Health, Safety, Cynicism and Alcohol in a Post COVID-19 World
“Public health and safety”.
It is the new mantra that wine and spirit wholesalers around the country are whispering into the ears of lawmakers, judges, the media and alcohol regulators. Not too many years ago, you didn’t hear wholesalers beat the drum of “health and safety” as they opposed efforts to reform a decades-old distribution system that was creaking and ossified but built to keep those alcohol wholesalers in control of just about everything. Today, “health and safety” all you hear.
Consider the recently enacted law in Kentucky that allows Kentuckians to purchase and receive shipments of wine and spirits from out-of-state wineries and distillers. It’s a pro-consumer bill that will bring additional revenue to the state, regulate the shippers and exponentially increase the products to which Kentuckians have access.
That’s not how wholesalers see the bill. The national association representing America’s wine and spirit wholesalers, the Wine & Spirit Wholesalers of America, issued a statement on the Kentucky legislation that warned of the health and safety implications of the bill:
“We urge lawmakers to recognize the valid public safety rationale upon which beverage alcohol laws are based and the long-term unintended impacts of sweeping policy changes made in the name of consumer convenience. Should states consider changes, we encourage them to always balance convenience and valid public health and safety policies.”
Meanwhile, yesterday the trade association representing Kentucky wine and spirit wholesalers issued statements to the media that included the same kind of warnings:
“Given the number of counterfeit products available on the Internet and the lack of carrier reporting, Kentucky consumers should be wary of purchasing alcohol online unless it is delivered by a local retailer.”
Charles George, Executive Director of Wine & Spirits Wholesalers of Kentucky, made similar comments to a Kentucky TV station:
“George said he was also concerned the law will open the doors for counterfeit or tainted alcohol. His advice is to only purchase alcohol that is delivered by a local retailer to not only support local jobs but avoid purchasing a bad product.”
It used to be that when wholesalers tried to convince the public and media that direct shipment of alcohol was a bad idea they would try to raise fears by claiming direct shipment of alcohol would destroy the long-standing “three-tier system” (it hasn’t). They claimed states would lose tax revenues (they have not). They claimed that minors would use the direct shipping channel to obtain booze and end up killing themselves (it hasn’t happened). And they argued that local retailers and wholesalers would be forced to shed jobs as direct shipment of alcohol hurt their revenues (this too has not happened).
Is “health and safety” simply the next argument against the direct shipment of alcohol that the wholesalers are rolling out as they witness the failure of their other arguments to launch?
No. What the wholesalers are doing is responding to a new legal paradigm that came into effect last June with the Supreme Court’s ruling in Tennessee Wine v Thomas. In that ruling, Justice Samuel Alito, writing for a 7-2 majority, explained the invalidity of a long time claim made by wholesalers that the states may not discriminate against out-of-state wineries, but could discriminate against out of state retailers:
“The [Tennessee Wine Retailers] Association and the dissent’s overly broad understanding of §2 [of the 21st Amendment] is unpersuasive. They claim that, while §2 does not give the States the power to discriminate against out-of-state alcohol products and producers, a different rule applies to state laws regulating in-state alcohol distribution. There is no sound basis for this distinction…Nor have States historically enjoyed absolute authority to police alcohol within their borders. Section 2 allows each State leeway to enact measures to address the public health and safety effects of alcohol use and other legitimate interests, but it does not license the States to adopt protectionist measures with no demonstrable connection to those interests.”
The emphasis Justice Alito placed on the issue of “public health and safety” in his Tennessee Wine decision gave clarity to the kind of justifications that states could use in defending their alcohol beverage laws, particularly those laws that have a protectionist and discriminatory intent or effect.
Put another way, the concern now being shown for the health and safety of Kentuckians by national and local wine and spirit wholesalers is entirely pretextual. They care about the health and safety of Kentuckians only insofar as these health and safety claims and warnings of illicit and tainted and counterfeit alcohol help keep in place laws and regulations that benefit their segment of the industry.
Compounding the wholesalers’ current problem in getting others to take up their concerns with health and safety as it is connected to alcohol is the fact that illicit, counterfeit and tainted alcohol just isn’t a problem in the United States, let alone within the direct-to-consumer shipping channel.
In fact, the only issue with counterfeit products comes when there are attempts to create and sell counterfeit examples of collectible and rare wines that sell for hundreds and sometimes thousands of dollars. There is no problem with counterfeit wine infecting the low end of the market. Nor is there a problem in the U.S. with tainted wine. And as for “illicit” products, this is term wholesalers apply to wine shipped from out-of-state to consumers who can’t find the wine locally In other words, “illicit” means a product on which wholesalers did not make a profit.
But more important is the role of direct to consumer shipment of alcohol in the current age of COVID-19 and a post-COVID-19 world.
Given new and likely long-lasting concerns of the potential for compromised health by contracting a virus from another person, there is no safer way to obtain alcohol than via direct shipment. If “health and safety” is really the primary concern of wholesalers, then they all ought to be working toward instituting direct shipping laws. But they aren’t. They aren’t because they believe direct shipment hurts their bottom line and because they believe there are more dire implications for their tier of the industry in Justice Alito’s sweeping declaration that a state is prohibited from passing discriminatory and protectionist laws impacting not just out-of-state producers, but also out-of-state retailers….and perhaps also out-of-state wholesalers.
Expect to hear a great deal more from the wholesalers and their allies soon on the issue of “health and safety”. Given the absolutely rational need for more direct shipping options in the wake of the COVID-19 outbreak, you can expect this issue to rise to the surface once the current emergency begins to quell. Moreover, there are currently bills in three states that would legalize wine shipments from out-of-state retailers. Finally, there are now lawsuits in seven states challenging discriminatory laws that bar wine shipments from out-of-state wine retailers. Wholesalers in those states always attempt to insert themselves into those lawsuits as “intervenors” and they are often granted that status. Together with the state defendants, they lean on the pretextual idea of “health and safety” to defend laws that allow in-state retailers to ship wine direct to consumers but bar shipments from out-of-state retailers.
It must be disheartening for the wholesalers to be forced to die on the hill of health and safety when there are no health and safety issues that are rationally related to the issue of wine shipments. That feeling of despair must also be based on the fact that what’s coming down the pike in so many states is a new, consumer and safety-centered alcohol distribution paradigm that will result in wineries, brewers, and distillers gaining direct shipping rights in the vast majority of states. Combine this with the fact that expanded shipments from out-of-state retailers are coming soon and the fact that there are real legal questions as to whether or not the Constitution allows a state to forbid retailers from purchasing inventory from out-of-state wholesalers, and you begin to understand the source of the wholesalers increasingly hysterical and cynical claims about “health and safety”.