UPDATE (1PM ET): I’d like to send out a special welcome to all of the PA State government folks who, according to my site stats, have been reading this post. The wine world wants to know your viewpoints on these topics, so please shout ‘em out in the comments section of this post if you’re inclined.
I suppose by now it’s no secret that I can’t stand the archaic, and probably unconstitutional three-tier monopoly wine distribution system still in effect in some states, including my hometown in the “Communistwealth” of Pennsylvania. The lucky numbers of you out there in blogosphere-land that are allowed to purchase the wine of your choosing, for a fair price, and have it shipped directly to your doorstep don’t really know the suffering that we unlucky hordes in PA have to deal with when shopping for wine.
Most readers will remember the board game Monopoly, in which players compete to take control of the highest amount of properties and services that they can, resulting in fees so high that the other players go bankrupt trying to pay them. States that operate under a monopoly of wine sales and distribution (like PA) are kind of doing the same thing, but in real life.
These stats should be abiding by the decisions of the Supreme Court and open up their borders to competition from wineries and direct shippers. The trouble is, the State monopolies have a crap business model, and they’d get handed their own jock straps in a fair capitalist marketplace. So instead, they are willing to go to extremes to protect their monopoly position.
Let the Dude enlighten you by way of an example…
- Let’s say that I badly wanted a wine that was not available for purchase through the Pennsylvania Liquor Control Board (PLCB). This isn’t difficult, since their selection, in the Dude’s opinion, is poor.
- Let’s also say that I spied a nice little beauty of a wine for sale on the Internet from someone else in another state. For this example, we’ll go to the way-cool folks at Domaine547, who sell all manner of tasty vinos. On their website, I spy the 2006 Scholium Project Gemella, Lost Slough Vineyard, and decide that I want a bottle for myself. (I checked – the PLCB doesn’t have it).
- Let’s assume that Domaine547 is a licensed direct shipper with the State of PA. That would mean that a) the PLCB doesn’t carry the wine so b) I’m allowed to order it from Domaine547 so long as they’re a licensed direct shipper with the state, provided that the following mandatory charges are added:
Following is a rough estimate of what this would cost me, before shipping charges are added:
“The Direct Wine Shipper will have a shipping charge, and must add a $4.50 handling fee, Pennsylvania’s 18% liquor tax, 6% sales tax (and 1% sales tax in Philadelphia & Allegheny counties).”
Wine Sale Price: $34.99
PLCB Handling Fee: $ 4.50
PA Liqour Tax (18%): $ 6.30
PA Sales Tax (6%): $ 2.10
PA County Tax (1%): $ 0.35
That’s an extra $13.25 out of my pocket. The additional charges constitute nearly a 40% premium above the sales price. At that level of markup, I might as well buy the wine in a restaurant instead of trying to have it shipped to me home. Imagine trying to buy something really pricey to being with, such as a case of Ch. Petrus (at upwards of $700 per bottle) with that kind of markup. Most PA state residents simply wouldn’t bother. And neither would the on-line wine sellers – it’s just not worth their time, because the state customers are unlikely to view it as a reasonable expenditure. That’s a “Lose – Lose” situation. Except for the state of PA, who are winning. At my expense.
The bottom line is that this system does not support real competition or competitive pricing – it amounts to a token gesture to appear to be opening the borders of the state to direct shipping (in this case, “direct” means shipped to a PLCB store, where you then have to go to retrieve it). In reality, all this system does is bolster the existing state monopoly on wine sales and distribution.
And finally, consider also that many high quality wine producers are shunning the State of PA because of state regulations that require them to add PA labels and bar coding to their wines. Why? Well, according to sources quoted by the Pittsburgh Post-Gazette, PA wine labels actually reduce the value of high-end wines because of the state’s reputation for poor wine storage, bad customer service, and overall expense of doing business.
In the words of Public Enemy, we’ve got to Fight the Power!
Here’s a little quiz for all of you out there in wine-land. What do you call a government that:
- Limits the choices of products available to its citizens by offering them only via government-run monopoly that has no incentive to provide competitive prices, good customer service, or expanded selection;
- Charges its citizens a premium for the “privilege” of the products limited choices & poor service, including taxation on goods already controlled by the government;
- Refuses to change archaic legislation that was enacted over 50 years ago, in order to protect its monopoly position & profits;
- Does nothing to alter its stance or comply with changing federal law, nearly three years after its current legislation has been deemed unconstitutional at both the federal and regional levels?
In most circles, the first two points could be considered Communism.
Technically, the later two points aren’t Communism, but I’d like to think that most people would at least consider them reprehensible…
Unfortunately, what I’ve described above is more-or-less what the state of Pennsylvania is doing in its wine trade, which is controlled by the Pennsylvania Liquor Control Board, right here in the good ol’ U.S. of A.
Bucking the Law Means Big $$$ for States
Actually, now that I consider it, I haven’t been entirely honest with you so far. Since the Federal government ruled that PA’s liquor laws banning interstate trade were unconstitutional in 2005, the PLCB has done something. It’s made money. Approximately $3 billion dollars in sales (that’s Billion, with a “B“), in fact. That is roughly twice the GDP of the country of Liberia.
That’s big, big money. In the case of the PLCB, it’s record-setting sales money, all achieved while operating what has been determined an unconstitutional system.
This is not just impacting PA wine lovers (& wineries) – similar situations are playing out in other states. The ones who benefit are the middle-men (distributors and state governments). The ones who get the short end of the stick? That’s you & me, baby (and the people making our favorite beverages!).
Distributors are – not surprisingly – paying big money to protect this windfall. What is surprising is that those same groups are claiming that money is not the motivator in their efforts to protect the “three tier system” of wine shipping. $3 billion in 2 years, seemingly operating unconstitutionally, and it’s not about the money?!?? I don’t know how they can even say that with a straight face…
Whether You Know it or Not, You’re Being Taken for a Ride
If you live in one of the States that prohibits (or seriously discourages) direct shipping of wine, and you buy wine, then you’re getting screwed. Your wine choices are probably limited. You might have little (if any) recourse to purchase the wines that you want. And likely, you’re paying too much for the wines that you are able to get.
What You Can Do About It
Big money issues like this one will not go away on their own. They require that wine consumers who want a fair deal – people like you (and me) – fight back:
- Visit the Shipment Compliant blog to find out where your state stands, and to catch the latest news in the fight for fair wine shipping for your state.
- If you have a blog or website, read Tom Wark’s posts on fighting back and link to support Wine Without Borders.
- Visit (and support) FreeTheGrapes.org.
- Write to your state legislators and let ‘em know how you feel! I have (many times) – and trust me, some of them will respond!
Found a great article on Newsday.com today detailing how the current archaic U.S. state wine shipping laws are negatively impacting the budding wine production business in New Jersey.
And if you think NJ is not state with fine wine potential, then you’ve probably not yet tasted the premium reds from Tomasello Winery, which was one of the top favorite picks of Andrea Immer on her TV show Simply Wine. For the record, Tomasello has stopped shipping wine to consumers within their own state.
This same scenario is playing out with similar negative effects all over the continental U.S. You can do something about it – starting with writing to your state legislators to let them know how you feel.