Tuesday, January 30, 2007
Editorial: Turning wine into vinegar
Lawmakers find a wine distribution scheme that won't work for anyone.
From the RoundTable blog
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Leave it to the General Assembly to come up with a needlessly complex, ineffective approach to a problem with a simple solution.
In 2005, a federal court ruled Virginia may not play favorites with its small wineries. For two decades, the commonwealth had exempted small, in-state wineries from a requirement that alcohol producers employ third-party distributors.
That favoritism, the court said, ran afoul of interstate commerce, creating an uneven marketplace. If some alcohol producers must hire distributors, then all must.
So, last year, Virginia wineries that had been self-distributing started paying for distribution they neither wanted nor needed. Vintners said the added expense could put many of them out of business, threatening a growing industry that draws tourists to the state.
The obvious solution would be to lift the distribution requirement from all manufacturers. After all, it is just an archaic Prohibition law that has no tangible benefit to the commonwealth.
It does, however, benefit the distribution industry, which enjoys its state-mandated customer base. The distributors' powerful lobby opposed any move toward lifting the requirement. Weak-willed lawmakers complied and have cobbled together a "compromise" alternative.
Under a bill making its way through the General Assembly, Virginia would create a state-owned, nonprofit distribution company. It would charge less than private distributors by not distributing anything. Wineries would be allowed to deliver their goods, up to 3,000 cases annually, as they had for 20 years. They would just pay the state for collecting money and handling paperwork.
In other words, small Virginia wineries could self-distribute, they would just have to pay the state for keeping up the appearance of using a distributor.
Only in-state wineries appear eligible for the deal. A winery just over the North Carolina border, for example, would still have to use the old-fashioned system. That might meet the letter of the federal court decision, but it certainly doesn't foster interstate commerce as was intended.
Virginians watch a new state bureaucracy entrench distribution fees. In-state wineries pay for "distribution" they do not want. Out-of-state wineries face an uneven marketplace. Everyone loses. And lawmakers call it "compromise."
