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The Daily Wildcat

The Daily Wildcat

 

    Free the grapes

    Matt Stonecolumnist
    Matt Stone
    columnist

    With the dawn of e-commerce has come great choice for the American consumer. Too bad that newfound choice doesn’t extend to the pleasures of the grape.ÿ

    In 24 states, including Arizona, state law limits the delivery of wine from out-of-state wineries by either banning it outright or creating such a confusing array of bureaucratic hurdles as to make it economically infeasible. In Arizona, out-of-state wineries must go through a complicated application process to ship directly to Arizona consumers. This necessarily precludes clearinghouse services like Wine.com that offer vintages from wineries around the world.ÿ

    The arguments for such laws seem logical: to prevent the delivery of alcohol to minors and to allow the state to collect taxes for wine purchases. These arguments, however, are wrong.ÿ

    As to the first, most minors looking to get smashed don’t choose to purchase wine over the Internet: It takes too much advance planning, and premium wine is much more expensive than a pack of Keystone Light. And with safeguards in place, such as requiring proof-of-age at time of purchase and adult signature upon delivery, it is incredibly difficult for minors to obtain their shipment.ÿ

    As to the second argument, according to a 2003 report by the Federal Trade Commission, “”several states that allow interstate direct shipping also collect taxes from those shipments”” through various shared-tax policies.ÿ

    Indeed, the obstruction of interstate commerce is downright unconstitutional. The commerce clause in Article 1, Section 8 of the Constitution forbids destructive trade-barriers between states. The privileges and immunities clause in Article IV, Section 2 ensures freedom of enterprise for out-of-state residents on par with that of in-state residents. In 2005, even the Supreme Court weighed in by striking down the state laws of New York and Michigan that prevented the delivery of wine from out-of-state wineries.ÿ

    Last year, following the Supreme Court decision, the Arizona state Legislature passed a law allowing out-of-state deliveries from wineries that produced less than 20,000 gallons of wine per year if those wineries completed a burdensome license application. It was a good first step. It wasn’t enough.ÿ

    Why do unfair, protectionist policies persist, especially in conservative Arizona? To fully grasp the controversy, we need to understand the nature of the alcoholic beverage market.ÿ

    In many states, producers of wine, liquor, beer and spirits can only sell to liquor distributors, who then sell to retailers, who in turn sell to the consumer. This “”three-tier”” approach to alcohol distribution represents an anachronistic, entrenched legal regime at its worst much to the detriment of the consumer.ÿ

    With the rise of the Internet, the “”three-tier”” distribution system helps keep a few middlemen rich while consumers are faced with less choice and higher prices. The nation’s top 50 wineries produce 87 percent of all wines consumed in the country each year. The remaining amount is produced by approximately 2,500 very small wineries. It is logistically impossible for the distributors to make these lesser-known wines available to retailers and subsequently, consumers across the country.ÿ

    The Internet opens up new avenues for wineries to reach their buyers. And in the wine market, selective buyers demand access to the very best. The very best often comes from the very smallest.ÿ

    Liquor distributors face significant financial losses when consumers are allowed to buy directly from the wineries via the Internet, outside the “”three-tiered”” distribution network. Southern Wine and Spirits, the Miami-based company that controls most distribution in Arizona, generates $2.8 billion in revenues per annum. Hence the controversy: Distributors fight any move to liberalize the system and Arizonan wine-lovers are left out in the cold.ÿ

    The system itself is deliberately archaic to protect the interests of a handful of liquor distributors. It would behoove legislators to take further action for the sake of a robust and fair economy.ÿ

    According to the Federal Trade Commission report, if the interstate wine trade was liberalized, “”consumers could reap significant benefits. Consumers could save money, choose from a much greater variety of wines and enjoy the convenience of home delivery.”” Small wineries, many family-owned, would prosper and proliferate by widening their consumer base using the Internet.ÿ

    Ultimately, this is about consumer rights. The wine-lovers the consumers of Arizona deserve a free functioning market economy, not thickheaded interstate protectionism. Let’s see some additional economic foresight and realism from the legislators in Phoenix.ÿ

    In vino, my friends, veritas.ÿ

    Matt Stone is a senior majoring in international studies and economics. He can be reached at letters@wildcat.arizona.edu.

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