Berger: Wine-shipping mess still around

A decade ago, shipping wine across state lines was still an unsettled issue, but the phrase “reciprocal trade” was a kind of well-understood tactic that solved problems.

It meant that if the state a winery was in and the state it wanted to ship to both had laws that permitted interstate shipping of wine, then wine could be shipped between them without restriction.

But the unsettled nature of the state-to-state regulations had so many legal issues swirling around them that no one was really happy. California wineries, being located in a reciprocal trade state, liked the ability to ship to 35 other states. But there were 15 other areas (including the District of Columbia) where California wineries could not ship.

Moreover, what about the ability of retailers to ship to consumers in other states? Or my ability to ship wine to my brother for his birthday party?

Through all this, wholesale companies opposed any form of direct shipping of wine since (as trivial to their businesses as it was) it was still was seen as a loss of revenue.

Under the old rules, the regulatory water was muddy and didn’t answer many of the questions that the federal government has never wanted to answer. (i.e., it never established a solution to the bad wording of the 21st Amendment to the Constitution that ended Prohibition, which appears to violate the same document’s Commerce Clause.)

In 2005, after years of lower-court controversy, the U.S. Supreme Court ruled in a case that some of the justices believed had clarified the situation. It ruled that states couldn’t discriminate against shippers of wine.

If a state allowed an in-state winery to ship wine intrastate, it had to permit out-of-state wineries to do the same. The ruling clarified one thing: States may not blatantly discriminate in the shipping of wine.

But in many ways, the 2005 decision made the shipping of wine across state lines worse than ever, creating a nightmare for many since the regulations that replaced reciprocity became so difficult to deal with that it led to establishment of companies who could sort out the legal spaghetti bowl.

Harmed more than any other entity was the wine retailer, who was all but left out of the wine shipping brouhaha. And in an era where Internet research appeals to wine collectors seeking esoteric wines, this is a headache that needs to be solved. Wineries still could participate in interstate shipping through use of permits, but retailers were blocked from any solution: they were prohibited from obtaining shipping permits.

Imagine finding some wines in a New York retail shop inventory that you want. Imagine that you live in a place where the shop has been told it cannot ship to you because you are in Louisiana. So what happens if that wine is shipped anyway?

This is almost the exact case of Empire Wine & Spirits of Albany, N.Y., which admits that it shipped wine to seven different states. New York’s State Liquor Authority charged the company with “improperly” shipping wine to other states. But “improper” is not defined.

As a result, Empire sued the state agency, arguing that it has no authority to control out-of-state wine sales and saying that the Constitution’s Commerce Clause trumps the state’s authority. So the shipments were not improper. The cases are still pending. For most, the compliance hoops they have to jump through now are far more onerous than ever, and many now use companies like Ship Compliant of Boulder Co., which specializes in unraveling the regulatory mess.

The 2005 decision also ended up harming retailers more than anyone had anticipated. Some wine retailers have established relationships that permit some shipping to some states, but for the most part this is a gray area that was made grayer by the 2005 case.

Inside the industry, the interstate shipping issue that was hard to discuss a decade ago is now even more of a mess than it was, leading some insiders to pray for another court case that resolves the remaining knotty issues.