Over Stepping Their Authority: New York vs Wine Retailers

big-stepThe New York State Liquor Authority (NYSLA)  has exceeded its authority in asking a New Jersey wine store, The Wine Library, to stop selling wine to residents of New York so as to do the bidding of local alcohol interests.

On August 12, the New York State Liquor authority sent a letter to Wine Library that stated the following:

The New York State Liquor Authority is in receipt of information that you are selling and shipping alcoholic beverages into New York State….In view of the above, you are directed to cease and desist selling and shipping alcoholic beverages into New York State.”

What’s really important to understand here is that the NYSLA has absolutely no authority to tell a consumer which retailer (in-state or out-of-state) it may buy wine from, nor does it have the authority to tell an out-of-state retailer that it may or many not sell a bottle or bottles of wine to a New York resident. A New York resident may purchase wine via phone or Internet from any wine retailer in the world, including retailers across the river in New Jersey. By asking the Wine Library in New Jersey to “cease and desist” from selling wine to residents of New York I can only surmise that the NYSLA (or its legal department) were being either careless or attempting to be intimidating.

It’s quite easy to conclude that the NYSLA was trying to be intimidating, if not careless. In the letter they sent to the Wine Library, the New Jersey Division of Alcohol Beverage Control was cc’d, Why? Well, New York has no jurisdiction over a New Jersey wine store. But the NJ Alcohol Beverage Control does. But what’s important, again, is that New Jersey retailers may sell wine to anyone they want anywhere in the world and neither the authorities in New Jersey or New York have anything to say about that.

Now, the issue of actually shipping the wine across state lines is another issue entirely. Whether the Wine Library arranged for the shipment to a New York resident, it is entirely possible that it was the New York resident that is responsible for shipping the wine to themselves. I don’t know if Wine Library is or will claim this or not nor do I know if there will be any litigation over this.

But what I do know is that the NYSLA has no authority to comment on who a New Jersey wine store sells to.

What I also know is that there is a concerted effort among New York distributors to use politics, the law and the NYSLA to assure as much as possible that they don’t have to compete on a level playing field and that they are throwing around their weight (gained only be being given extraordinary privilege within NY liquor law) to make this happen. Consider the following:

• New York Distributors have actively attempted to stop consumers from using any and all means for obtaining wine from out-of-state sources, be they wineries or wine stores.

• New York Distributors have made the case to the NYSLA in public and in private that companies like Amazon and Lot 18 and other marketers ought not be allowed act as marketers of wine for out-of-state wineries or retailers.

• New York Distributors have attempted to change the law so that smaller distributors can’t warehouse wine in less expensive nearby states, effectively trying to put these smaller, artisan distributors out of business

• New York Distributors have attempted to end the so-called “Grey Market” in New York, which allows a number of hard to find and out of vintage wines to make their way onto NY wine lists and stores shelves.

Now, I don’t know why all of a sudden the NYSLA is going after The Wine Library. But I’m willing to bet dimes to dollars that it was big New York distributors that insisted they do so. The problem is that the NYSLA is exceeding its authority in trying to tell The Wine Library it can’t sell wine to New Yorkers. Of course it can. But here is the really interesting question: Are the wines that are being bought from The Wine Library by New York consumers being shipped back into New York by the consumers themselves and is The Wine Library merely being paid to put the wine in boxes and to call the carriers on behalf of the consumers? If so, shouldn’t the NYSLA be going after the New York consumers, rather than doing the big NY distributors’ dirty work?

The law in New York that prohibits consumers there from having wine shipped to them directly from out-of-state wine stores is arbitrary and protectionist. In fact there is no good reason why shipment of wine from out of-state wine stores to New York consumers can’t be governed by exactly the same set of rules and regulations that govern the shipment of wine from out-of-state wineries. Both are acting as retailers and the transactions would be identical in nature.

There is another issue here too. By banning New York consumers from having wine shipped to them from out-of-state retailers, New York law is discriminating against all imported wines. While the state allows domestic wines (from domestic wineries) to be shipped into the state, it completely bars the shipment of imported wines from out-of-state since only retailers in the U.S. sell imported wine. That’s product discrimination. And again, it’s a form of discrimination that can have only one purpose: protect big New York distributors.

You might ask why I’m not railing against New York retailers, who are also protected from competition by these kinds of bans on shipping. Well, the fact is there are numerous retailers in the state of New York that are all in favor of allowing NY residents to have wine shipped to them from out of state wine stores. They are in favor of it because they aren’t cowards who fear competition.

Tags:


17 Responses

  1. Pawineguy - August 26, 2013

    Of course the irony here is that another internet retailer, based in NY, who feels that they are now covered from a compliance standpoint, is actually the party that started the complaint. It’s not exactly a big secret.

    • Daniel - August 29, 2013

      I would like to know who outed Wine Library. I do not believe that it was one specific retailer, but if you have information, please feel free to email me.

  2. Thomas Pellechia - August 27, 2013

    In NY, the Liquor Authority hardly ever goes after these kinds of things until another retailer sends a formal complaint. Some retailers have trouble taking care of their own businesses, so they try to wipe out their competition instead by using the very restrictions of the system that they claim to abhor. It’s known as hypocrisy.

  3. Robert - August 27, 2013

    I think you’re barking up the wrong NYSLA tree if you want to make this about imported wine, Tom. New York and Chicago have the most diverse, thriving imported wine scenes in the country (to which I’d probably add DC), yet neither allow shipments from out of state retailers.

    This issue in New York that threatens consumer access to imported wine is the effort in the state legislature (funded through donations by Southern and Empire) to bar small, importers/distributors from using New Jersey based warehousing and force a “24 hour at rest” law into effect.

  4. pawineguy - August 27, 2013

    Thomas,

    That’s exactly what happened in this case…

  5. cmnoble - August 27, 2013

    Per Warren Zevon: Lawyers, Guns and Money

    The system is broken. But some like as is. Follow the money to see who likes the current system.

  6. JK - August 27, 2013

    Tom, you underestimate the power of seemingly unconnected regulators. Most states require that licensees operate lawfully and comply with all applicable rules and regs. READ: other states, federal, etc. So, while NYS has no direct regulatory control, they can ask NJ to step in and take action. In an extreme case, they could bring an action in NYS against Wine Library for something like conspiring to evade the payment of NYS alcohol tax (something that they are probably inadvertently doing). NYS brings the action and if there is any kind of criminal penalty then it would effectively put WL out of business as the local regulators would likely bring an action to suspend or revoke their permits.

    You cannot treat the regulators disrespectfully. The industry is at the mercy of the state and federal agencies. They hold ALL of the cards ultimately, and god help you if you piss the wrong ones off. Their entire business is at risk.

    I’m not an attorney.

  7. tom merl - August 27, 2013

    Tom, what about the Webb Kenyon Act to utilize the Feds to enforce state alcohol laws ?(though it does go back to 1913)

  8. Terroirist: A Daily Wine Blog » Daily Wine News: Coravin at Top - August 28, 2013

    […] to them directly from out-of-state wine stores is arbitrary and protectionist.” Tom Wark isn’t happy about New York’s apparent decision to crack down on its law against retailer […]

  9. James - August 28, 2013

    While I do not agree with these actions or any similar activity from other states, I am not sure why anyone would think that this is out of the bounds of any ABC regulatory body. Massachusetts has similar laws that they enforce through UPS. They confiscated and supposedly destroy any shipments they discover coming into the state. South Dakota threatens legal action against retailers, including criminal proceedings for a “possible class 1 misdemeanor.” The Alcoholic Beverages Division of the State of Iowa also doles out cease and desist letters. Their law is that only manufacturers may ship, not re-sellers.

  10. carroll price - August 28, 2013

    It’s a pity that the 21st Amendment which ended Prohibition, didn’t also include language forbidding federal and state governments from ever again becoming involved in liquor control legislation in any way, shape or form. There’s a long list of things that don’t need government controls and regulations, with the manufacturing and distribution of alcoholic beverages ranking near the top..

  11. Robert - August 28, 2013

    Carol, that’s a nice sentiment looking at it through today’s prism, but the key is to look at it through a lawmaker’s prism of the early 30s. America had gone through a period where there was absolutely ZERO government regulation of the alcohol industry–other than the obvious one of trying to ban it completely–and look at the system that sprung up–organized crime, Alfonse Capone, Lucky Luciano and Meyer Lansky.

    Attempting to put some oversight, regulation and firewalls into the system was an absolutely judicious exercise in policy making.

    • carroll price - August 28, 2013

      If I am misinterpreting your comment, please correct me. But it is quite clear that the organized crime wave to which you refer did not exist prior to Prohibition, but came about as a direct result of Prohibition.

      • Thomas Pellechia - August 29, 2013

        Yes, organized crime was the reaction to the extreme government control: Prohibition.

        The saddest part of this story is that upon Repeal, some states handed distribution over to groups that before Repeal were the very criminals or friends of criminals that the federal government helped to spawn.

  12. GregT - August 29, 2013

    The last time the Supreme Ct spoke on the case, in Granholm v. Heald, they said:

    “This Court has long held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” ”

    In other words, the Court did not let the rights given to states by the 21st Amendment trump the Commerce Clause. In this case it’s retailers and not wineries, but the Court didn’t distinguish – it talked about economic interests w/out regard to the specifics

    They later said:

    “The Twenty-first Amendment’s aim was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use. It did not give States the authority to pass nonuniform laws in order to discriminate against out-of-state goods, a privilege they never enjoyed. ”

    So this latest ploy is doomed and I hope the WL fights it. I will continue to patronize the WL, which is a great store.

    • Thomas Pellechia - August 29, 2013

      Operative words, GregT: “in all but the narrowest circumstances.”

      Why issue a definitive opinion when you can string the court cases out for a lifetime with but a few choice words of ambiguity?

      First, WL would have to bring it to the Supremes; then, prove that this is not one of those narrow circumstances. Could be costly and time-consuming, which, in my view, is THE major fault with our so-called system of justice.

      On a narrow front, states have a tax issue to use in the fight.

  13. Vinny Vino - December 4, 2013

    Tom I think there is a bit of confusion here. NY SLA has the authority to regulate its state in regards to liquor as does any state authority. As an importer we face these regulations all the time. I’m willing to bet that the NY distributors filed a complaint with the State of NY. The only reason why the US continues to work through the three-tier system is because the large importers/distributors are paying off the politicians to keep these rules in effect.


Leave a Reply


eight − four =