Stop, Do Not Uncork: Direct shipment laws limit choice more than anything

prohibition photo

Pouring out beer during Prohibition

Back during Prohibition in the 1920s, Americans were forced to pay homage to sleazy bootleggers to get a buzz. Choices boiled down to dangerously strong distilled spirits and whatever concoction someone brewed in their basement. Once the temperance-driven experiment failed 13 long years later, Americans breathed a collective sigh of relief, believing the federal government’s control over their beverage choices had evaporated.

Unfortunately, the control only shifted to the state level.

The 21st Amendment, passed in 1933, repealed Prohibition and gave every state the broad right to control the sale and distribution of alcoholic beverages within its boundaries. Over the years, the states have developed elaborate systems of power, ranging from complete government control to the three-tier system, used in places such as Georgia and Florida. “Three-tier” refers to the marketing/distribution system whereby a supplier — that is, the winery — sells product to the wholesaler, who in turn sells it to restaurants and retailers. The success of the system is three-fold. Wholesalers collect excise and sales taxes on alcohol, a hefty task considering Americans’ drinking habits. They also prevent alcohol from getting into the hands of minors — a heartstring issue the lobbyists are pulling to block changes to the existing laws. They also prevent the “Wal-Marting” of alcohol, in which small companies would be forced out of business by mammoth competitors able to negotiate lower prices on bulk shipments. If wineries, for example, could sell directly to large warehouse clubs, then small retailers would have no way to meet or beat their prices.

Three-tier distribution has, over the years, become as much a matter of choice limitation as it is one of temperance and revenue. Currently, over 2,400 wineries call the U.S. home. Of these, roughly 25 percent are represented by wholesalers in all 50 states. Although this limited selection is sufficient for most folks, the adventurous wine consumers seeking obscure labels face a steep wall of legalities. If you’ve tried to buy wine online in the past few years, chances are you were informed that it’s illegal (or a felony in Florida’s case).

But progress has been made in the past three years in several states. In July 2000, Georgia made it legal for consumers to receive up to five cases of wine, provided the winery does not already have representation, does not ship more than 50 cases a year, obtains a $50 license, and collects taxes at the point of purchase. South and North Carolina, in mid and late 2003, announced new laws that allow wineries to ship not more than two cases of wine per month to an individual consumer, provided that their total shipments don’t exceed 1,000 cases, shipment containers announce their contents as alcohol, and a recipient over 21 signs for them. But in Florida, although there are at least three lawsuits fighting the anti-competitiveness of the current laws, you’re shit outta luck if you want to ship wine into the state. Circumventing the system can actually land you in jail.

Sooner rather than later, the laws preventing direct shipment will probably fall on their collective asses, ending up in the Supreme Court. It seems that, as most states are discovering, a mixture of the two systems could make us all happy. But, you gotta find it weird that in any other business, finding a way to profitably eliminate the middleman is considered an achievement, but in the alcoholic beverage industry, it’s a crime. Go figure.

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