On February 1, 2018, the writing was on the wall. The New Hampshire Liquor Commission’s attempt to convince the state’s lawmakers to strip out-of-state wine retailers of their right to obtain permits to ship wine to consumers was going to die in committee. The Commission’s response to this reality was unusual: The Liquor Commission chose to disregard the obvious will of the legislature and begin arbitrarily and on its own denying new shipping permits as well as renewals of shipping permits to all out-of-state wine retailers that applied for them.
Despite being a “control state” that is both the only wholesaler and the primary retailer of wine, New Hampshire has long allowed both out-of-state wine retailers and wineries to ship wine direct to its states consumers under a permit system. This worked out well for Granite State wine lovers. With the state in control of wine availability, the selection of wines in state stores had never been exemplary. With direct shipments from both wineries and retailers, consumers in New Hampshire had access to nearly every wine available in the United States.
That outstanding access to wines was about to end, however, with the Commission’s arbitrary denial of permits.
When the National Association of Wine Retailers spoke with the Liquor Commission to protest this action the Commission offered up RSA 176:11 of its state liquor code as justification:
RSA 176:11, II
In the event that the commission determines New Hampshire liquor revenues are being diverted by actions taken by persons holding either liquor and wine representative licenses, liquor and wine vendor licenses, or direct shipper licenses who compete directly or indirectly with the commission for market share, the commission may take such marketing or merchandising action, or both, as it deems necessary, including sanctions against the competing entities.
This section of the code was added in 2017. However, the part about “or direct shipper licenses” was an amendment that was added with no testimony in committee. Now, in 2018, the Commission decided to interpret any shipments by out-of-state retailers as diverting New Hampshire liquor revenues and, thus, worthy of sanctions. In this case that meant automatic denial of shipping permits.
This was the sort of capricious action that could easily have gone unnoticed. It was also the kind of action that could only be reversed if lawmakers were informed their will was being subverted, if consumers knew the impact of the action and if the media reported what the Liquor Commission was up to. So, NAWR worked to make all this happen. It should be noted that no other organization or association in America determined to push back against this attempt to arbitrarily bar retailer wine shipments into the state—no other state wine retailer associations, no other national wine retailer association and no other national wine consumer rights organizations.
Once the state’s lawmakers were alerted to what was happening as a result of NAWR’s efforts and the media’s coverage of the issue and also due to the heroic efforts of State Senator Andy Sanborn, things moved fast. Debate in the Senate over the issue led to amendments outlawing the action, which in turn were met by amendments to bill to turn New Hampshire from a “permit” state into a “reciprocity” state for retailer shipping, which in turn led to the creation of a conference committee that would consider what to do about the Commission’s actions via legislation.
A few interesting things came out in the course of all the flurry and action over the Commission’s attempt to end retailer shipping. First, it was discovered that the NH Liquor Commission took this action while knowing it would not meet its annual revenue projections and this has consequences for the Commission’s following year’s budget appropriation. It was also discovered that while the Commission claimed the retailers it was denying permits were selling the same wines as the Commission and therefore “diverting” state revenues, the Commission had done little or no investigation into this question and in fact had been denying permits on this basis before many retailers had shipped a single bottle of wine into the state. Finally, it was discovered the the State Liquor Commission itself had plans to get into the interstate wine shipping business.
In the end, NAWR’s efforts succeeded. Upon being admonished by a number of lawmakers, the Liquor Commission Chairman committed to granting out-of-state retailers new and renewed permits. Reciprocity would not go into effect in New Hampshire. And, the Liquor Commission’s next budget allocation was cut by 1% despite their request that there be no cut in their budget as the law requires when the Commission does not reach its revenue projections.
The episode demonstrates a number of things that wine retailers, regulators, consumers and the trade ought to take to heart:
1—When retailers band together, they are highly capable of protecting their interests
2—A state that is the retailer of wine has no business regulating its competitors
3—These Gangster Tactics used by the NH Liquor Commission always appear odious.
4—Consumers make a difference when they contact lawmakers in large numbers
5—It appears independent fine wine retailers have only NAWR to rely upon to protect their interests