Friday, June 18, 2010

How Initiative 1100 Helps Wineries

1)Initiative 1100 is unique among the current proposals for liquor store privatization in that it comprehensively removes the state from not only the business of selling alcohol, but of regulating the economic aspects of alcohol trade as well. As such it is arguably the most fundamentally important and positive change in Washington state liquor law since the repeal of Prohibition. 1100 will get state bureaucrats out of winery front offices and re-focus the Liquor Board's limited resources on public safety and tax collection.

2) "Money's Worth Restrictions." Current law prevents a winery from giving any money or thing of monetary value to its customers, including credit (a loan of money), joint advertising, personal gifts and many ordinary customer service functions. 1100 removes these restrictions.
  • Credit. 1100 would end the current preferential treatment for wholesalers (allowed to ask wineries for credit terms) and allow wineries to set their own credit policies for all their licensed customers. Wineries will be able to, at their discretion, use their valuable inventories as readymade credit facilities which are bank free, application free, and cost free to the winery. The availability of additional credit will expand economic activity in the Washington wine business exactly the way it does in every other business. Even wineries who choose to extend only short-term credit will be able avoid the current hassle of standing around waiting for a check from a trusted client.

  • Advertising. Under 1100 wineries will no longer be prevented from engaging in targeted win-win co-promotions with their retail customers to showcase their wines. No longer will wineries have to go to the legislature to ask for permission to take advantage of every new idea or development in advertising and promotion that comes along.

  • Gifts. Under 1100 wineries will no longer be prevented from exploiting the strength of their personal relationships with clients. It will no longer be illegal for you to give someone who sells your wine a book, a dinner, or a special bottle of wine. Excessive gifts will still be subject to the commercial trade laws against bribery.

  • Customer service. Under 1100 you will be allowed to direct customers to specific stores, perhaps for a special sale event or to find sold out wines. Likewise such stores could advertise availability of long sold out wines on your website and unclutter their shelves. These are just a few of countless examples of ordinary and customary business practices prohibited under the current law that would be allowed under 1100.

3) 1100 will eliminate the extremely limited exceptions to tied house ownership rules passed into law in 2009, exceptions that require separate companies and stock ownership as the only acceptable forms of investment.

4) Opponents of 1100 argue that it will increase pressure for wine giveaways such as sales incentives, underwriting of advertising, promotional material giveaways etc. Asking for those items is not fundamentally different from the bargaining that already goes on. Whether a retailer asks for a lower bottle price or the cost of some advertisement, it is the same to the winery.

5) Opponents of 1100 argue that it will lead to uncompetitive strong-arm practices such as coercion, threats of product withdrawal, exclusive marketing etc. The current state and national legal system already contains safeguards under the antitrust, fair trade, and consumer protection laws that make illegal the egregious economic activities that opponents claim will be allowed.

6) Passage of 1100 would give Washington the best wine laws in the country and thereby make available a competitive advantage to Washington wineries not available to other states until they revise their own laws. California’s laws have many of the benefits of 1100 already and small wineries are doing fine there.

7) Without hindering public safety, 1100 would make it easier for wineries by themselves and with other members of the industry to market their wine. This will increase wine sales.

8) The independent state auditor’s report concludes that 1100 will raise revenue for the state, putting less pressure on the legislature to raise taxes on wine for revenue.

Passage of 1100 will allow Washington wineries to unleash their full competitive strength and innovative creativity. FWWS truly believes that 1100 will greatly increase the long term potential for success in our industry. Embrace the future and fair competition by supporting I-1100!

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