Editorial Advisory Board: In vino veritas

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Several bills have been introduced into the General Assembly that would weaken the stranglehold that the three-tier alcohol distribution system has on wine sales to Marylanders. The bills would allow direct shipment of wine to Marylanders to varying degrees. We support allowing direct shipment of wine to Maryland consumers.

One vestige of Prohibition and its repeal by the Twenty-First Amendment is the “three-tier distribution system” for the sale of alcoholic beverages. Producers must sell their wares to wholesalers who then resell them to bars, restaurants and retailers who then resell them to the consuming public. Producers cannot sell directly to the public. It is a felony under Maryland law for out-of-state producers or retailers to ship alcohol directly to Maryland residents. During the past 40 years, lock-step distribution networks and “fair trade” laws have fallen throughout the U.S. economy. Through mail order in the 1970s and 1980s and e-commerce in more recent years, consumers have been able to obtain a greater variety of goods, often at better prices, than they could in days of yore. That is, except for alcohol.

The three-tier distribution system not only inflates prices and restrains trade, but it limits the range of products available to the public. This is especially pronounced with respect to wine from small producers. Many small wineries do not produce sufficient quantities of wine that would justify wholesalers or Maryland retailers carrying them and some only will sell their products directly. Not just oenophiles, but people who have visited particular wineries and people who have an interest in drinking wines that differ from those commercially available cannot obtain wines from small wineries. The increasing interest among consumers in the origins of what they consume is exemplified by the “farm to table” movement that has gained steam in recent years. Yet, the three-tier system precludes “farm to table” with respect to one of the world’s most celebrated agricultural products, wine.

There is no good reason to prevent direct shipment of wine to Maryland residents other than protectionism for wholesalers and retailers. All of the bills pending before the General Assembly contain mechanisms for the collection of taxes; directly shipped wines will not escape taxation. Some opponents of direct shipment have argued that minors will be able to obtain alcohol illegally through direct shipment. In December 2010, the Comptroller of Maryland submitted a report to the General Assembly regarding direct shipment of wine to consumers in Maryland. The report stated, inter alia: “There is no evidence that underage drinking has increased or decreased as a result of direct wine shipment.” Further, all of the pending bills would require the signature of a person age 21 or older for delivery. FedEx, UPS and other shippers already have such practices in place in states that allow direct shipment of wine.

The differences among the pending bills concern the types of entities that would be allowed to direct-ship. HR 234 and SB 248 would allow wineries and retailers to direct-ship. HB 1079 would allow wineries and only in-state retailers to direct-ship. HB 1175 would allow wineries to direct-ship but continue the prohibition on direct shipping by retailers. We support HR 234 and SB 248. HB 1079 and HB 1175 are blatant protectionist measures for the protection of Maryland retailers. Further, given the licensing, reporting and tax remittance requirements that the bills place on out-of-state shippers, many individual small wineries may choose not to direct-ship, but there may be retailers in wine-producing regions that would be willing to ship wines from a number of small wineries.

Also pending before the General Assembly are bills to permit restaurants with liquor licenses in Baltimore County and Frederick County to allow customers to drink their own wines on the premises. The Frederick County bill stems, at least in part, from fines levied upon Volt, the Frederick restaurant of Top Chef finalist Brian Voltaggio, which had allowed patrons to drink their own wines with their meals. The bills leave it to individual restaurants to allow patrons to bring their own wines and give restaurants the right to charge a “corkage fee” for the privilege. There is no reason to oppose the bills other than the automatic opposition by the liquor lobby to any deviation from the three-tier system.

We do not deny that the pending bills could be the proverbial camel’s nose under the three-tier tent. However, the bills are more like a chihuahua’s nose under the tent. These very small changes to Maryland law hardly are going to upset the three-tier system. And, if they do, we will not be crying in our beer.