Shipping ban pours grief over many wine retailers

John Lossia, owner Merchant’s Fine Wine in Dearborn, said the new law will essentially eliminate his ability to deliver gift baskets that contain wine.

Over the past two years, Martin Mueller and his five business partners crafted a business plan to sell wine from the eclectic wine lists at restaurants to consumers looking for high-end wines through a Web site.

Mueller was expecting the usual challenges of marketing and finding capital, but he wasn't expecting a new state law to cripple the business before it started.

A bill signed into law Jan. 9 now makes it illegal for retailers to ship wine to anyone in the state of Michigan.

So while Mueller's budding business, Wine Junkies L.L.C., can ship wines to Ohio residents, it can't target those in Michigan.

“It's still viable, but it's ironic that I can sell to people all over the country but not folks in my own backyard,” Mueller said. “I wasn't planning on that.”

Those in the wine industry are adjusting to the new regulations that come with House Bill 6644, trying to assess what the impact to their bottom lines will be.

For John Lossia, it will be significant around the holidays.

Owner of Merchant's Fine Wine in Dearborn, he considers the sale of gift baskets to be a steady profit center around the holidays. Gift baskets, assembled at his store, typically contain a few bottles of wine paired with some pasta and other food items.

Under the new law, the wine can only be delivered by an employee, not shipped by a third party.

“Do you know how much it would cost me to hire someone to take a gift basket five miles?” Lossia said. “It would cost me a minimum of $50, when I can hire a service to do it for $15.”

Shipping is also a major component of business for The Blue Goat, a wine store in Traverse City, which often ships Michigan wines to metro Detroit customers, said owner Ron White.

“It's hard to judge right now how big of an impact this will be,” he said. “We have to get through a year, but it will definitely have a negative impact.”

Ferndale-based Winebuys.com, likewise, is expecting a significant hit to its business, said co-owner Jeff Resnick.

The company buys wine from Michigan wine distributors and sells to consumers through its Web site. The new law has cut 25 percent from the company's revenue since the legislation surfaced just before Thanksgiving.

Resnick's business fills a niche by offering consumers access to the wide range of wines. “We offer 13,000 wines,” he said. “Michigan consumers just can't get all of those at a store.”

The new law was written in response to a recent court opinion.

The ruling issued by U.S. Eastern District Court Judge Denise Hood in September sided against Michigan's law, which prohibited shipping from out-of-state wine retailers but allowed shipping by in-state retailers.

The case followed a 2005 U.S. Supreme Court ruling regarding shipment of wine from wineries to Michigan consumers, in which the court ruled that laws must be equal for in-state and out-of-state companies.

J. Alexander Tanford, an attorney and Indiana University law professor who sued Michigan on both cases, said Michigan continues to craft liquor laws ripe for legal challenges.

“They just can't resist filing stupid laws, and are, in fact, putting my kids through college,” he said.

The Supreme Court ruled that a state can't make it economically impossible for a company to do business, Tanford said. Allowing the shipment of wine only by an employee violates the spirit of that ruling.

“What difference does it make that is has to be an employee,” he said. “Why not make it a one-legged Lithuanian immigrant? The intent of the Legislature was to screw everyone except the liquor distributors.”

He expects a legal challenge to Michigan's law.

The task for the Legislature was to come up with a law in response to Hood's September ruling, said Ken Wozniak, director of executive services with the Michigan Liquor Control Commission, who was consulted during the lawmaking process.

The new regulations will take effect 90 days from the Dec. 18 passage of the bill in the Michigan Senate.

He said that if Michigan was opened up to retailers shipping from anywhere in the country shipping to consumers, local retailers could be undercut. But identification and quality standards, for example, can't be strictly followed.

“Why go through all the trouble of requiring Michigan businesses to have standards when someone from out of state could be shipping here, and we have no control over that at all?” Wozniak said.

While he acknowledged there will be inconvenience to some businesses, on the whole, retailers in Michigan will have less out-of-state competition.

Mary Campbell, owner of Everyday Wines Inc., an Ann Arbor wine shop, said the new law doesn't hurt her business now as much as it hurts her future.

“You can't expand your business online like other businesses can,” she said. “You can only expand through bricks and mortar.”