Virginia Governor Youngkin, claims 28.8% regulation reduction – nothing for wineries

Another chapter of the real story behind Virginia ABC's actions

Governor Glenn Youngkin recently celebrated a 28.8% reduction in state regulations, touting it as a great achievement for Virginia. Despite this supposed wave of deregulation, the state has done absolutely nothing to reduce regulations that would help consumer choice and wine sales. In fact, things are getting worse through VABC regulations and their increasingly creative interpretations of existing rules.

As I have laid out in earlier articles on my observations of regulatory capture at the Virginia ABC and the absurd hearing process where the VABC appeals their own administrative law judge’s (ALJ) decisions, the agency appears to actively hunt for ways to stop direct sales. The pattern has become so predictable that we can forecast outcomes before hearings even occur.

The usual suspects: Wholesale associations & their anti-consumer agenda

I always caveat that I’m not anti-wholesale. I am opposed to the mandatory nature of the three-tier system, franchise rules, and the dominance of wholesaler associations in contributing to legislators to ensure their protected position remains untouchable. While this dynamic exists in many states, Virginia’s version makes it particularly easy to see how the game is played.

The Virginia Wine Wholesalers Association and Virginia Beer Wholesalers Association, both represented by Marston & McNally, P.C. and their partner Mr. Kevin McNally, are what I would consider a first-class demonstration of anti-American business practices. They do not believe in consumer choice, they do not believe in free trade, and they will do anything to protect their personal profit interests over both state tax revenue and consumer choice. What’s more, is their willingness to document this opposition in their official state filings against any new and innovative processes unless that process directly benefits their business model.

Predictable outcomes and last-minute interventions

In my last article, I outlined how the state was appealing its own ALJ findings and pointed out that there will be a Board hearing shortly. With regulatory capture in full effect, we can see the ending before it happens – it’s unfortunately comical to watch it all unfold.

True to form, at the last minute, Mr. Kevin McNally states he is going to file an Amicus Curiae Brief in favor of the VABC. Of course he is. This unheard of move in a VABC administrative hearing serves the same goal as always: curtailing consumer choice and making navigating of the rules as difficult as possible, even when it reduces state taxes, solely to protect the profit interests of the wholesalers, who have no axe to grind beyond market protection for their members.

The contradiction of “modernization”

I found it ironic reading Governor Youngkin’s article, talking up a story of modernization and regulation reduction, yet the judges in his state make comments (supporting the VA ABC) like: "VinoShipper may have developed an innovative and efficient wine-shipping model that is ideal for a "'just-in-time' digital economy," but that model does not currently comply with Virginia law."

Funny how the initial judge in the same case found the opposite to be true, that the model did comply. But when you try to change outdated laws, you find every interested legislator has received contributions from the wholesaler associations who will fight any changes. Meanwhile, the Governor demonstrates no intention to deregulate and modernize the beverage alcohol sector. Do note the current CEO of the VABC, Dale Farino, served as President of the Wine Wholesalers Association from 2019-2023.

The VABC’s own compliance problems

Adding insult to industry, I’ve mentioned in my previous articles that the compliance rate of the VABC-run stores is significantly lower than the documented online transactions of direct shippers to Virginia consumers. This must be embarrassing for the VABC. They cannot control their own sales operations yet cast stones at companies that do a better job.

The predictable path forward

Keep an eye on this case, though the outcome is predictable due to regulatory capture. As an observer of the Virginia ABC and their actions, it’s clear they are not serving Virginia, its residents, its wine industry, or the country in a positive fashion.

Add to this the current administration’s stated desire to grow US business and reduce costs to the US consumer. The administration and state should look no further than the alcohol beverage industry to find opportunities to help rather than roadblock innovation and efficiency.

To the regulators, this is just a paycheck and keeping their wholesale masters happy. To those of us in the industry, it's a livelihood that creates real jobs in this country – something those collecting government paychecks don't worry about when they clock out at 5.

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