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Michigan shipping restrictions collapse

Published:  23 July, 2008

Michigan residents were last week granted full access to
wine from across America, when a federal court judge in Detroit lifted a 20-year ban on interstate, direct-to-consumer shipping.

The action followed a US Supreme Court decision in May striking down laws in both Michigan and New York that had permitted direct-to-consumer sales for wineries located within these states but denied the same market access to out-of-state producers.

In the wake of that ruling, Michigan legislators began debating compliance with the high court, either by dropping existing restrictions or through a total ban on direct sales - including those enjoyed by Michigan's own wineries since 1985. During the legal wrangling, Michigan's beer and wine distributors began intense lobbying for the latter option in order to protect their control over the sale of alcohol in the state. Campaign finance disclosure reports found that wholesalers gave nearly $50,000 in political contributions to Michigan's governor and other lawmakers between July and October.

However, Judge Bernard Friedman said during a court hearing on 1 November that the state had failed to resolve the matter during more than five months of deliberation and that impending action contrary to his ruling would have denied the victory won by Michigan plaintiffs before the nation's high court in May. Even so, the judge said that it wasn't the job of the court to legislate and that the state still has the ability to amend its shipping regulations.

Beyond Michigan, the Supreme Court decision this spring has sparked significant legislative and judicial action. In mid-July, the governors of New York and Connecticut signed laws opening these states to interstate, direct-to-consumer wine sales. Shortly afterwards, a federal judge in Ohio declared discriminatory shipping laws in that Midwestern state to be invalid. Then, in early August, there was a similar ruling in Florida; but a direct shipping ban remains in place there while regulators negotiate the constraints of other state laws.

The tide of liberalisation is good news for small producers who have difficulty gaining listings with major distributors. However, many analysts believe the high cost of shipping single cases will effectively limit direct sales to high-end wines. The vast majority of brands will continue to be sold through established wholesale networks.

The Pennsylvania Winery Association has asked for a court injunction to preserve the right of its members to ship wine directly to customers within the state. The state liquor control board implemented a ban on such direct shipping on 1 November to comply with the US Supreme Court ruling in May. Like New York, Michigan and other states, Pennsylvania had permitted direct sales to state residents from wineries within the state but had denied that sales channel to wineries located outside of the state.