The sham and hypocrisy behind the three-tier system

three-tier

“Quick — get the wine unloaded before anyone spots us.”

The Wine Curmudgeon buys wine from an out-of-state retailer – even though it’s illegal

A case of Domaine Tariquet was delivered via Fed Ex to Wine Curmudgeon international headquarters in Dallas this week. The shipment violated the laws of two states – that of the retailer who sold me the wine, and Texas, which forbids shipments from out-of-state wine retailers. Welcome to the sham and hypocrisy that is the three-tier system.

Why a sham? Because the liquor cops in Texas and in the retailer’s state both know I bought the wine, since Fed Ex and UPS send so-called common carrier reports to the agencies. The Texas Alcoholic Beverage Commission received the electronic paperwork saying the order was shipped to my house; the retailer’s state alcoholic enforcement agency got the same thing when the order was shipped.

I’m not going to name the retailer or its state; let the liquor authorities do their own investigating. Click the links to see the address label and the alcohol warning label that said the package wasn’t olive oil. Also, everyone quoted in this post was given confidentiality, since I committed a crime with my purchase.

So why did my reverse sting operation work? Because each state doesn’t always enforce the interstate retail ban, according to a prominent liquor law attorney.

“It’s not high on the list of priorities,” he told me. “Most of the time, unless someone objects to that kind of sale, they don’t do anything about it. It’s like enforcing the speed limit on a highway. The police may not enforce it for a long time because they have other things to do – until someone complains about speeding, and then they set up a speed trap.”

And, now – hypocrisy

Interstate retail shipping is banned in most of the U.S. in the interest of “public health and safety” – the legal doctrine that has overseen liquor law since the end of Prohibition. Yet, more than a century later, state regulators and legislators still insist that it’s not safe for me to order wine from a retailer in another state. Yet, if it’s so dangerous, why isn’t it enforced more often?

The answer can be found in the July 8 decision by the Ohio attorney general to sue Wine.com and six other interstate retailers for selling wine to Ohio residents in violation of the state’s interstate shipping ban. Yet, according to two people with knowledge of the attorney general’s suit, Wine.com has been selling wine in Ohio in violation of the ban for more than a decade – and the Ohio Division of Liquor Control knew it was doing so and exchanged letters with the company acknowledging the practice.

The July 8 lawsuit, says the prominent liquor attorney, fits a pattern – interstate shipping bans are often enforced only when wholesalers and distributors press the issue. In Ohio, Wine.com and the other retailers weren’t buying from Ohio distributors, as required by law, but from distributors in other states. This lost business, combined with the dramatic drop in restaurant wine sales during the COVID-19 pandemic and increasing legal direct-to-consumer wine shipments in Ohio, probably had the wholesalers “crapping in their pants,” e-mailed an Ohio wine business consultant who has worked with the state’s distributors. No wonder, he wrote, that they pressured Ohio authorities to sue the interstate retailers in an attempt to redirect the lost business and revenue their way.

So where’s the public health and safety?

And, in fact, the news release announcing the lawsuit barely mentioned “public health and safety.” Instead, it emphasized lost tax revenue and lost retail sales, quoting an Ohio retailer and distributor. In addition, the Wine & Spirits Wholesalers Association, the national distributor trade group, issued a news release saying the same things. The attorney general’s spokesman didn’t respond to two requests for an interview for this post.

Keep in mind that this post isn’t about defending an illegal practice. If anyone violated the law, they should be punished, whether Wine.com (which is a long-time supporter of the blog) or me. And this post doesn’t advocate selling liquor without regulations — we certainly need regulation, but regulations that are fair and efficient.

Because selective enforcement isn’t either. If interstate wine shipping is truly dangerous, then the ban needs to be enforced. Because if the ban isn’t enforced, then it follows that interstate shipping isn’t as dangerous as it’s supposed to be. And if that’s the case, why have the ban at all?

Photo: Odd Truck” by oliva732000 is licensed under CC BY-SA 2.0

8 thoughts on “The sham and hypocrisy behind the three-tier system

  • By Eric Awes - Reply

    It’s a big “Catch 22” in that national distributors can’t & won’t carry smaller brands (thus locking them out of state distribution) but doesn’t want competition from any where.

  • By Lawrence Tureaud - Reply

    the wine is available in Texas – saw it offered at Houston Wine Merchant. you can order from them and catch 12 bottles or you can even catch 22 of them. Eric, your logic is flawed.

    • By Wine Curmudgeon - Reply

      Thanks for the comment, Lawrence. Actually, it’s just as illegal for me to order Tariquet from Houston as it is from the state that I did. as Houston Wine Merchant notes on its website: “We can currently ship wines anywhere within Harris County, Texas (Greater Houston) as well as the states of Alaska, California, Idaho, Missouri, New Mexico and Washington D.C.” So not to Dallas.

  • By Dan O’Brien - Reply

    Love how two (maybe 3) wholesale conglomerates control over 80% of the wholesale business in this country only to act like small companies when it comes to interstate shipping laws. Breaking up these huge companies would be a huge step towards there lobbying power. Furthermore, abolishing interstate shipping laws and individual state tax filings that costs a fortune to small produces (not to mention permit fees) would go a long way in balancing the playing field for small producers and retailers alike.

  • By Joel Butler MW - Reply

    Jeff
    Our biggest problem with shipping interstate is that the common carriers (UPS, FEDEX) have become the gatekeepers, on direct orders from the government. They simply will not accept a knowing alcohol shipment to a state that is illegal to ship to, as they fear losing their licenses. Even if that state’s looking the other way, the carriers simply will not pick up, or in the case of VA last year, shipped the case back to us, doubly exposing the wine and thus ruined.
    The 3-tier system exists only to protect distributors-the health issue is pure hypocrisy we all know. Another issue is that in some states that have decided to allow shipments, they require an ‘in-state’ license or equivalent, to sell to consumers in that state. But the cost is only affordable to very large retailers, like SPecs or K&L, who may have a significant clientele in that state. For those like me, it effectively means the state is still off-limits.
    joel

  • By Lawrence Tureaud - Reply

    If the wine is available in your state, why wouldn’t you first contact your local retailer and ask him/her to get you a case? You talk about drinking local., why not shop local too? They could probably use the revenue and you wouldn’t have to ship the wine across the country in the summer.

    • By Wine Curmudgeon - Reply

      The wine is not available in Dallas. I can tell you exactly where it used to sit on the shelf at Central Market on Lovers Lane in Dallas. And few wine writers support local retailers the way I do. I buy almost two-thirds of the wine I review.

      But that’s also not the point of the post. The point is that inter-state retail purchases are illegal in Texas and the state where I bought the wine. But the law is not enforced unless someone complains, and that’s usually the wholesalers. And what’s the point of a law that is only enforced when the group that benefits from it asks it to be enforced?

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