According to empirical study, the benefits to consumers from direct wine shipment can be substantial, both in terms of variety and price. A study by the FTC

published during my tenure found that found that 15 percent of a sample of popular wines available online were not available from retail wine stores within 10 miles of McLean. Moreover, because this was a study of the “Top 50” most popular wines the Wine and Spirits annual poll, these were not obscure wines. For smaller wineries, availability in traditional outlets would be even smaller.

In addition, depending on the wine’s price, the quantity purchased, and the method of delivery, consumers can save money by purchasing wine online. Because shipping costs do not vary with the wine’s price, consumers experience the greatest savings on expensive wines, while brick-and-mortar stores may offer better prices on less expensive wines. The McLean study suggests that, if consumers use the least expensive shipping method, they could save an average of 8-13 percent on wines costing more than $20 per bottle, and an average of 20-21 percent on wines costing more than $40 per bottle. In a recent working paper, the authors of the original paper update their research and find essentially the same findings:

What about underage drinking? This may come as a shock to Conspiracy readers (who certainly would never have done such a thing in their younger days), but apparently some kids these days are able to buy beer and wine at the local 7-11, notwithstanding the vigilent efforts of the sleepy, hourly-wage sales clerk behind the counter at 11:00 p.m. Friday night. In fact, studies show that minors can fairly routinely purchase alcohol from traditional bricks-and-mortar sellers.

Does this mean that minors will be buying Pinor Noir over the Internet? Probably not. The FTC surveyed liquor enforcement officials in several states that permit direct shipping and they reported few, if any, problems with direct shipping leading to increased underage access. This is not surprising, of course, as intuition tells us that minors are not likely to get a hankering for a perky Merlot, swipe their parent’s credit card, order wine on-line, and have it shipped to them for arrival several days later, and to make sure that there is some adult at home to sign for the package when it arrives.

In fact, the actual experience of state liquor officials confirm this intuition. They point to several reasons why minors are unlikely to buy wine over the Internet. First, Gallo, Blue Nun, and other cheap perennial favorites of 20 year olds are cheaper and easier to get at 7-11; because of shipping costs, only more expensive wines are cheaper on-line. Second, there are substantial inconveniences associated with obtaining alcohol on-line as opposed to a traditional seller, such as needing a credit card and being forced to wait several days for delivery of the product. Finally, many states have implemented safeguards that can reduce the danger of underage access to alcohol, such as clearly labeling the package and requiring an adult signature upon delivery.

Also, in the Supreme Court cases, there are already 200 New York wineries shipping directly to consumers. The issue is not whether or not to allow direct shipping–that bridge has already been crossed. The issue whether to allow Virginia and Oregon wineries to ship to consumers on the same basis as the 200 New York wineries that are already shipping. Consumers can get just as drunk on New York wines as California or Washington wines, thus it is doubtful that temperance is the real justification for these laws. Indeed, the legislative history of the states’ enactments indicate that it was protectionism, not temperance, that animated them.

Proffered concerns about underage drinking are thus merely a stalking horse for the financial interests at stake in these cases. Allowing direct shipping of wine isn’t going to cause minors to start getting loaded on Sonoma Cutrer. Its just a question of whether consumers will be allowed to take advantage of the greater selection and lower prices available from direct shipping.


A few other thoughts prompted by reader inquires:

First, it is clear from the legislative history of the state regulatory regimes that the purpose of the discrimination in NY and Michigan is to protect and encourage their in-state wine industries, not to further consumer protection goals.

Second, in the testimony at the FTC hearings on the topic, the states that permit direct shipping testified that to the extent that they get complaints about supposed shipments to underage drinkers, those complaints have almost uniformly come from competitors and wholesalers–they almost never receive any complaints from parents saying that their kids bought wine off the Internet.

Third, to the extent that there is some generic consumer protection goal furthered by the regulatory regimes here (such as food purity, etc.), there is no distinction between wine, grapes, grape juice, etc. In fact, one of the leading dormant Commerce Clause cases on point is the Hunt case, which dealt with a discriminatory ban imposed by North Carolina against Washington apples. Moreover, the question is not whether California wineries can sell wine in New York, it is whether California wineries can ship directly to consumers for personal use, rather than having to pay the wholesaler’s mark-up. Thus, the product is going to get directly to consumers in the same form in a sealed package and the question is whether it will be done so in the most efficient manner possible.

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