Consumers Win with Direct Shipping

Published July 1, 2005

The main argument against direct shipping of wine was that it promotes underage drinking. A 2003 study by the Federal Trade Commission found no evidence for that charge and noted direct shipping of wine would lower prices to consumers as much as 21 percent.

The 21st Amendment, which ended Prohibition, established a three-tier system involving the producer, wholesaler, and retailer. The system forced producers to sell to wholesalers and distributors, who then sold to retailers. New York, Michigan, and most other states used the system to protect in-state wholesalers and retailers by restricting sales from outside the state.

That is why so few wines are widely available. Producers have had trouble getting wholesalers and distributors to carry their wines.

This system had problems beyond its constitutionality. In recent years, wholesalers have consolidated while the number of winemakers has increased to more than 3,500. Wine consumption also has increased. Huge wholesalers, with their quasi-monopoly advantage, have been unable or unwilling to carry many new wine labels.

There are more than 25,000 wine labels in the United States, but only about 500 are widely available through retailers in the national market. Many consumers remain unable to purchase new vintages or must pay higher prices due to the cut taken by the middle man.

K. Lloyd Billingsley