Tuesday, June 2, 2009

Law Seminars International - House Bill 2040

Comments of Family Wineries of Washington State President Paul Beveridge on House Bill 2040

The following comments were provided by FWWS President Paul Beveridge during a June 2, 2009, tele-seminar sponsored by Law Seminars International:

Thank you Corbin. The specific detailed comments of Family Wineries of Washington State on the new law are contained in the written materials that are provided on the Law Seminar International's website and the FWWS website. As you will note from our written comments, we are very disappointed in the bill. We see it as three steps backward described as two steps forward. But rather than discussing in detail our specific concerns with the new law, I would like to make a general comment as a winery owner.

I would like to ask a central question: Is Washington wine a good thing? Would the world be a better place if more people drank Washington wine? I think how you answer this question determines where you come out on this new law and other wine law reform legislation. As a winery owner, am I a pillar of our agricultural economy in Washington who should be supported and promoted by the State? Or am I an evil drug dealer who should be discouraged and controlled?

In Washington, our wine laws were largely written after the close of prohibition when we had no wine industry in this state. The existing statute treats me like a drug dealer and requires the Liquor Board to meddle in my private economic affairs with little corresponding public safety benefit. The new law does little to change this presumption. It continues a legislative policy of economic regulation that has little to do with public safety or preventing alcohol abuse. Rather, it expands economic regulation because that regulation benefits a few (and by a few I mean a few established wineries and a few large distributors). It benefits these few at the expense of the many (and by the many I mean small wineries and, most importantly, wine consumers). It claims to provide a few new exceptions to these onerous economic regulations, but it does not do a very good job of drafting the exceptions, actually repeals some former exceptions, and in fact dramatically increases the Liquor Board's role in economic regulation. It continues the Kafkaesque presumption that unless an economic activity is expressly permitted in the statute, it is prohibited. That's no way to help promote an important state industry.

Perhaps the best (or actually worst) example of the unnecessary and counterproductive expansion of the Liquor Board's regulatory power over private economic activity is the supposed relaxation of the tied house rules on cross ownership between industry tiers. Presumably, this would allow restaurants and hotels to partner and invest with wineries. Presumably that would be a good thing. Perhaps we would get more good restaurants and places to stay in wine country. However, the new law giveth with one hand and taketh away with the other. It gives the Liquor Board the unprecedented power to cancel private contracts after they have been consummated if there is "undue influence" or "an adverse impact on public health and safety." Any person may file a complaint - even after the contracts have been signed and even after the buildings have been constructed. Who is going to make substantial investments with this cloud of uncertainty hanging over their head?

Another example is the supposed relaxation of the moneys' worth restrictions to allow wineries to give knick knacks to their retail customers. But the law does this in such a poorly drafted manner that it threatens a winery's longstanding right to give such "branded promotional items" directly to consumers. It means I may no longer be able to give my best customers a t-shirt or corkscrew when they purchase a case of wine. That's one step forward and two steps back.

I am pleased to hear today that the Liquor Board is going to interpret the new law in ways that may blunt some of its more onerous economic restrictions. However, the fact remains that this new law does little to move Washington wine law into the 21st century. We still have a Liquor Board that is statutorily required to limit competition and the economic growth of Washington wineries. The new law strengthens the regulation of private economic activity at the expense of local industry, agriculture, innovation and consumers. You can rest assured that Family Wineries of Washington State will be back at the legislature again next year seeking more meaningful change.

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