When free markets aren’t so free
America is known for having a free market economy. But there is one area where markets aren’t so free and that is the shipment of wines. In fact, California producers can only ship to 11 states that have “reciprocal” trade. This makes for headaches for small producers and limited access for many consumers.
The production, distribution, and sale of wine—along with beer and distilled spirits—were outlawed during Prohibition. But Prohibition spanned much longer than just the 14 years (1919-1933) at the national level. As early as the 1851 Maine Law, states implemented their own state level prohibitions.
Similarly, when the passage of the 21st Amendment repealed national Prohibition, many of the states won what amounted to “opt-out” clauses and set their own state policy. As a result, some state prohibitions continued into the 1960s. Many county and municipal level controls still exist. Even for those consumers who don’t live in directly affected area, the sediment of prohibition still covers the map.
This patchwork repeal maintained state controls over production, distribution, and sale of wine and other alcoholic beverages. For most states, not as viticulturally endowed as California, this meant concerning themselves with distribution and retail. This right has generally been given to private firms within each state but some states, notably Pennsylvania, maintain state ownership over distribution and retail. All of this means that—unlike books or electronics—simply getting quality wine from producers to consumers is tightly controlled.
Pressures are mounting for this situation to change. Some hail technology as the force that tears down these barriers. As internet usage increases, consumers will become more informed (by reading drvino.net for example!), compelling firms to offer wine sales over the internet. But it is actually increased airline security that has led to the first legal loosening. Last week, Congress passed a bill that allows out-of-state tourists to west coast wineries to ship their purchases home. Although this affects only a handful of states and an even smaller percentage of wine consumers, it is a sign that the winds of change are blowing.
As tantalizing as the prospect of change might be, it is unlikely to occur quickly for several reasons. First, many of the firms that aspired to sell wine over the internet have failed. Second, states and local authorities collect significant revenue from wine (and beer and spirits) that they would lose through direct shipments. Third, the political weight of distributors is significant both at the local and state level where they are large political contributors as well as at the national level where their industry organization is on the Republican Party’s “Team 100” of top political donors.
It is a paradoxical situation that a country that prides itself on free trade has such restrictions on shipping quality wine but one that unfortunately looks likely to endure.
