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A bottle for my mother
By Jim Clarke

I could go to jail for sending my mom a bottle of wine for her birthday. She lives in Florida, and if I wrap it up and hand it over to UPS, Florida law says I could face up to five years in prison- the same sentence a burglar could receive. Similarly, since I live in New York, there are several wines I had while visiting Sonoma that I probably won’t be able to buy again until my next visit to California. They are from small wineries that don’t have distributors outside the state, and shipping wine to individuals in Florida, New York, and twenty-four other states is illegal.


The state(s) after Prohibition

When the Twenty-First Amendment repealed Prohibition, it also handed over the regulation of alcohol to the states who generally responded with some variation of a three-tier system of producers, wholesalers, and retailers; ownership at more than one of these levels was disallowed. This structure was considered easy to tax and regulate, and prevented monopolization which lawmakers associated with the violent excesses of organized crime during Prohibition. One result, however, is that in many cases a wine cannot be shipped from state to state without passing through a wholesaler.

This was not a problem at the time as there wasn’t really that much wine to be shipped. But the then-nascent American wine industry has since grown into one of the largest in the world, with wineries in all fifty states and considerable diversity of styles. Contrariwise the number of wholesalers nationwide has dwindled from some 20,000 in the 1960s to about 300 today. Under this arrangement many smaller producers are not adequately represented; less than 17% of American producers have distributors in all fifty states.

Finding that obscure wine you had on vacation is now easier than ever, courtesy of the Internet; but an internet wine retailer may not be able to send it to you. If you do order wine online many Internet wine retailers now ask you what state your wine would be shipped to before they can confirm its availability. If I want to send a bottle of wine to my mom in Florida, it best be available from a Florida retailer – who I can order from online, but their selection will still be limited to what the state’s distributors provide. This conundrum and the growth of e-commerce have brought matters to a head.


A wine war on two fronts

The war for greater availability is being fought on two fronts: changing legislation, and fighting it out in the courts. Wine producers have been lobbying state governments to pass bills that allow them more freedom, and various consumer and winery organizations are pursuing cases in several state and federal circuit courts. Opposition comes from the wholesalers and state taxing agencies, who are both concerned about the loss of revenue.

Progress for the winemakers has, so far, come mainly in the courts. Most of the lawsuits hinge on state laws that permit in-state wineries to ship directly to consumers but prohibit interstate shipments. This exception for in-state wineries was intended to promote local wine production, but winemaker groups say it violates the Commerce Clause of the Constitution because it favors in-state interests over the commerce of other states. While successful in some states, this tactic actually backfired in North Carolina when The Fourth Circuit Court ruled that the exception for in-state wineries was indeed unconstitutional… so they extended the ban to include in-state direct shipments along with those from out-of-state. Unfortunately none of the cases pending challenge the three-tier system in and of itself, so it seems unlikely that the bottleneck created by limited distribution will be drastically changed without more work on the legislative front.

Even with their successes in the courts, wineries still face substantial bureaucratic challenges when shipping their wines to out-of-state consumers. Kathleen Schumacher is the CEO of New Vine Logistics, a company which has figured out how to ship wines legally throughout the country. She allows that “the tide is turning in favor of the wineries,” but believes that alcohol regulations are not likely to become simpler. Even if the laws are loosened, the states will certainly protect the tax revenue that alcohol sales afford.

The Coalition for Free Trade and other organizations continue to fight in the courts to break down the barriers on interstate direct shipments of alcoholic beverages, and it seems likely that one of the several cases pending will make it before the Supreme Court in the next few years. Despite recent successes for winemakers at the state court level, the Supreme Court could still rule against them because of the 21st Amendment, which empowers the states to regulate alcohol themselves. The middlemen would be relieved, but it would be a loss for wine producers, consumers, and my mother.


Resources:

http://www.law.indiana.edu/webinit/tanford/wine/
Maintained by James A. Tanford, an attorney, this site catalogs the various lawsuits concerning direct shipment of wines currently in progress.

http://www.wswa.org/public/legal/direct.html
This is the Wine and Spirit Wholesalers of America site, and by-and-large defends the existing regulations.

http://www.wineinstitute.org/shipwine/ and
http://www.americanwineries.org/wineshipment/shipment.htm
These two sites are from winery associations – The Wine Institute and WineAmerica, respectively – that are committed to challenging the current restrictions on direct shipment of wines.

http://energycommerce.house.gov/108/Hearings/10302003hearing1119/hearing.htm
This government site includes transcripts from testimony at a session of the Subcommittee on Commerce, Trade, and Consumer Protection on the issue of online wine sates and direct shipment.

http://www.newvinelogistics.com
The website for New Vine Logistics, which specializes in arranging interstate wine shipments.

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  Published: Feb 2004

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