Study Boosts Wine Online

Federal regulators gave wine drinkers -- and California vintners -- some news to toast on Thursday, concluding in a report that if states lifted restrictions on Internet wine purchases, consumers could save up to 21% without any real danger of providing minors with another way to buy alcohol.

The Federal Trade Commission report provides new ammunition to the wine industry, which wants to overturn laws that effectively drive up prices by requiring that wine move through networks of wholesalers, distributors and retailers.

Should those statutes be loosened, California’s $14-billion wine industry would be the biggest beneficiary.

“These laws protect the wholesalers and harm consumer choice and hundreds of small wineries that are locked out of the distribution system,” Robert P. Koch, president of the California-based Wine Institute, said. “Wholesalers have used the bogus underage access argument in order to preserve the discriminatory status quo. We are pleased that the FTC has debunked this false claim issue once and for all.”

Koch and others said the report should aid efforts to overturn restrictive state laws.

On the other side has been the Wine and Spirits Wholesalers of America Inc., which contends that the current rules provide an orderly and easily monitored system that keeps wine out of the hands of minors. Trade group officials were unavailable for comment Thursday.

The FTC studied Virginia’s ban on direct wine sales from out-of-state supplies to arrive at its cost-saving figures. Using a sample of 83 popular wines, the agency compared the online price per case with the retail price at stores in a Washington suburb.

The survey found that the online price of a case with bottles costing $20 or more, plus ground shipping, averaged 8% to 13% less than the retail price. The savings increased with more expensive labels, reaching 21% for a case containing bottles costing at least $40.

The FTC’s study was undertaken after hearings in October that included testimony about whether state laws restricting electronic commerce were necessary or simply being used to protect licensed retailers and wholesalers from competition.

Vineyards and other interests have filed suit to overturn state laws restricting sales of wine online or by other means of direct shipment.

Jon Fredrikson, a San Francisco Bay Area wine industry consultant, noted that the 21st Amendment, which repealed the 18th Amendment’s prohibition on liquor sales, left the right to regulate alcohol to the states.

“Someone is going to have to make a big constitutional argument on whether federal law can transcend states’ rights,” Fredrikson said.

The FTC report said California was one of 13 so- called reciprocal states that allowed wineries to conduct direct-to-consumer online sales across their borders as long as those states also allowed the sale of California wines. Despite continuing legal challenges to the sales ban, 26 states still restrict direct shipments, the FTC said.

The agency’s report poked holes in several arguments against online sales. It referred to the state bans primarily as barriers to competition that restricted consumer choice and prevented significant savings.

The report said most fears about sales to minors appeared unwarranted, in part because wine sold by the case online was a relatively expensive form of alcohol favored by adults.

“The states that permit interstate shipping generally report few or no problems with shipments to minors,” the report said. “Some states have applied the same types of safeguards to online sales that already apply to brick and mortar retailers.”

Such measures include requiring the signature of an adult at the point of delivery.

Still, the Texas Safety Network, a group sponsored by that state’s wine and distilled spirits distributors, contends that such protections are inadequate.

The group says a minor could simply present a fake identification card to a delivery worker.