Online Crossroads: Marketing Agents Seeking to Sell Wine Online get a Hearing at the SLA
The State Liquor Authority of NY is preparing a new set of guidelines that could have national implications for how wine is sold online. While the jurisdiction of the SLA is limited to licensed wholesalers, retailers and restaurants, the issue at hand is how unlicensed marketing agents can promote wine. As a price-posting state NY has strict laws about 3-tier compliance, and given the size of the NY wine market most marketers will build their business models with these rules in mind. At a special meeting in January Chairman Dennis Rosen of the SLA clearly felt it was time for an open discussion with the industry, so they could discuss their concerns in anticipation of a new protocol.
There are several marketing agents that actively promote wine to consumers including The New York Times and Wall Street Journal wine clubs, the flash sale site Lot 18, and most recently Amazon which sells wine from US wineries on its website. Until a little over a year ago marketing agents operated in an uncertain space, but an advisory from the California ABC in November 2011 changed this. The Golden State clearly saw that its wine industry would benefit from having more marketers promoting their products and opened the door for marketers to be more direct in their pursuit of consumers. For the first time it was clear that credit cards payments could be collected by the unlicensed agent, even though control of the disbursement of funds must stay under the control of a retail license. This was significant in that it gave marketers a green light to put a shopping cart on their website and collect payment directly from consumers.
A special SLA meeting was convened in January in response to a request from ShipComplaint who were seeking validation of their marketplace platform. It turned out the SLA had been conducting its own investigations into the activities of ShipCompliant’s licensed business partners and was using this opportunity to address the wider issue of unlicensed agents participating in and being compensated for the sale of alcohol. Two of those business partners, marketer Lot 18 and the wholesaler MHW faced some tough questions about contract language that specified compensation for the retailer and wholesaler, and the price posting of duplicate items. The resulting discussion identified some principals the SLA considers important, and Rosen made the point that the model itself may be sound, but it depends on how the business partners are using it. Was ShipCompliant driving a taxi or a getaway car?
Among Rosen’s concerns were that the retailer needs to exercise control over the transaction, and be exposed to risk. The wholesaler cannot avoid duplicating the brand registrations of other wholesalers in the state by “stickering” products so they become eligible for a new label approval code (COLA) and a separate registration. It was pointed out that the retailer may be able to purchase the same product from a different wholesaler at a different price.
After what was quite a dramatic hearing the publication of the SLA’s guidelines are eagerly anticipated. Amazon announced in January the construction of a 1 million square foot warehouse and fulfillment facility in NJ and had legal representation at the hearing. As a marketing agent Amazon could present a big opportunity for US wineries or a competitive threat for local retailers. Either way the SLA was clear that it does not intend to stand in the way of internet sales.