FTC Wants Online Wine Sales Uncorked

State laws that prevent people from going online or using catalogs to buy wine impair competition, restrict choice and burden consumers with higher prices, according to a government report released today.

The Federal Trade Commission (FTC) said that customers could save more than 20 percent on some of their wine purchases and obtain wine varieties often unavailable at their local stores if they could be ordered directly from wineries or distributors in other states.

A 2002 survey from the Wine Institute found that about half of the states restrict or ban residents from ordering wine online or through catalogs. The most common goals cited for the laws are curtailing underage drinking and taxing alcohol sales.

Those concerns could be addressed without outlawing interstate wine shipments, said Jerry Ellig, deputy director of the FTC's Office of Policy Planning and a contributor to the report. To ensure that mail-delivered wine isn't purchased by minors, Ellig noted that states like New Hampshire and Wyoming require adults to sign for deliveries.

Ellig also contended that wine is not the favorite illicit beverage of underage drinkers.

"[B]uying online where you have to wait is one of the less convenient ways of getting alcohol," Ellig said.

As for taxes, some states require out-of-state wineries to obtain licenses as a way to secure tax revenue on catalog or online sales.

More than a dozen states have joined in a compact to ensure that their residents can buy from wineries in the participating states. Virginia Gov. Mark Warner (D) recently signed a bill bringing his state -- and its growing wine industry -- into the agreement. The law went into effect on July 1.

Maryland allows its residents to order wines from other states, but they must pick up their purchases at a wholesaler's outlet. Until recently, it was a felony to import alcohol into the state. The District of Columbia allows one quart of imported alcohol per person per month.

The real reason many states limit or ban direct shipments of wine is because of the political strength of the wine wholesalers that stock local grocery and liquor store shelves, said Robert Atkinson, vice president of the Progressive Policy Institute. The wholesalers, he said, do not want small wineries eroding their hold on the distribution market.

The FTC report, Atkinson said, probably will not sway the U.S. Congress to pass any federal laws allowing interstate wine shipments, he added. "There are wholesalers in every single state [so] the political playing field is completely tilted when it comes to making these decisions in state legislatures."

The Wine and Spirits Wholesalers of America, a lobbying group that supports state restrictions on direct shipments, says that more than $1 billion in illegal alcohol shipments elude the taxman each year.

The group's general counsel, Craig Wolf, disputed the FTC's assertion that direct-shipment bans limit the variety of wine available to consumers.

"This is an elitist issue," he said. "Most citizens are quite satisfied, in fact overwhelmed with what's available on their [local wine retailer's] shelves."

Wolf also insisted that the industry's opposition to lifting direct-shipment bans is not about money. "No wholesaler is going to out of business because of this," he said.

The FTC report, "Possible Anticompetitive Barriers to E-Commerce: Wine," is posted on the commission's Web site.