Breeding Corruption and Disrespect: Wine In The Digital Age

The experiment known as "Prohibition" failed for one primary reason:

The legal, law enforcement and regulatory means it used to promote its goals of curbing corruption and over consumption of alcohol so far exceeded what ordinary people thought reasonable that it actually promoted a disrespect for the law and with it even more corruption.

The response to the failure of Prohibition, Repeal and the institution of a "three-tier system of alcohol distribution, has, ironically, failed for the same reasons.

To quote Professor Lawrence Lessig, speaking on NPR's "To the Best of Our Knowledge" about the impact of highly restrictive copyright laws in a digital age, "when the law reaches too far…it begins to erode society's respect for the law generally and it begins to breed a kind of corruption inside of society."

This is exactly what has happened with regard to wine distribution laws in America. The various laws that define the three-tier system by restricting more direct distribution of alcohol, particularly of the vast number of wines that have entered the American marketplace in the last 20 years, reach so far beyond what consumers and alcohol vendors want or understand as reasonable, that a certain disrespect for these law and for alcohol regulation in general, has built up inside the industry and even within the wine consuming vanguard.

In speaking to the current state of copyright law, Lessig actually uses the experience of Prohibition to note, by analogy, that excessive, ill conceived and unsupported regulation of digital culture has led to a disrespect for laws in general, but also to massive corruption inside government.

Were professor Lessig to have explored and followed the analogy of Prohibition to current copyright law to its historical outcome, he would have found that the alcohol distribution regulations that followed the demise of Prohibition have become, like Prohibition itself, so ill conceived and so unsupported as to result in corruption inside government, inside alcohol regulatory agencies, inside the semi-private institutions (alcohol distributors that occupy the middle tier of the 3 tier system) that are state mandated, and even inside the other tiers of the state mandated distribution system. This massive corruption is a result of an old system that has long failed to recognize the needs and desires of the industry groups and the general society it is supposed to serve.

What kind of corruption and disrespect for laws has the post-Prohibition 3-tier system bred?

Among Wholesalers and Distributors: Their state-mandated monopolies on alcohol distribution has led to such extreme wealth and control that they now virtually determine the lawmaking process where alcohol related laws are concerned. In addition, they are so completely favored within the legal structure of alcohol distribution that they can dictate terms to all but the largest product suppliers. And, their favored role inside the three-tier system allow them to ignore regulations that affect them with the knowledge if they are caught, the penalties will be so inconsequential as to make the law breaking worth the potential consequences that come with getting caught.

Among Producers & Suppliers: For years, and still among some today, producers and suppliers ignore many of the laws, tax reporting requirements and prohibitions on shipping directly to consumers where it is illegal. When these regulations are ignored it is done because absurd and unsupported claims are used to justify these outdated restrictions on trade and fail to take account of real consumer demand and the substantial changes in the structure of the economy, the marketplace and technology that make these restrictions and their original justifications inconsequential.

Among Vendors: Today some retailers ignore the widespread restrictions on shipping direct to consumers across state lines. They do this not because their is substantially more profit to be made by shipping direct to consumers, as there is for wineries, but because there has yet to be offered a single justification for the restrictions on retailer shipping that goes beyond the predatory and protectionist desires that wholesalers and distributors have where their control of alcohol distribution is concerned. The giant alcohol distributors and their associations offer depraved and insulting public threats of "minor access" to wine if it is shipped direct, the ridiculous notion that tainted products will be shipped across the country if they don't have a hand in their distribution and the self-serving but unsubstantiated idea that government won't collect its due taxation on wine sales if distributors don't control its collection. These set of claims are so absurd that retailers have come to develop a disrespect for the law and restrictions they are supposed to support. And in some cases that disrespect, combined with the the obvious desire among consumers to obtain the wines they offer, lead retailers to ignore the laws and find a way to get the wines shipped.

Among Alcohol Regulators: For the most part alcohol regulators across the country have found themselves in the position of being referees in between competing systematic interests groups, be they distributors, consumers, suppliers or vendors. And for the most part, they do the best job they possibly can in managing the rules and regulations that define the three-tier system. Yet, the fact that the continued existence of the arcane, ancient, silly and often unsupported rules that make up the three-tier system defines their jobs and their future has led some alcohol regulators to go well beyond simply enforcing the laws they are empowered to implement. Many actually team with the most powerful players inside this system—the distributors—to help them maintain their control and power. In Michigan we saw the head of that state's alcohol regulatory body actually lobby to strip retailers of the means to get wine to their customers, to give greater power to distributors and to further strip consumers of their ability to access legal products. That's not their job. But the nature of the system they regulate has led to this corruptive activity.

Among Lawmakers: The lawmakers at the state level that craft the rules regulating the distribution of alcohol regularly create and pass the rules that breed disrespect for laws and the corruption that ensues from that disrespect. They find themselves under different kinds of pressure. The nature of campaign financing requires them to raise substantial sums of money to get re-elected. The nature of the three tier system has given distributors the power to help them do just that. Alcohol distributors in nearly every state donate substantial sums of money to the lawmakers that are empowered to create the laws that define wine distribution. It's no wonder that the laws that are crafted most often protect the monopoly status that distributors enjoy in so many states while at the same time restricting the growth of the wine market, inhibiting the growth and prosperity of wine producers, stifling the ability of retailers to fulfill a growing demand for specialty wine products and angering consumers who are forced to take part in lawbreaking just to get a simple bottle of wine or to submerge entirely their interest in specialty products and find tainted solace in the wines to which they are told by middlemen they may have access.

I'm always wary of those people who declare that "if you are not with us, you are against us" or "if you are not part of the solution then you are part of the problem." It strikes me as an unthinking and ridged stance that doesn't account for the details and nuance of an
issue that often defines reality. But in the case of the three-tier system and its corrupting nature, I'm actually inclined to believe that if you are not in favor of a complete overhaul of this system of alcohol distribution then you are indeed part of the problem that only breeds corruption and disrespect for law.

7 Responses

  1. Bob - March 23, 2009

    All I can say is amen. But the big problem is that things can only be changed on a state-by-state basis. The only exception was the Supreme Court’s decision on direct shipping, and even that now has to be dealt with on a state-by-state basis.

  2. Thomas Pellechia - March 23, 2009

    I have an idea, Tom: why don’t we talk about the three tier system, the Commerce Clause, the 18th Amendment to the Constitution, and the Supreme Court?
    We haven’t had that conversation in at least fifteen minutes 😉

  3. Australian wines - March 23, 2009

    Great article, the law has to respect the needs/wants of the majority. Without respect the law will not be followed and the issue snowballs. Learn from history!

  4. Randy Watson - March 24, 2009

    I agree! It is time for an overhaul.

  5. Alfonso - March 24, 2009

    Guilty, guilty, guilty, we’re all guilty. Someone hand me a bottle of Barolo so I can drown my shame…
    Gotta hand it to you Tom, when you get a bone in your grip, you never let go. Go get ’em tiger…

  6. David Cole - March 29, 2009

    Tom, thank you for the continued fight! As a small producer I couldn’t agree more and find it amazing that the people we send to office still do not understand or will listen to all parties in this system.
    If more people knew what a producer has to go through in each state, they would be amazed. When I talk to folks about why I am not in this state or that state, they are in serious amazement as to the hoops we have to go through.
    I along with folks like you will continue to tell the story and hope that in my lifetime we serious change in the system!

  7. Name - April 4, 2009

    The night of the fight, you may feel a slight sting. That’s pride f*cking with you. F*ck pride. Pride only hurts, it never helps.

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