NY Liquor Authority to Wine Library: “immediately cease and desist”

ny_liquor_authorityNew York law states prohibits wine shipments from New Jersey retailers to NYS residents. But you’d never know it since New Jersey is home to many wine shops that sell wine online to New York and beyond. One of the state’s highest profile retailers is Wine Library, popularized by Gary Vaynerchuk who once streamed 1,000+ videos from the store.

In a staggering change of direction, the New York State Liquor Authority has now decided to enforce the law on the books. In a letter dated 8/12/13 that has not been seen publicly even though it is on the SLA website, the SLA instructs Wine Library to “immediately cease and desist” sales to New York residents. Wine Library did not respond to a query for comment.

Over the past decade, New Jersey has turned into one of the most vibrant states in the country for online sales. Beyond Wine Library, it is the home of Wines Til Sold Out, which last year stated they have $70 million in annual revenue. WTSO did not immediately respond to a query whether they also received a letter. Many other retailers based in New Jersey operate on thin margins and often jockey to display the lowest price of a given wine on wine-searcher.com.

Clear losers in this are New York wine consumers who will lose a major source of wine selections. It does make New York state taxpayers who enjoy wine wonder whose interest does the SLA serve? And why change the enforcement now? And what would it take to revert to status quo ante and restore sales from NJ wine stores but with all above board?

The winners under this would appear to be New York wine shops as consumers might refocus their shopping at in-state retailers. But they could also direct shopping to retailers in California or elsewhere.

One New York wine retailer who thinks otherwise is Daniel Posner of Grapes The Wine Company in White Plains. He says “the trickle down effect is very bad. New Jersey is likely to enforce their ban of wine shipping against NYS retailers.” He continued, “Thirty seven states have banned wine shipping from retailers outside the state. All they need to do is enforce their own laws.”

Whether the SLA will crack down on other states remains to be seen.

The SLA has a three-person board of commissioners. The Chairman is Dennis Rosen who is in charge of day-to-day operations. Jeanique Greene is also a Commissioner and serves on a per diem basis. The third seat is vacant. The Governor appoints commissioners for terms of three years and the state senate offers advice and consent on nominees. A query to the SLA about plans to fill the vacant seat did not meet with a reply.

See the letter

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29 Responses to “NY Liquor Authority to Wine Library: “immediately cease and desist””

  1. What happened to “truth, justice and the American way?”. Can you just imagine what the rest of the world thinks of this kind of hick behaviour? Honestly you guys across the pond have governments that make one wonder what happened to Superman. is he dead or what?

  2. I hope they #crushit.

  3. This is HUGE, and I could see this breaking one of two ways…a really good way and a really bad way.
    As someone who purchases 99% of my wine on-line (and a lot of that comes from WineLIbrary…and I live in New Jersey), I have noticed that many retailers sell across state lines despite the legal prohibition to do so. While I’m not a lawyer, I have the impression that many of the retailers get around the law by including some sort of disclaimer at the time of purchase to the effect that legal possession of the wine transfers to the buyer at the point of sale. In essence, even though you live in NY you purchased the wine in New Jersey and you are simply shipping the wine to yourself with a 3rd party shipping company simply facilitating the process. Should WineLibrary choose to fight this order, which I hope they will, we could see a judge opine on the legality of this process. If the process is upheld, then it would be a huge move in favor of the consumer as it would provide a roadmap for any wine store that wants to legally sell and ship wine across state lines. However, if the court strikes it down, then we are all screwed until such time as the archaic laws are changed (which, given the industry money behind the laws, could be like Waiting for Godot).

  4. Spencer – true, if WL challenges it in court and wins, they could be the champion of pushing back anti-consumer shipping laws and bringing liberalization to the US wine market! Echoing Ben above, will GaryVee return to Crush It?? If so, it would merit a statue of Gary somewhere. 😉

    Or would they be reluctant to fight it fearing liberalization would pave the way for more competition from the likes of Amazon?

    Clearly, a lot to look out for as this important story unfolds.

  5. This happened once before when a New York retailer (Zachy’s) filed a complaint. Many retailers ship across state lines, legally or illegally, as enforcement is difficult. Many New Yorkers drive into New Jersey to buy their wines (as do many Philadelphians).

    Here in Utah, where it’s actually a felony to buy wine out of state, people frequently go into nearby states and bring back whatever they can. But direct shipping, while it does happen, is somewhat rare.

    These laws are anti-competitive and totally idiotic.

  6. This is a direct result of the three-tier system and the WSWA wholesale lobby.

    Follow the money.

  7. Thinking more about this…if WineLibrary does decide to fight, where do they go to court? Is it a state issue, since it is NY State that issued the letter? Or is it a federal issue, since this relates to a matter that crosses state lines?
    As for your question “Or would they be reluctant to fight it fearing liberalization would pave the way for more competition from the likes of Amazon?”…good point, but doesn’t seem like Gary V’s way. I get the impression that he likes opportunities to be disruptive of the status quo in business. Plus, he always says that he likes competition. Fighting and winning would certainly be disruptive!

  8. It is a Federal issue (or can be if the state wants to go that route) since there is now a law called “The 21st Amendment Enforcement Act” (crafted by Sen. Orrin Hatch of Utah). This allows the states to use Federal remedies to enforce state alcohol laws.


  9. “But they could also direct shopping to retailers in California or elsewhere.”

    Is there any reason to believe the C&D letters are only being sent to NJ retailers?

  10. If WL wanted to challenge this, they would do so in NY court. They could get there one of two ways (perhaps others): 1) seek a declaratory judgement; 2) make a shipment and then defend themselves in court.

    In either case they would likely challenge the state law as a restraint on interstate commerce in violation of the commerce clause.

  11. It’s been a while since I’ve studied jurisdictional doctrine, but I think the following is correct:

    If WL challenges the cease-and-desist as a violation of federal law (e.g., the Constitution’s dormant commerce clause), then they would be raising a “federal question” that would give jurisdiction to federal courts.

    However, if WL challenges the cease-and-desist as improper ONLY under NY law (because, as was suggested above, WL sold the wine to the consumer in NJ and it was shipped by a 3rd party at the consumer’s behest), then there’s no federal question and the case would likely be heard by a NY state court (or by a NJ state court applying NY state law).

    If I’m WL, I’m making both arguments — thereby landing the case in federal court.

  12. There have been previous cases in Federal court, in regards to this, including in NY, and a big one in Texas. Each time, the court has sided with the state, despite it being anti interstate commerce clause.

  13. That’s right, Daniel. Sadly, WL’s chances of challenging this and winning are extremely remote. Gary’s competitive nature notwithstanding, I doubt whether they’ll expend the resources to take this to the courts, because precedent is squarely on the side of the state — both with respect to the federal law issue (other circuit courts have found that the commerce clause non-discrimination requirements that apply to wineries do not apply to retailers) and the New York law argument (states have the right to regulate interstate shipments and the statute quoted in the letter pretty squarely prohibits what WL is doing).

  14. The commerce clause and the 21st amendment are in direct contradiction on this. Ultimately, it will need to be a federal appellate court (if not the Supreme Court) that once and for all clarifies this conflict and determines the supremacy of the initial clause or the amendment.

    It would seem as the WL might be, should they choose to pursue it, the test case to start working its way up the chain.

  15. Bill

    As I mentioned, WL is not the test case here. The biggest case to date was involving the state of Texas. Wine Country Gift baskets was the plaintiff, I believe. The case dragged for 3+ years. Cost a lot of money. And lost on appeal.

    It was a blatant violation of the commerce clause. In state Texas retailers are allowed to ship to residents of TX. out of state are not. Pretty cut and dry. Judges hate getting involved in liquor.

  16. […] a staggering change of direction, the New York State Liquor Authority” has decided to enforce its law prohibiting “wine shipments from New Jersey retailers to NYS […]

  17. Some of you get confused about what the issues are- taxes & protecting the monopoly that’s it. The arcana of prohibition ect is the smoke & mirrors to distract from the true motivation of states & distributors.

  18. Under a capitalistic system, corporate greed always trumps consumer interest.

  19. I will be very, very intrigued to see how ‘other’ states’ shipments are being ceased and desisted, if at all. While NJ may make the most logical sense (illogical in my mind but I thought capitalism and free trade were at the core of America)due to geography, there are plenty of other states that ship wine (many to NYC).

    Has there been any mention of wine producers shipments from out of state to NY?

  20. I work in NY now but spent time in NJ industry for years. Unfortunately NJ has many programs such as dealer loaders (buy 26 cs of 1.75L Absolut and get a TV) or RIPS (retail incentive programs-essentially credit from the distributor for purchasing a minimum quantity of goods) that make them uncompetitive in the marketplace for most states. As these equate to money under the table RIPS and dealer loaders are illegal in most states.

    Until we have national regulation it is in the best interests of the states to protect its own market and jobs.

  21. I’m surprised no one has mentioned the obvious here: It is illegal for New York wine stores to ship wine to New Jersey. Isn’t it only fair for the reverse to be the same?

  22. Alcoguy, I understand the discrepancies in ‘incentives’ but NJ, like NY, is a posting state. The RIP programs are to protect pricing, not hurt it. Quantity discounts, incentives and the likes certainly have the ability to decrease retail pricing.

    That said, ALL states (including state control) have under the table deals happening all of the time.

    I have never understood why alcohol is regulated so different than all other goods for interstate commerce. One can buy tobacco freely but not booze. (Yes I know that the constitution gives power to the states – but that’s another subject).

  23. Jeremy

    It is illegal to ship into both states.

    The real question is, “why?”

  24. Imagine how this might play out when USPS changes their rules to allow shipping of wine (which generates massive profit for UPS & FedEx).

    Heard recently from distributor representatives: “we just want a level playing field that is fair”. The distributors believing that the current system is fair.

  25. Gary has changed… KaD

  26. Spencer

    The wholesalers definition of fair is quite contradictory to the realities of the world.

    In NY, I used to work with a small wholesaler, now out of business. He had a “boutiquey” California winery that I liked. His wholesale price was higher than CA retail prices. I questioned him on it. He said, “I can charge whatever I want. That is what our system allows for. Competition.”

    I then pointed out to him that I could not buy the wine from any other wholesaler and what he was doing was taking advantage of a situation.

    We never did business again.

  27. A few points:
    1.Retaliation will hurt NY much more than NJ. Think of you the number of top end stores, not to mention auction houses etc, none of whom will be able to ship to Jersey. Extend this to other states, and NY may lose its place as the largest distributor of new and secondary wines in America. Just the kind of addled Maths that I expect out of our friends in Albany.

    2. This is the logical extension to the Supreme Court case a few years ago. The decision was relatively narrow, and seemed to protect wineries; wine stores just jumped in expecting similar protection. It was only a matter of time before somebody tried this, in fact I am surprised it took so long.

    3. Yes it is dormant commerce clause versus State’s rights to legislate alcohol, and that needs to be dealt with, again I suspect at Supreme Court level. Expect to see stories of minors ordering booze over the Internet over the next few months. It’s an effective tactic that WSWA has used in the past, and seems to be either credible or convenient to legislators nationwide.

  28. I doubt any minor has ever ordered alcohol over the internet, except as part of a sting operation. But it is effective when the criminal class, AKA the WSWA, uses that tired argument to keep lining their own pockets.

  29. Anyone know if there is an update on this situation? Anyone in NY try ordering wine from WineLibrary recently to see what would happen? Their web site seems to indicate that they can/will still ship to NY.


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