COURTING WINE LOVERS CONSUMERS TO BE AMONG BENEFICIARIES OF COURT RULING.

Byline: GARY M. GALLES Local View

THE Supreme Court ruling Monday holding that states cannot ban consumers from ordering wine directly from out-of-state producers was a major victory for wine drinkers. The case, Granholm v. Heald, struck down substantial protectionist barriers against wine competition in 24 states.

The effects on the more than $20 billion-a-year wine industry could be large. In a 2003 study of these restrictions, the Federal Trade Commission found that purchasers could access a far larger selection of wines online for direct delivery and could save 8 percent to 13 percent on wines costing $20 or more per bottle and 20 percent to 21 percent on wines over $40.

In-state wine wholesalers, in-state wineries and their political patrons - the primary beneficiaries of direct delivery restrictions - claimed that they really existed to restrict underage drinking and to allow states to collect taxes. But the FTC rejected those claims as fig leaves for protectionism, as well as revealing other state restrictions that make sense only as ways to hinder competition.

Fortunately, the Supreme Court was not fooled, either.

How can we know the restrictions were not about holding down underage drinking?

Minors can rather easily buy alcohol locally, and there is little evidence that minors actually buy alcohol online. Liquor enforcement agencies in states allowing direct shipment have reported very few problems. Instead, complaints come dominantly from competing sellers.

Besides, the FTC study showed that the low-cost wine underage drinkers tend to buy is actually cheaper at local stores than delivered directly. Online purchases also require a credit card and a several-day wait for delivery, unlike local stores. Many states impose added restrictions and controls, such as requiring adult signatures for delivery. Moreover, many states that exclude interstate direct shipments allow in-state shipments, even though they would create the same underage access problems.

As underage drinking has been increasingly exposed as a protectionist ruse, proponents of restrictions shifted to arguing that they were necessary for states to collect taxes. But that claim is no more credible.

States allowing interstate direct delivery use far less restrictive policies, such as requiring registrations or permits from out-of-state wineries, and report few problems collecting taxes. Some work directly with other states to resolve any problems. Those allowing direct in-state shipment express no major difficulties collecting taxes. In addition, legislation passed in 2000 now lets states bring actions against violators in federal court.

Winery and wholesaler interests, insulated from competition by restrictions on interstate wine shipments, dressed up their case as attractively as possible. However, since that involved blatantly false arguments involving underage drinking and tax collection, they were not the real reasons. They were just what Ambrose Bierce once called ``a strife of interests masquerading as a contest of principles.''

Economist Daniel McFadden more accurately described the restrictions as ``another example of the abuse of the regulatory process to protect concentrated economic interests, going far beyond the minimum regulations needed to maintain the integrity of taxation and to protect minor consumers.''

The clear anti-consumer nature of the state restrictions on interstate wine shipments - the FTC received more complaints about those restrictions than any practice in any other industry - did not determine the Supreme Court's decision. But in finding the restrictions unconstitutional, the court has substantially benefited wine consumers and wineries previously frozen out of markets. Well-deserved scrutiny of costly restrictions on beer and liquor marketing may also follow.

And by revealing their only real purpose as raiding consumers' wallets for those with clout in the capitol, the ruling might get voters to consider booting out the politicos who have been feathering their own nests by facilitating the transfer.

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Photo:

Edison Voong packs up boxes of wine to be shipped from Wine.com at the Internet wine firm's warehouse in Oakland.

Eric Risberg/Associated Press