Three Tiers for Wine: Hip Hip Hypocrisy!
Interstate shipping laws

A few clicks of the mouse will get you caviar, sex toys and Mexican Vicodin delivered to your door.  But in twenty-four states you can’t get wine.  In some, it requires crawling through a daunting maze of permits and licenses, while in others it’s an outright felony.

The interstate commerce clause of the Constitution made this country a powerful trade zone by keeping goods moving freely through the states.  With the exception of wine.  When the 21st Amendment repealed Prohibition, each state was granted the right to regulate its own alcohol sales.  The idea was that some might want to stay dry.  None did.   But all pounced happily on the loophole, using it to protect local business, some by banning direct shipping, and virtually all through the “three-tier system” which plops a mandatory state wholesaler and retailer between a drinker and his bottle.

Wholesalers have it particularly good.  “At-rest" rules require wine to pay a visit to their warehouses, needed or not, accompanied by a storage fee. "Primary source" rules let them monopolize brands in certain regions, effectively eliminating price competition.  “Franchise” rules forbid a winery from changing wholesalers without the first wholesaler’s permission — no matter if their wine isn’t moving, or even if they’ve been officially dropped from the roster.

Once 11,000 strong, wholesalers have shrunk to an oligopoly of two or three per state.  Wineries too small to attract one, or too poor to sell for the price offered are shut out.

How do they justify this arrangement?  They claim to bring you a better variety of liquor and to keep retailers from being overly influenced by one manufacturer. 

States, some of whom monopolize the retail end through state liquor stores, claim it’s purely to ensure alcohol prices don’t drop to “levels that would encourage over-consumption.”  Perhaps you’d prefer to keep the extra money and regulate your own drinking, thank you.  Or exchange it for more wine.  But you’re not a concentrated voting block, so tough noogies. 

Not surprisingly, state governments and wholesalers oppose direct wine shipments, and they do so to the surefire hit-tune “Protecting the Children.”  Setting aside the question of whether that’s necessary, let’s take them at their word and see how it’s working: 

You’ve probably read a few stories about college kids ordering liquor on-line and accepting delivery at their tender age.  Who caught them?  No one.  These are high-profile, PR-inspired stings, set up by wholesalers or attorneys general, who proclaim, as their picture is snapped amidst a pile of contraband bottles, that this example of the “freewheeling wine industry” delivering a “lethal” product into the hands of minors just shows how direct shipping is “fraught with danger.”

Not quite.  For one thing, the stings have all taken place in states where shipping is illegal.  Drivers, there, haven’t been trained to demand adult signatures.  Besides, many states that forbid interstate shipping allow local liquor stores to deliver.  Somehow that danger isn’t quite so fraught.

Wine.com, an internet wine start-up that was planning to branch into spirits and deliver them to your door, burst, alas, with the dot-com bubble.  A disappointment for their key investor, the Wine and Spirits Wholesalers of America, who seemed surprisingly un-concerned about the welfare of kids when they were invited to the party.

Meanwhile, despite the froth of panic whipped up, no danger has materialized.  A recent FTC study found no evidence showing direct shipping increases underage access to booze.

Why not, given computer-savvy kids and alcohol just a click away?  No need.  Why order expensive Napa Cab, when beer is cheap and available?  Underage drinkers get booze at home, have adults buy it for them, and buy it themselves with both fake and unexamined IDs.  While shipping opponents insist that when it comes to keeping liquor from minors, “The face-to-face transaction between a retailer and a customer is the gold standard,” study after study shows minors managing to score liquor on around 55% of their tries.

Wholesalers want to protect your children the way the wolf wants Little Red Riding Hood for dinner.  No doubt they’re a valuable distribution route for some wineries, as long as it’s a voluntary arrangement.  The fact that they want a mandatory one is as good as saying they couldn’t stay in business without it.