EPISODE #7 FRANCHISE LAW PART 2

In this Episode #7, I detail how I unwittingly jumped in and tried to make a significant change in the wine industry by trying to undo the Franchise Law protection that the alcoholic beverage wholesale distributors have in this country. These Laws are a vestige of the repeal of Prohibition and harm the wine producers in the most unfair way possible in well over half of the states in the country.

I started a new organization on the heels of the Coalition for Free Trade's successful Supreme Court ruling that was issued on May 16, 2005, which allowed the direct shipment of wine from the producer to consumers throughout most of this country. 

The new organization was aptly named Wine Fair Trade Coalition (WFTC), as the goal was to provide the Federal Trade Commission (FTC) with a roadmap for them to investigate and help, as they did in their work that helped set a course for the CFT's successful fight. However, it turned out to be a fool's errand in the long run.

Take a listen.

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Transcript

Episode # 7 FRANCHISE LAWS PART 2

 Fred Reno  

Hi folks, welcome back to the Fine Wine Confidential Book Podcast, hosted by me, Fred Reno. In this latest episode #7, I detail how I finally got my chance to take on the Franchise Laws, which protect the alcoholic wholesale distributors in over half the states in this country.

It would come over 20 years later, after I had encountered these laws in the state of Georgia. The timing wasn't the best for me, as I was recovering from my heart attack at that point and a 5-vessel bypass. However, you often don't get to choose your timing.  When the opportunity presented itself. I was a willing warrior. Take a listen. 

Well, my day did finally come, even though it was over 20 years later. It would come on the heels of the successful efforts of the coalition for free trade to get our case, Granholm vs Heald, to the Supreme Court, challenging states' laws that ban the Direct Shipping of wine to their residents from other states. On May 16, 2005, the Supreme Court ruled in our favor on the case's merits. It was a narrow ruling, though, and left much work to be done to implement the justice’s interpretation.

Numerous press releases were published from both sides of the argument, claiming some level of victory. There was cause for celebration, though, because there was no doubt that the sale of wine directly to consumers in this country was about to change dramatically.

 Unfortunately, my life was no different. As it turns out, five days later, on the 21st of May, I had a heart attack, subsequently underwent a five-level bypass surgery, and would spend the next six weeks focused as best I could on my health and family. Then I received a call the first week of July from Tracy Genesen, a friend of mine who had also served as the legal arm of the Coalition for free trade and our liaison with Kirkland & Ellis. She said there was going to be a luncheon where Ken Starr, whom the Coalition for Free Trade had hired to shepherd the case to the Supremes, was expected to speak. One of the Jackson Family Wines facilities, Cardinale, would be hosting it. Ken would be there that day to share with winery owners and executives his belief that the Federal Trade Commission would be interested in reviewing any additional constraints wineries were facing, which were anti-competitive in nature. 

 Tracy told me that they had not been able to make any progress since I had been out for the past six weeks. They continued to encounter the usual foot-dragging and other excuses that the industry always faced when it came to change and how to pay for it. I'm a bit overwhelmed by the call. I let Tracy know that my surgeon had just given me the green light to drive again, but quite honestly, I'm still a bit fragile and weak. I'm not sure if I can stomach or have the energy for this. She continued to plead with me that my presence would make a difference. I caved in. I said, 'Yes, I would be there.'

 To the best of my memory, the lunch was on Wednesday, July 6. As I drove to Napa that morning, I replayed in my mind the many years and struggles I had experienced as part of a small group attempting to make changes in the industry. I reflected on how long it had taken to get to this point; however, I was still apprehensive about how it would react in a crowd of people. As I entered the room at Cardinale, I noticed several people I hadn't seen before; however, for the most part, it was the same familiar faces who had attended many of these meetings in the past. I see Tracy. She comes over and gives me a hug. I say Hi to Ken Starr and various other individuals and get myself a glass of wine to calm my nerves. I find myself seated next to Jim Basile from Kirkland and Ellis at lunch, whom I hadn't seen or spoken with since my heart attack. It would provide me with the opportunity to thank him again for the legal advice and direction he provided during our fight in May with Clicquot of USA, just before my heart attack.

 Tracy kicks off the meeting, thanking everyone for attending and formally introducing Ken to the group. Ken starts by recapping the Supreme Court ruling and its ramifications. He then explains that Kirkland & Ellis conducted numerous meetings with interested parties to identify the next logical target in the fight to sell wine unencumbered by the vestiges of post-Prohibition laws. Several vintners at the head table commented, but it was mainly Ken talking. He then said he had indications that the Federal Trade Commission is willing and ready to go further, but they're looking for a roadmap. The industry needed to create a report or white paper outlining the issues it still faces and how to proceed. Then the Federal Trade Commission would have a clear target. At this point, I could see that Ken's comments were not gaining any momentum or response from most of the winery leaders in the room. I couldn't help myself. I stood up, looked around the room, and said, "Excuse me, but I need to be Fred Reno for a moment." (I was shaking inside because the adrenaline flowing through my body; I could tell I had stunned the group). What the hell are you all waiting for? Get your checkbooks out and start writing a check. Ken has made it clear that this is the moment when the FTC is ready and willing to help. They're asking us to provide direction for their efforts. We can now take on the Franchise Laws. Then I made a mistake, I kept speaking instead of sitting down. I've never been one wanting to shrink, especially when it came to the issue of Franchise Laws. I continued, If all of you are not willing or able, then I guess I have to jump in. I turned to Jim Basile and said, Jim, do you have a coin on you? Jim reached into his pocket and handed me a quarter. I looked at Tom Sheldon, who, at the time, was president of Joseph Phelps Winery. Tom, I said, “You seem to be the only one in this room besides myself who's being vocal about this opportunity. I guess it's either you or me. I will flip the coin, and you call it. I flipped it. He calls tails, and it turns up tails. I looked at him, and I guess I'm now the President, and you're the Vice President of this yet-to-be-named organization. Ken Starr starts to applaud. Most of the folks in the room join in. I left that day, saying to myself on my drive back home to Santa Rosa. What the hell did I just do?  For the record, that quarter still sits on my office desk today. Stay tuned. More to come. Thanks for listening.