Direct-Shipping Opponents Try to Shift Debate to Congress

Kim Marcus
Posted: February 3, 2000

Direct-Shipping Opponents Try to Shift Debate to Congress
By Kim Marcus, assistant managing editor

For those of you who order wine directly from your favorite producers, last year was a long one. It all centered around the stiffening of the criminal penalties in certain states, mostly in the South, against those shippers found in violation of alcohol distribution laws. Following the lead set by Kentucky in 1996, for example, it became a felony for a winery or retailer to ship directly to customers in Florida and Georgia.

That's a stiff penalty for a winery owner, because a convicted felon cannot hold the federal license needed to operate a winery. There are several reasons why the states are getting tough, but the two most commonly cited by state legislators and alcohol regulators are a fear of losing tax revenue collected by in-state distributors, and the supposed threat posed by minors obtaining alcohol through direct shipments. Alcohol wholesalers who feel threatened by the growing direct-shipment trade have been instrumental in lobbying for the get-tough approach.

For opponents of direct shipments, the emotional power of playing the underage card has proven especially appealing. Late last year, the Wine and Spirits Wholesalers of America (WSWA), an organization that represents alcohol wholesalers, launched an attack on this front through an organization called Americans for Responsible Alcohol Access (ARAA), which it founded in November. It fired its first shots during a Washington, D.C., news conference complete with banners, television lights and an appearance by New York Attorney General Dennis Vacco.

Vacco was there to announce a "sting" operation that netted 11 out-of-state wine shops and wineries allegedly shipping wine to minors. Included in the press conference was undercover video showing the delivery of wine via Federal Express to an underage recipient--without the required age verification. Not noted during the press conference, however, was the fact that New York allows direct shipments within its borders, and that no in-state retailers were targeted in the sting operations.

In the Jan. 2 edition of the WSWA newsletter, called "Upfront," the Washington news conference was covered in detail, and it provided for some interesting reading. In it, the WSWA proved once again the old saying that politics does indeed make for strange bedfellows. Quoted extensively in an article entitled "Anti-direct shipping movement gains national momentum" was Nikki Finch of Students Against Destructive Decisions (SADD), the campus organization allied with Mothers Against Drunk Driving (MADD).

Finch said that while underage purchases through the Internet were not yet "rampant," danger was just around the corner. "This is a time when the number of teen alcohol-related traffic fatalities is increasing and college students are becoming so intoxicated that they are killing themselves not only behind the wheel but by falling down stairs or out dormitory windows," Finch said.

"In the name of convenience these shippers are willing to make it easier for underage people to obtain alcohol," Finch added. "We must stop this now before a tragedy occurs."

With the Vacco appearance, the words of Finch and a poll commissioned by WSWA indicating that 69 percent of 1,012 Americans surveyed are against direct shipping, it appears that WSWA is also seeking to prove another adage: The best defense is a good offense.

For a time last year, WSWA projected a more moderate face to the outside world. By defending the status quo of alcohol distribution, the so-called three-tier system by which wholesalers buy wine from producers and sell it to retailers, it was merely defending states' rights and the collection of state tax dollars through the wholesalers. The underage issue was mentioned, but it wasn't the major focus of the strategy.

Why the shift in focus? It appears the WSWA has run up against the same problem facing those who want to liberalize shipping laws: the 50 states themselves. While the Florida and Georgia felony provisions were passed, others were stopped in Montana, and a felony bill was modified in North Carolina to make it less onerous. Also, a much-touted compromise was reached in Louisiana whereby direct shipments are allowed so long as tax revenues are collected by the winery or retailers that send the wine, who are also required to register themselves with the state. However, WSWA opposes the Louisiana law and any other solution that involves the diminution of the three-tier system.

Through the summer and fall, meetings were held between representatives of the wineries who ship directly, state officials and distributors in order to reach some sort of overall solution. Not surprisingly, little agreement was reached. "No common ground found between distributors and illegal direct shippers" was the headline for the final article in the Jan. 2 WSWA newsletter.

Instead, the WSWA will seek to federalize the issue in the name of states' rights. It is supporting a bill in the House, H.R. 1063, that would give the states the ability to bring to federal court those shippers accused of breaking misdemeanor and felony laws against direct shipping. Currently, the bill has 53 cosponsors. That's the strategy. The tactic: Keep the focus on the underage issue.

"Congress certainly listens when organizations like SADD, MADD and the National Association of Governors' Highway Safety Representatives vocally express their concern about illegal access to alcohol," said Harry Wiles, one of WSWA's lobbyists in the capital.

Get ready for another long year in the direct-shipping wars.