Interstate Shipping Matters for Wine Retailers
Wine stores selling online have had relatively open access to consumers in the major US wine markets, which has been a welcome addition to their local business. While some laws have been in place that should limit these shipments, there has been lax enforcement at state agencies that are reluctant to take action beyond their jurisdictions. Retailers have been able to find sales in this grey area between the rules and enforcement. However this environment is changing as retailers face the limitations of their legal standing.
Over the past few months both FedEx and UPS have sent “cease and desist” letters to retailers in several states that have shipped alcohol across state lines into New York. The NY State Liquor Authority is putting pressure on the carriers to block out-of-state stores from shipping to NY consumers. While the SLA has no jurisdiction over retailers in other states, they issue permits for the carriers to fulfil wine shipments in NY. Failure by these retailers to halt NY shipments would jeopardize all shipping privileges with the carrier. Meanwhile, retailers in NY enjoy legal intrastate shipping privileges for both wine and spirits.
UPS in particular has begun circulating a strict new retailer wine shipping agreement. Feeling the heat from a related lawsuit where UPS is accused by NY of violating tobacco shipping laws, they have tightened up their policies. An Addendum to the agreement outlines states where retailers can ship. The list details Reciprocal states (5), Permit states (8), and the few states where no permits are required (3). It also makes the distinction, for the first time, between direct to consumer shipments by a winery and retailer; a distinction that does not favor retailers.
Wineries have, of course, had their day in front of the Supreme Court and won a major battle with the 2005 Granholm decision. That decision established the principal that out-of-state wineries could not be discriminated against by laws that restricted shipping while in-state wineries were permitted to do that same. The Granholm decision also cast doubt on whether reciprocal shipping laws between states is constitutional.
Retailers have been trying to establish the basis for a similar decision in their favor since it became clear that states were treating them differently from wineries. In recent months, two legal actions could signal a change in their prospects. The Texas Package Store Association has asked the Supreme Court for a Writ of Certiorari, that retailers should be treated the same as wineries, and not be discriminated against when shipping to consumers from out of state. A further case filed in Missouri challenges that state’s reciprocal shipping law for retailers. The question is why a state law can favor retailers from one state but not another.
For a retailer who is concerned about competition from out-of-state stores, it is tempting to encourage your state agency to enforce shipping restrictions in the hopes it will protect your business. The majority of your business may be local, but you are vulnerable to competition from big box and grocery on that front too. Having access to out-of-state wine consumers helps diversify your customer base and strengthen your product selection so you are less dependent on core brands. The consequence of shipping restrictions is the limiting of your own access to consumers in profitable markets as carriers enforce the shipping laws of each state.