consumers to also grant such privileges to out-of-state wineries, marked the beginning of a new era of wine direct-shipping. With the relaxation of wine shipping laws around the country following Granholm—nearly every state now allows wineries to ship wine directly to in-state consumers—the wine direct-shipping landscape has changed greatly over the past decade. Indeed, wine shipments in 2016 saw double-digit growth in both volume and sales.

At the same time, growth in recent years in the online shopping industry has led to new innovations in the wine retail space: the existence of a multitude of internet wine retailers, wine-of-the-month clubs and mobile wine delivery apps offers consumers greater access to wine. Many states—and courts—though, are now grappling with the legalities surrounding direct shipping of wine by retailers, as well as the role of unlicensed third parties in such transactions. Some states prohibit retailers from directly shipping wine to consumers altogether, while many others give in-state retailers the right to ship wine directly to consumers while withholding the privilege from out-of-state retailers.

Most recently, in January 2017 Michigan enacted legislation allowing in-state retailers to ship wine to in-state consumers, but prohibiting out-of-state retailers from making such shipments. The new legislation, which amends Michigan’s existing statute addressing wine shipments, authorizes a retailer located in Michigan to obtain a “specially designated merchant license” in order to ship wine to in-state consumers. The specially designated merchant license is only available to in-state retailers, so retailers located outside Michigan remain prohibited from directly shipping wine to consumers in the state.

Unsurprisingly, given the requirements of Granholm (which, incidentally, concerned in part a Michigan law), the new legislation retains the right of both in-state and out-of-state wineries to ship wine directly to Michigan consumers upon obtaining a direct shipper license. In fact, the new statute even reduces the burden on wineries shipping to consumers; under the new law wineries will no longer be required to include their direct shipper license number and the order number on each shipping container, or the brand registration approval number for each shipped wine on the accompanying invoice (although label registration requirements will still apply).

The legislation does not go into effect until March 29, 2017, but already litigation involving the new law has commenced. In late January 2017, an Indiana retailer and several Michigan consumers sued Michigan’s governor and attorney general and the head of the Michigan Liquor Control Commission in federal court, alleging the statute violates the US Constitution’s Commerce Clause and Privileges and Immunities Clause. Similar lawsuits are pending in Illinois and Missouri.

Some courts have already interpreted the constitutionality of similar laws that treat in-state and out-of-state wine retailers differently. While the US Courts of Appeals for the Second and Eighth Circuits have interpreted Granholm to apply only to differential treatment of producers and products (and not to wholesalers and retailers), the Fifth Circuit [...]

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President Trump Issues Executive Order Aimed at Reducing Regulation and Controlling Regulatory Costs

by | Feb 13, 2017 | , , , , , ,

On January 30, 2017, President Trump issued Executive Order No. 13771, entitled “Reducing Regulation and Controlling Regulatory Costs.” A link to Executive Oder 13771 appears here.  The Order provides:

  1. For Fiscal Year 2017 (which ends September 30, 2017):
    1. For each new “regulation” published for notice and comment “or otherwise promulgated,” the agency in question must “identify” two existing regulations to be repealed. Notably, the Order does not require the repeal to be concurrent with the publication or promulgation of the new regulation.
    2. For Fiscal Year 2017, each agency must ensure that the total incremental costs of all new and repealed regulations shall not exceed zero, unless otherwise required by law or as consistent with the advice of the Office of Management and Budget (OMB). The Order does not specify whether the costs in question represent costs to the agency, costs to the government or total societal costs. It also does not provide any guidance on how to calculate such costs.
    3. To the extent permitted by law, the costs of any new regulations shall be offset by the elimination of costs associated with at least two existing regulations. Once again, the Order provides no guidance on what constitute costs of a regulation or how to calculate such costs.
    4. The OMB is directed to provide agencies with guidance on how to implement the Order.
  2. Beginning with Fiscal Year 2018 (which begins October 1, 2017):
    1. The semi-annual Unified Regulatory Agenda for each agency must: (i) identify for each new regulation “that increases incremental cost,” two offsetting regulations; and (ii) provide an approximation of the total costs or savings for each new and repealed regulation.
    2. Each regulation approved by the OMB shall be included in the Unified Regulatory Agenda.
    3. Unless otherwise required by law, agencies may not issue new regulations that were not listed in the most recent Unified Regulatory Agenda.
    4. During the budgeting process, the OMB shall notify agencies of the total costs per agency that will be allowed in issuing and repealing new regulations for the upcoming fiscal year.
    5. The OMB shall provide agencies with guidance on implementing the Order’s requirements.

Executive Oder 13771 applies to each “executive department or agency,” but leaves a number of government regulatory functions outside of its scope. These include agencies involved in military, national security, and foreign affairs functions, as well as any government organization arising from the Legislative or Judicial branches. Nevertheless, the Order applies to a vast swath of the federal bureaucracy.

On its face, Executive Order 13771 could have a significant impact on the pace of federal rulemaking during the Trump Administration. The “two-for-one” requirement, in particular, appears to be a blunt instrument aimed at shrinking the Code of Federal Regulations. Moreover, the explicit requirement for cost estimates and “zero” total costs flowing from the rulemaking process plainly seeks to halt the growth and costs of the federal administrative state.

But the jury remains out on the practical impact of Executive Order 13771. Longstanding observers of the federal bureaucracy will, no [...]

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DC Council Passes Amendments to Alcohol Beverage Code

by | Jan 11, 2017 | ,

In early December 2016, the Council of the District of Columbia (the Council) unanimously passed the Omnibus Alcoholic Beverage Regulation Amendment Act of 2016 (the Act). The Act amends a number of provisions of DC’s alcohol beverage laws, several of which particularly affect DC manufacturers, brew pubs, wine pubs and distillery pubs.

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