Time to Allow the Import and Export of Wine
By Jon S. Cardin and Steven Waddy
Tuesday, January 11, 2011 3:49 pm
In the 2010 session, my colleagues and I agreed to fund a study by the state comptroller on the current state and best practices of direct wine shipment in the United States. This also included the legal framework and legislative history of such efforts here in Maryland, and the costs and benefits related to this measure. The report was released on Dec. 21, and I for one am glad to see that the benefits outweigh the costs.
The issue of direct-to-consumer wine sales came to the forefront in the past two decades primarily for economic reasons. The U.S. has seen a marked rise in the number of small wineries and an increase in wine consumption, while at the same time the number of wholesale distributors of wine has reduced significantly. With the market power of a small number of wholesalers becoming greater, small wineries felt pressure from wholesalers to either produce more wine or lose the possibility of regional or nationwide distribution.
From a legislative perspective, most states prohibited the sale of wine directly to consumers in the interest of temperance, and for states such as New York and Michigan, out-of-state wineries could not sell to in-state consumers at all. Small wineries took their concerns to the courts and sought the ability to ship directly to consumers, bypassing the three-tier structure in use by most states to control alcohol distribution: producer, wholesaler, retailer.
In 2005, the Supreme Court declared that Michigan and New York were illegally discriminating against out-of-state wineries. The Court held unconstitutional any statute which prohibited the direct shipment by out-of-state wineries to in-state consumers while allowing in-state wineries to directly ship wine to in-state residents. The effect of that decision led us to consider changes in our own regulatory scheme here in Maryland.
There are concerns among consumers and businesses alike that by allowing direct-to-consumer shipping there is a greater opportunity for underage drinking. I hear these concerns and understand them. However, according to the comptroller study, wine is not the primary drink of choice for underage consumers, nor can most underage youth afford the increased price of wine relative to other drinks.
In addition, the direct shipping industry will likely operate through two primary methods: those who order wine after visiting a winery and those who order wine over the Internet.
The Supreme Court and the comptroller's study both found this concern to be an illegitimate reason for discriminating against out-of-state retailers. Finally and not surprisingly, the studies cited in the comptroller's report indicated that minors are hardly willing to wait for wine shipments to arrive.
The concern that I have is the loss of competitive advantage and revenue for my local business owners struggling to attract wine purchases at our local liquor stores or wine shops.
Many small local retailers will be hurt by the ability to do shopping online. I therefore suggest that we begin a serious conversation about giving our local retailers the same power to ship directly both in and out of state. As we make this policy, I want to make sure that we keep our own constituents on an even playing field.
Let's follow the recommendations of the state comptroller's report. Maryland should implement a limited direct shipping policy. To keep minors from acquiring liquor, we should also require an adult to sign for the conspicuously labeled wine delivery. If we implement these ideas the state of Maryland can achieve what 38 states, including our neighboring jurisdictions of Washington, D.C., Virginia, and West Virginia, have already done, and see our tax revenues increase.