FTC Staff Backs Direct Interstate Wine Shipments in NY Letter

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Federal Trade Commission staffers recommended that New York lawmakers pass bills allowing out-of-state wineries to sell and ship products directly to consumers in the state, the FTC said yesterday.

In a letter to state lawmakers, staffers from several of the FTC's bureaus argued that allowing direct interstate wine shipments benefits consumers. Including New York, 24 states ban direct interstate wine shipments, hindering wineries and wine sellers from selling their products out of state via e-commerce or other direct sales methods.

According to the letter, in examining states that allow interstate wine shipments, FTC staffers found no reported problems with alcohol sales to minors or with collecting taxes on sales of alcoholic beverages. States that allow interstate wine shipments have adopted alternative procedures, such as requiring adult signatures for wine shipments and requiring out-of-state sellers to obtain permits and collect taxes.

"By allowing interstate direct shipping, the bills could allow New York residents to purchase a greater variety of wines at lower prices," the staffers wrote.

The letter quoted a 2002 study in which the FTC examined the bricks-and-mortar wine market in McLean, VA. FTC staff found that by buying online, consumers stood to save 8 to 13 percent on bottles costing more than $20 and 20 to 21 percent on bottles costing more than $40 when using the cheapest shipping method.

Also, 15 percent of the wines found online were unavailable in retail stores within 10 miles of McLean, according to the letter. The FTC chose McLean for the study because the socioeconomic status of the town's residents made it likely that retail stores catering to sophisticated wine tastes would be in the area.

New York state legislators are considering three bills that would let out-of-state suppliers ship wine directly to New York consumers. In addition, a public interest law firm, the Institute for Justice, filed a petition in March asking the U.S. Supreme Court to overturn a 2nd U.S. Circuit Court of Appeals ruling that upheld the state ban on direct shipments of out-of-state wine.

Federal appeals courts have split on the issue, with courts in North Carolina, Texas and Michigan upholding the bans, while the U.S. appeals court in Indiana upheld the law. New York Gov. George Pataki has supported legislation to allow direct interstate shipments.


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