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The Arguments Against Allowing Retailers to Ship Interstate

January 14, 2011

There are two different campaigns being fought that concern the interstate shipping of wine. Wineries have been largely successful in convincing the courts that they deserve the right to ship direct to consumers and will operate in compliance with state laws, whether favorable or not. To date their campaign has yielded 37 states and DC with the prospect of gaining 3 new states (NJ, MD and NM) in the coming legislative year.  

 

On the other hand there is a campaign being waged by retailers that they should be afforded the same protection from discrimination as the wineries. Retailers want the 2005 Granholm decision to apply to them too, so that states which permit in-state retailers to make delivery must similarly allow delivery from out-of-state retailers. Retailers argue there is no difference between the retail transactions a winery or retailer conducts in shipping to a consumer. But retailers have access to only 13 states; they have been losing ground and will likely be excluded from shipping to the 3 states wineries expect to gain this year.

 

Initially the arguments against retailer shipping were the same that were made about winery shipping; that underage drinkers could order online, and that taxes would not be collected. However, new arguments appear to be gaining traction that need to be rebutted if retailers hope to win similar privileges as US wineries.  Unlike wineries, retailers are usually licensed to sell more than just wine and will sell spirits and in many states beer too. A retailer doesn't discriminate against a customer in the store because she buys California Cabernet, the makings of Gin and Tonics, or a case of Bud Light. The store may offer delivery so customers can avoid lugging awkward boxes around as they finish their errands. But as soon as that customer's commute involves crossing a state line a distinction is made between the types of alcohol purchased. If her state is one of the 13, then the wine can be legally shipped, but not spirits or beer. Retailers are in the business of servicing customers and it may be the same customer that orders wine one day, gin the next, and beer the next. As a result retailers have been known to push the envelope in an effort to service their customers. Spirits and beer are sometimes included in shipments despite FedEx and UPS contracts that permits only wine. Deliveries are also made to states that are not strictly legal but have minimal enforcement.

 

In a recent interview with Vintank, Craig Wolf of WSWA expressed the concerns of those opposed to retailer shipping that by allowing wine shipments it leads to spirits and beer being shipped too, and these are products more likely to be consumed by minors. They argue that the delivery system is very porous and that carriers cannot be relied on to check the age of a recipient. Further, that if a small state were to open its borders to wine shipments they would lack the resources to effectively police that border. The conclusion of this argument is that retailers cannot be trusted and the enforcement of interstate shipping is too costly; therefore the retail tier needs to be held under close control by the states where they are licensed.

The retailer lobby, Specialty Wine Retailers Association, is arguing that retailers can be trusted to pay taxes to the destination state and will comply with shipping regulations. They have petitioned the Supreme Court to review a Texas appeal and will argue that discrimination against retailers is unconstitutional. Even if SWRA is able to secure a Granholm-like decision on behalf of retailers, each state would then decide whether to level up and allow all retailers to ship or level down and block shipments by in-state retailers.

 

It may be time for retailers to challenge the argument that spirits and beer should not be shipped across state lines. According to Discus a diverse collection of established experts recognize that alcohol is alcohol is alcohol' and that there is no scientific basis for treating distilled spirits differently from other beverage alcohol, shouldn't alcohol equivalence extend to shipping alcohol too? Several states currently allow retailers to deliver spirits in-state and a Granholm-like decision would probably require the state to extend these privileges to out-of-state retailers. For an argument like this to survive scrutiny by the states the burden will fall on retailers to demonstrate that they, like wineries, can be held accountable across state lines. Until then the arguments against interstate shipping will result in access to fewer states for retailers.

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