New York Tackles Internet Alcohol Sales
Dana Nigro
Posted: May 20, 1999
The battle over whether consumers should be able to receive direct shipments of wine is heating up again in the state of New York -- the second-largest wine market in the United States.
In Albany yesterday, two legislative committees held a joint hearing on the subject of alcohol sales over the Internet. The wine industry came out in full force to promote a bill that would allow out-of-state wineries and retailers to ship limited amounts of alcohol to New York consumers under regulated conditions. However, liquor wholesalers -- who are behind many state and federal initiatives to prevent interstate direct shipping -- kept a noticeably low profile.
New York already prohibits interstate direct shipping, though the law does allow in-state wineries and retailers to deliver to customers' homes. Prompted by recent congressional attention to sales of alcohol to minors via the Internet, state assembly members Harvey Weisenberg, who heads the Committee on Alcoholism and Drug Abuse, and Robert Sweeney, who heads the Commission on Science and Technology, called a hearing to determine if these sales are a problem in New York, and if so, how to address them.
Several high-profile retailers and winery owners took the opportunity to push for new legislation that would make New York a "reciprocal state" -- one that allows direct shipments from states which allow direct shipments from New York wineries -- while keeping a closer eye on alcohol shipments coming across state lines. Those testifying included Michael Aaron, chairman of Sherry-Lehmann; John Dyson, chairman of Millbrook Winery and former deputy mayor of New York City; and Jeff Zacharia of Zachys.
The new bills (S4941 and A7895), sponsored by Sen. John Kuhl and Assemblyman Herman Ferrell, would allow U.S. wineries and retailers in other reciprocal states to ship up to two cases per month to New York consumers. The bill addresses several points that were not included in a 1995 permit bill vetoed by Governor George Pataki: Out-of-state shippers would have to apply for licenses to sell in New York, would be subject to record-keeping and auditing requirements and would have to pay all state sales and excise taxes.
At the same time, the wine lobbyists argued that the real issue surrounding direct shipping is not access to minors but clashing economic forces. "We have had intrastate shipments in this state for many years -- through the Internet, phone and mail order -- and we have yet to find any great complaints that teenagers are buying what they drink through [direct] shipping," pointed out former state Sen. Manfred Ohrenstein, who represented wine industry members pushing for the permit bill.
"This conversation starts with the self-interested wholesaler lobby that is afraid of losing its monopoly position in the so-called 'three-tier system' [in which products go from wineries to wholesalers to retailers]," said Dyson. "It is they who have encouraged the various states to view the Internet with alarm."
Aaron, who said he spoke to numerous teens to research the subject because few statistics are available, argued that underage access to wine is not a significant issue because most teens prefer beer and sweetened hard-liquor drinks, which they can easily find in local stores. He suggested that enforcement efforts should concentrate on local access and the sweet products that he says are marketed to teens.
"Kids probably don't prefer fine wines ... but I don't know how you would discriminate in legislation to say you can access this kind of alcohol, but not this kind," objected Michael Vacek, president of the New York State Beer Wholesalers Association, the only wholesaler organization to testify at the hearing.
Unlike most of the states that currently prohibit the interstate shipping of alcohol, New York has a significant wine industry, with about 125 wineries currently in operation. The current regulations hurt New York wineries because they can't sell to consumers in states that have reciprocal shipping laws, said Dyson. Also, many package carriers currently refuse to accept alcohol shipments due to recent sting operations in the state.
"In our case, 13 percent of our gross profits were eliminated," Dyson said. "The truth is that the three-tier system fails to distribute the wines of our state's small and midsize wineries. If we don't have an alternative sales route, some of our wineries will go out of business. That route is direct shipment to the customer."
For more on direct shipping:
May 19, 1999
Senate Approves Amendments to Restrict Home Delivery of WineMay 8, 1999
Senator Hatch Adds Alcohol Shipping Amendment to Juvenile Violence Bill March 19, 1999
Federal Legislators Craft New Bills on Direct ShippingMarch 13, 1999
Planned Internet Service Hopes to Solve Direct Shipping Issues March 10, 1999
Senator Moves to Put More Bite Into States' Direct-Shipping Bans May 15, 1997
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