Senator Moves to Put More Bite Into States' Direct-Shipping Bans
Dana Nigro
Posted: March 10, 1999
States that ban direct shipments of alcohol to consumers would have the power of the federal courts behind them under a new bill introduced on March 9 by Senator Orrin Hatch, R-Utah.
The Wine Institute, a trade organization that represents more than 450 California wineries, spoke out in opposition to the bill. The group has been working to convince more states to allow them to ship wine directly to consumers. Currently, regulations vary widely among states, from those that have made it a felony for wineries to directly ship wine to their citizens to those that permit direct shipments under certain conditions.
However, alcoholic beverage wholesalers -- including the Wine & Spirits Wholesalers Association and the wholesaler-backed American for Responsible Alcohol Access -- applauded Hatch's move. The bill would give wholesalers and distributors another arsenal in their fight to ban direct shipments altogether, as their business is threatened by the recent growth in Internet and mail-order sales.
Hatch unveiled his new bill, called the 21st Amendment Enforcement Act, during a Senate Judiciary Committee hearing on direct interstate shipments of alcohol. He is chairman of the committee, which has jurisdiction over the bill.
The 21st Amendment, which was ratified in 1933, gave states the power to regulate the importation of alcoholic beverages and distribution of alcohol within their borders. However, Hatch said that states have had difficulty enforcing these laws, particularly when the seller is from out of state. His bill would allow state attorneys general to seek an injunction in federal court to stop shipments of alcohol that violate state laws. "Only through such rulings can both the states and companies seeking to conduct interstate shipments be assured of consistency in interpretation and enforcement of the laws," Hatch said at the hearing.
A similar bill -- seeking access to federal courts to enforce felony laws -- had been introduced in 1997 by Rep. Robert Ehrlich, R-Md., but a House Judiciary subcommittee declined to take action on it until after the wine industry and states made efforts to work out the shipping issue amongst themselves.
Hatch opened the hearing with a video of a news story that ran on KUTV in Salt Lake City; the piece depicted a 13-year-old ordering beer over the Internet by borrowing an adult's credit card. While he said that it is important for states to be able to collect tax revenue from the sale of goods, his main concern is the illegal sale of alcohol to minors. "It is apparent that modern technology has opened the door for abuse and created the need for further governmental action to address those abuses," he said.
But underage access to wine has not been a significant problem in the states where direct shipping is legal, according to Robert Koch, senior vice president in the Washington, D.C., office of the Wine Institute, a trade organization that represents U.S. wineries. In those states, customer identification is checked at the time of delivery to ensure that minors aren't receiving the alcohol. "The whole underage-access complaint is being driven by the wholesalers," he said.
The real issue, acccording to Koch, is wineries' ability to do business in today's marketplace. "The distribution system is 65 years old, and it functions very well for large wineries. The same is not true for many small wineries, and therefore we're interested in augmenting the three-tier system [from winery to wholesaler to retailer] in order for consumers to have access to hard-to-find wines." He added that the organization is going to continue to work on a state-by-state basis to support laws that allow consumer access to wine while building in proper controls to prevent minors from buying alcohol.
The Wine Institute opposes Hatch's bill as it is currently worded, according to Koch. "It would have a chilling effect on what we are trying to do in the states," he explained. "It would allow the middle tier to walk away from the table." He pointed out that the Bureau of Alcohol, Tobacco and Firearms already has federal jurisdiction over alcohol sales and can take away the federal permit of any winery that violates interstate shipping regulations. "If one has its permit taken away, they are out of business -- that is death for a winery owner," Koch said. "Legislation is flat-out not needed, because the ATF is already there."
At the hearing, Hatch assured small wineries and other specialty producers of alcoholic beverages that he was sympathetic to their concern that they will be shut out of the marketplace if they can't sell directly to consumers. However, he concluded, "If there is a problem with the system, we need to fix the system, not break the laws."
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