New U.S. Liquor Law Could Benefit Marketers

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A new federal law that allows state authorities to take legal action against out-of-state direct marketers that sell alcoholic beverages imposes few new restrictions and could eventually benefit marketers, a wine industry executive says.

Under the law, which took effect last month, attorneys general of all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam can seek civil penalties in federal court against out-of-state liquor companies and wineries that violate state liquor laws.

Most states do not allow direct shipments of alcoholic beverages from producers outside their borders and require that all producers go through a wholesaler/distributor system. Until the new federal law was implemented, however, authorities had little or no legal recourse against violations.

John De Luca, president/CEO of the Wine Institute, San Francisco, which lobbied for the law, said the legislation could prove beneficial by allowing direct marketers to argue their case in federal court, "as it is clear that certain state alcohol laws are discriminatory and anti-competitive.

"These laws protect the wholesalers and harm consumer choice and hundreds of small wineries that are locked out of the 65-year-old distribution system," De Luca said. "State laws that encroach on interstate commerce or other constitutionally guaranteed rights are being challenged by wineries and consumers in New York, Texas, Florida, Virginia, Indiana, Michigan and North Carolina."

Some initially thought that the bill, S. 577, would "halt Internet sales of wine," but De Luca disagreed.

"Quite to the contrary, the legal framework already in place allowing consumers to receive interstate shipments in 20 states and intrastate shipments in 30 states will remain intact," De Luca said. "The new law does not provide for either civil damages or criminal penalties and will not adversely affect businesses currently making legal shipments."

The bill, known as the 21st Amendment Enforcement Act, was sponsored by Sen. Orrin Hatch, R-UT. The bill was signed into law last October.

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