Indiana Reverses Decision on Southern

FILED NOVEMBER 1, 2009

Dear Client:

Wine & Spirits Daily has learned that Indiana has reversed an earlier decision to block Southern Wine & Spirits from entering the state. Ed Dunsmore, the executive secretary at the Indiana Alcohol and Tobacco Commission, confirmed that the state has approved Southern's request for a wine and spirits license although they must conduct a final inspection before officially issuing the license. “The final inspection has to be arranged before they can get the permit...they’re in the process of arranging that with the local excise officer but that’s the only thing holding it up that I’m aware of,” he said.

We asked if Southern’s joint-venture proposal with Glazer’s was the main hindrance from Southern entering Indiana, and Ed replied: “That was the main hindrance, I believe, and that was taken care of.”

When the board refuses to issue a permit they have to give notice of their proposed reason of denial. At that point Southern was entitled to a rehearing, which took place on Tuesday where they reportedly presented evidence in their favor. The board announced its decision yesterday. According to Ed, the announcement said that “all of the concerns expressed in its official notice was removed with satisfaction of the commission and they voted to allow them [Southern]” into the state. Southern did not respond to a request for comment by press time.

QUICK BACKGROUND. You’ll recall that Indiana has used two different arguments to block Southern from entering the state. (1) Indiana first used the “residency requirement,” which basically says that Southern can’t distribute liquor in Indiana because owners of its parent company reside in Florida. Ironically, SWS managed to do away with a similar Texas residency requirement in 2007 by claiming it was in violation of the Commerce Clause (an argument also used in the Granholm dispute). SWS headed to the courts last December and sued the Indiana Alcohol and Tobacco Commission, specifically targeting the residency requirement. The Indiana Attorney General’s Office issued an opinion in December that the state’s residency law violated the commerce clause and would not stand up to a pending legal challenge.

(2) Then the Indiana ABC offered a new rationale in its formal denial and ruled in mid-September that Southern could not hold a wine and spirits permit in the state due to what they consider “anti-competitive behavior.” They claimed Southern would monopolize the state by taking brands away from local wholesalers (such as National Wine & Spirits) and raising prices on wine and spirits, which would result in lost jobs.

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Until Monday, Megan

“Truth is what stands the test of experience.”
Albert Einstein

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