TCS Daily


Fine Wine?

By Sonia Arrison - May 2, 2002 12:00 AM

This spring brought good news for wine enthusiasts. Not only did Justin Vineyards release a very good 1999 Cabernet Sauvignon, but two federal judges ruled in favor of scrapping state laws in Virginia and North Carolina that essentially banned the online sale of wine to consumers.

For a few years now, small and medium-sized wineries have been fiercely battling the wholesale and retail lobby for the simple right to meet consumer demand. The problem is that a handful of states have passed laws that make it illegal for out-of-state wineries to ship directly to consumers, conveniently ensuring a monopoly on most sales to wholesalers and retailers.

In some states, such as Florida and Maryland, direct importation of out-of-state wine is not only illegal, but is also a felony. As an attempt at injecting some lightheartedness into a not-so-humorous situation, the Free The Grapes coalition coined the phrase: "ship the wine, do some time." With anthrax fears and terrorist attacks a present threat, it's hard to believe that police resources are being used to enforce these kinds of laws.

Childish arguments

Proponents argue that the laws help curb under-age drinking. This requires the belief that a 16-year-old would use his parent's credit card to order a $30 bottle of cabernet online and wait two days for it to arrive. More likely, the teenager will find an older sibling to score cheap beer from the local store on Friday night.

Since states without a direct shipping ban, such as Nebraska and New Hampshire, don't have underage drinking problems of epic proportions, this argument is a distraction from the real issues. A second argument made by the ban-enforcing states is that they will lose tax dollars if they allow consumers to purchase from whomever they'd like.

The fear is that consumers will start buying all their wine and spirits online and the state will have no way to collect lucrative excise taxes. But this doesn't make much sense either.

Shipping costs serve as a serious disincentive to purchasing large quantities of wine from afar. Most online buyers are in the market for limited quantities of hard-to-find wines, meaning that the average bottle of wine for dinner will still be purchased at the local store. Wineries and their organizations have also stressed that they would voluntarily agree to collect taxes, so it's not clear that any tax money would actually be lost.

What is clear, however, is that state bans on the direct purchase of out-of-state wine are protectionist, discriminatory, in conflict with the Commerce Clause, and bad for consumers and the economy.

Sour grapes

The laws are protectionist because they treat the sale of out-of-state wine differently from the sale of in-state wine. They are discriminatory because they treat online sales differently from in-person retail sales of the same product. Someone in Florida can't buy a bottle of Rodney Strong over the Net, but they can buy it in the local store if the retailer decides to carry it.

Out-of-state wine shipment bans also conflict with the Commerce Clause, which was meant to ensure free trade within the country. The Framers conceived the Commerce Clause specifically for this type of situation. They knew that if states had the opportunity to set up barriers to protect in-state business interests, there was a good chance it would happen. The 21st amendment is often used to counter this "Commerce Clause" argument, but while the amendment does allow states to ban alcohol, it wasn't meant to ban e-commerce.

Most important, the bans are bad for consumers because they reduce choice and stymie the economic growth of America's wine industry. If a wine aficionado in Virginia, New York or Florida wants to buy a rare bottle of Stag's Leap directly from the winery, he or she should have that ability.

Government should not interfere with legitimate commerce between two parties simply to protect special interests, such as those of wholesalers and retailers. By granting a government-created monopoly to such middlemen, the ban-enforcing states are driving up prices and stifling economic growth. Ironically, this eventually hurts tax revenues.

The two recent victories in Virginia and North Carolina do not bottle up this issue. Wineries and consumers have had as many losses as wins and there are still states with bans in place. Virginia is currently appealing its loss and the case may go to the Supreme Court. If that happens, and the Court rules in favor of freedom, then we may have reason to raise our glasses in celebration.

Sonia Arrison is director of the Center for Technology Studies at the California-based Pacific Research Institute. She can be reached at sarrison@pacificresearch.org
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