Legalize It

New York is cracking down on illegal direct shipping. Why are retailers and wine lovers outraged over enforcement rather than lobbying to legalize it?
Oct 9, 2014

The New York State Liquor Authority (NYSLA) has been making waves in the wine industry, ramping up enforcement on a range of fair-business guidelines intended to even the playing field among large and small retailers and distributors. Most of the $3 million-plus in fines levied over the past three years have resulted from illegal transactions between wholesalers and retailers, having little effect on consumers, but one recent NYSLA filing has wine lovers up in arms: 16 charges of improper conduct for Albany-based retailer Empire Wine for shipping wine to consumers in other states.

A look at the states that actually permit their residents to buy wine from out-of-state retailers reveals a shockingly sparse map. Just 10 states allow unrestricted retailer shipping. But residents in far more than those 10 states regularly buy wine from top retailers all over the country, many of which are located in New York.

Direct wine-shipping laws have long been loosely enforced, leaving the market open to any retailer willing to skirt the law. In a 2006 civil action in U.S District Court, the state of California stipulated that its Department of Alcoholic Beverage Control “will continue to exercise its prosecutorial discretion not to pursue enforcement action of any type … against retail licensees in other states for shipping wine … directly to California residents.”

But now the state of New York is laying down the law, first by sending cease-and-desist letters to out-of-state retailers shipping wine to New Yorkers, and now taking Empire Wine to task for selling wine to out-of-staters. Why? The most common argument against enforcing shipping laws is that direct wine shipping is a victimless crime. But is it? What of all the law-abiding retailers, trying to turn a profit without breaking the law?

NYSLA commissioner Dennis Rosen makes a compelling argument for enforcement. “When someone is doing $20 million or $30 million in interstate sales illegally, I think it puts the local operators competing with them, who aren't selling illegally over the Internet, at a terrible disadvantage for doing the right thing,” said Rosen. “When you can deal on such a large scale, you’re going to get huge quantity discounts that the smaller retailer who is not on this steroid of selling illegally into other states doesn’t have the same ability to purchase. You can purchase 500-case deals that your competitor can’t because you’re selling a lot of it illegally in a market that they choose not to have access to.”

Legal retailer direct shipping, on the other hand, is a win-win-win for consumers, retailers and the states. Wine lovers gain access to thousands more wines, retailers gain access to millions more customers, and the states collect revenue on every sale.

Almost 10 years ago, wineries took the shipping fight to the U.S. Supreme Court and won the right to send wine to and from almost every state that supports shipping by its own wineries (40 states and counting as of Jan. 1, 2015). The roadmap has been in retailers’ hands ever since—the Granholm decision should apply to them as well. Now that New York is standing up to illegal retailer direct shipping, maybe retailers will finally stand up and get it legalized.

Direct Shipping Legal and Legislative Issues News

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