CC image courtesy of David Becker
Posted by Byron Crowe II on April 4, 2013.
As the 2013 South Dakota legislative session came to a close last week, I was disappointed that our legislators again failed to pass a law allowing the shipment of wine directly from producers to South Dakota consumers. Despite the efforts of Senator Adelstein and South Dakotans for Better Wine Laws, who advocated for direct shipping under SB 100,1 the wine market in our state is no freer. South Dakota continues to be one of only ten states that do not allow direct shipping.2
The benefits of direct shipping of wine are substantial. Direct shipping would increase the variety of wines available to our state’s consumers and would allow South Dakotans to enjoy these new products at lower prices than otherwise available by cutting the markups at the wholesale and retail levels. Direct shipping also has the benefit of decreasing the prices of wines that are already available by increasing the number of sources from which consumers can purchase them. Consumers are offered better prices because wholesalers are forced to compete not only with each other, but also directly with producers. In short, direct shipment means more selection, better prices, and freer markets.
The 28 wineries3 currently operating in South Dakota would also greatly benefit. Direct shipping would allow our local wineries to ship directly to South Dakota residents and foster the development of a local market for their products. Currently, in-state wineries cannot ship to in-state consumers, and under the Supreme Court’s decision in Granholm v. Heald,4 South Dakota law cannot allow for direct shipment from in-state wineries until it allows for shipment from those outside the state. Thus, adopting a broad direct shipping law is necessary for allowing our in-state producers to ship directly to South Dakotans.
The cost of direct shipping, on the other hand, is merely the reduction in market power held by wholesalers. Senator Adelstein put it well this session when he said that “two or three companies should [not] impose their monopoly rights on the majority of South Dakotans.”5 The opponents of direct shipping this legislative session, which included mostly distributors, do not care about the benefits for South Dakotans; they are more concerned with preserving the status quo. One opponent this session, representing MillerCoors LLC, even went as far as to suggest that it be made a felony for any consumer to receive shipments of wine,6 a draconian move which would put South Dakota on the same level as Utah.7
The most surprising opponent of direct shipping this session, however, was the office of Governor Daugaard. While supporting the concept of direct shipping, the Governor’s office advocated killing the bill before it got out of committee, citing the need for more time to study the tax implications.8 Although this was a disappointing move on the part of the Governor’s office, there is a bright side: in return for the committee referring SB 100 to the 41st day, the Governor’s office agreed to make a good faith effort to look at direct shipping over the summer and be prepared to address it during the 2014 session.9 Having removed any potential excuses from the debate in 2014, the wine drinkers of South Dakota will be in a great position to take what is rightly theirs: more variety, better prices, and freer markets.
Byron Crowe is a J.D. candidate at Cornell Law School, where he is the Senior Online Editor for the Cornell International Law Journal. He holds a B.A. in economics from Tufts University. He is a long-time South Dakota resident who grew up in Pierre and the Black Hills. He enjoys Pinot Noirs and New Zealand Sauvignon Blancs.
This article was originally published in the “Voices” section of Argus Leader newspaper on March 26, 2013. To read it in its original format, click here.
- For the full text of the proposed law, see http://legis.state.sd.us/sessions/2013/Bills/SB100P.pdf. ↩
- Theresa Cederoth, An Introduction to U.S. Wine Shipping Laws, Soc. Wine & Jur., Jan. 25, 2013, http://wineandjurisprudence.org/?p=275. ↩
- See Testimony of Senator Adelstein before the S.D. Senate Commerce and Energy Committee, Feb. 5, 2013, http://sdpb.sd.gov/SDPBPodcast/2013/sco18.mp3. ↩
- Granholm v. Heald, 544 U.S. 460 (2005). ↩
- See Adelstein Testimony, supra at note 3. ↩
- Testimony of Ronald Olinger before the S.D. Senate Commerce and Energy Committee, Feb. 5, 2013, http://sdpb.sd.gov/SDPBPodcast/2013/sco18.mp3. ↩
- See Utah Code Ann. § 32B-4-401(West 2010). See also Cederoth, supra at note 2. Utah is the only state in which it is a felony for an of-age consumer to receive wine in the mail. ↩
- See Testimony of Kim Olson before the S.D. Senate Commerce and Energy Committee, Feb. 5, 2013, http://sdpb.sd.gov/SDPBPodcast/2013/sco18.mp3. ↩
- See id. ↩