• No state has ever repealed pro direct shipping legislation based on non-compliance, including underage access.
• No winery or retailer has ever been prosecuted under the wholesaler-supported 21st Amendment Enforcement Act, which allows states to prosecute out-of-state wineries in federal court for breaking their laws.
• Common sense says that direct shipping-which requires a credit card, 3+ days delivery time, and an adult signature at delivery-is not the common means for illegal youth access to purchase wine, beer or spirits. Procedures that avoid underage purchases are already in place in the legal shipping states. It's no coincidence that the "stings" are crafted in the non-legal states, where common carrier drivers have not been trained to handle wine shipments.

• Over the past 30 years, the wholesale cartel has consolidated from 11,000 wholesalers to an oligopoly of two or three per state. The wholesalers, not consumers, are deciding which wines are available.
• Southern Wines & Spirits, its largest, is a $5 billion company. According to IMPACT magazine, the nine other privately-held cronies in the Top 10 control 55% of a $32 billion market. That's power.

"The [wholesaler] industry's tactics are a civics lesson in how scare stories, lobbying and political money can be used to limit consumer choice through special-interest protections." (USA TODAY editorial, July 7, 1999)

• The FTC's survey of regulators in 11 legal direct shipping states found "no evidence suggesting direct shipping increases underage access."
• These findings were consistent with previous sworn testimony by state alcohol regulators as well as anecdotal evidence in states with long-standing, pro-consumer direct shipment provisions.
• Additionally, the report concluded that "State bans on interstate direct shipping represent the single largest regulatory barrier to expanded e-commerce in wine…(and) prevent consumers from saving as much as 21 percent on some wines and from conveniently purchasing many popular wines from suppliers around the country." The FTC statement on the report is available at http://www.ftc.gov/opa/2003/07/wine.htm

"(underage access)…has not spiked in states that permit direct-to-consumer sales. The shipment bans are protectionist at the expense of consumers and small vineyards, and the court should not permit that." Opinion, Newsday (June 5, 2004)

The wholesaler's concern for youth is a sham. In 2000 they partnered with a direct shipping company; now they're opposed to all direct-to-consumer shipments.

• WSWA was a partner in the now bankrupt WineShopper.com, which intended to sell and deliver not just wine, but beer and spirits, directly to consumers' homes.
• WSWA executive director, Juanita Duggan: "…so [WineShopper.com] is going to have the marketing muscle. It's going to have the traffic. It's not going to be subject to limits of any kind. And it's going to have the complete cooperation of wholesalers in providing inventory." (www.beveragebulletin.com, March 2000). Duggan herself was an investor in WineShopper.com, according to the San Francisco Chronicle ("Hypocrisy in the service of monopoly," August 12, 2004).
• Until recently, the WSWA was opposed only to interstate shipments, not intra-state shipments, because only interstate shipments bypassed their coffers.

These [wholesalers] are not kindergarten teachers, although WSWA executive director Juanita Duggan used to be a lobbyist for Phillip Morris, which I guess is pretty wholesome. Why would the WSWA suddenly appoint itself the guardian of our nation's children? Let's not be naive here, people! They have a financial motive. (San Francisco Chronicle, August 12, 2004)

Direct-to-consumer wine shipments do not present a "slippery slope" to shipments of beer and spirits.

• Consumer demand for wines produced by America's 3,000 mostly family-owned wineries is driving this issue, not consumer demand for beer and spirits.
• Consumer demand is increasing for wine partly because very few wineries are nationally distributed and available to consumers in each state. Beer and spirit producers, in general, are far fewer in number than wineries and are much more broadly distributed in retail stores across the U.S. It is simply not logistically possible for any single wholesaler or retailer to truck and sell the 10,000+ wines introduced each vintage by American wineries. The typical grocery store carrying 30,000 items would need to devote one-third of its shelves to wine in order to carry all American wines, let alone imports.
• Wine has a status separate from beer and spirits in the capitols of 39 states that allow their in-state wineries to ship intra-state directly to consumers. The "farm winery exemption" was developed after careful legislative review of the public policy implications, or lack thereof. An extension to include beer and spirits is unlikely since there is no pressure from consumers or beer/spirits producers to provide this exemption. Any attempt to extend the exemption to beer and spirits would require an equally carefully considered public policy review by each state legislature.

Issue Summary:
A wine war pits wine consumers-who want to purchase wine directly from wineries-against the multi-billion dollar wholesaler cartel, who want all purchases to flow through them.

The wholesaler middlemen have aggressively supported legislation creating state-sanctioned monopolies in wine distribution in many states, triggering a thorough study by the Federal Trade Commission in 2003. The FTC concluded that "state bans on direct shipping prevent consumers from saving as much as 21 percent on some wines and from conveniently purchasing many popular wines from suppliers around the country."

The majority of states (26) now allow interstate direct shipments from out-of-state wineries to adult consumers. These states have procedural safeguards in place to prevent shipments to minors. The FTC's survey of regulators in 11 of these states found "no evidence suggesting direct shipping increases underage access."

These laws (that prohibit direct shipments) violate the Constitution by discriminating against interstate commerce. They also hurt consumers by keeping prices artificially high and limiting their choices. The (U.S. Supreme) court should rule for the retailers and the consumers challenging these laws. (New York Times editorial, June 2, 2004)

Free the Grapes!

Consumer Grassroots Coalition
Visit www.freethegrapes.org to join the national coalition of 300,000 consumers and 1,000+ wineries who seek to help overturn archaic, protectionist laws.

Media Contact: Jeremy Benson, Executive Director, (707) 254-1107, fedup@freethegrapes.org.

Litigation Campaign
Visit www.coalitionforfreetrade.org to learn more about how consumer and winery plaintiffs have successfully taken the issue to the U.S. Supreme Court.

Media Contact: Either Jeremy Benson (see above), or Tracy Genesen, Legal Director, Coalition for Free Trade (916) 930-7702, tgenesen@nossaman.com

Legislative Activity
For state-by-state shipping laws, visit www.wineinstitute.org, and for additional winery association information, visit www.wineamerica.org and www.familywinemakers.org.