US court kills wine shipping ban

- Last updated on GMT

Related tags: Supreme court, Supreme court of the united states

The US Supreme Court has ruled that all consumers should be able to
buy wine directly from out-of-state vineyards, offering smaller
producers greater access to the market by diversifying selling
channels, reports Chris Mercer.

The court voted 5:4 in favour of overruling state laws in New York and Michigan that ban consumers from ordering and receiving wine from out-of-state producers.

Justice Anthony Kennedy, representing the majority, said the restrictions violated the US constitution: "States have a broad power to regulate liquor. This power, however, does not allow states to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorising direct shipment by in-state producers."

Some pressure groups have hailed the ruling as a victory for small producers by enhancing direct internet sales over the traditional use of third party wholesalers, as set out by the 21st Amendment - passed in 1933 to repeal prohibition laws.

The two states had complained that more direct selling via the internet would increase underage drinking and raise tax evasion issues. But, the court said they had provided little evidence to support these views and that the 26 US states now permitting direct sales had not reported any problems either.

"The only way that most small wineries can survive economically is to open up new markets and that means shipping directly to consumers,"​ said Paul Kronenberg, president of the Family Wine Makers of California.

The US now holds around 3,500 wine businesses, according to trade association WineAmerica, yet 50 of these produce about 87 per cent of all US wine - helping them to build exclusive links with wholesalers at the expense of others.

Other campaigners claimed the Supreme Court's decision would benefit the whole US industry.

"We all know that economic discrimination doesn't work and this decision will increase the market for everyone interested in wine-for wholesalers, for small wineries, for everyone. This decision will grow the pie, not divide it,"​ said California vintner David Lucas.

Lobby group Free the Grapes! nevertheless attacked the "$32 billion wholesaler cartel"​ for monopolising wine sales against consumer wishes.

It highlighted a 2003 report by the US Federal Trade Commission that said state shipping bans were "the single largest barrier to expanded e-commerce in wine"​, inflating retail prices by a fifth in some cases.

The trade association for Californian vintners estimated that a mere one or two per cent of US wine is currently sold directly to consumers via the internet and telephone.

There are still restrictions on direct out-of-state shipping in 24 US states.

New York and Michigan were also quick to point out that the Supreme Court called for an even handed approach; meaning states could ban all direct shipments from both inside and outside their boundaries if they chose.

However, the court suggested that a licensing agreement would be a more positive step.

A model direct shipping bill is already in place in a number of states, requiring outside wineries to: purchase a direct shipping license from the state, pay both excise and sales taxes, limit shipments, mark boxes, and consent to the jurisdiction of the state issuing the license. This could now act as a template for others.

Related topics: Markets, Beer, Wine, Spirits, Cider

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