Direct Shipping Threat to Three-Tier System, Entire Industry, CEO Says

By Brenda Owen

Through illegal direct shipping of beer, wine and spirits products to consumers by some in the industry, alcohol beverage retailers and wholesalers face a systematic and coordinated attack on their businesses from within their own ranks, says Juanita Duggan, president and CEO of Wine and Spirits Wholesalers of America Inc., speaking at the organization's 61st Annual Convention & Exposition held recently in Las Vegas.

“The form of these attacks is framed under the guise of the so-called direct shipping of wine,” she said. “But anyone in this room who really believes this is just about farmers or crops or a divine right of some to ship alcohol to whomever and wherever they please is terribly confused. As we have said all along, this is about tearing down an entire system dedicated to the responsible sale and distribution of alcohol in this country.   The public understands this and that we — alcohol wholesalers — are caretakers of their trust in this system.”

Both wholesale distributors and retail storeowners who ship alcohol beverages ordered via Web sites to customers' homes, rather than delivering the goods themselves, are breaking the law, she said.

“There are a lot of retailers who are shipping illegally — a lot of them,” Duggan said in a phone interview regarding the issue. “However, ABL (American Beverage Licensees) has endorsed our position and is a very strong partner in this.”

System of Safeguards

Bolstering WSWA's long-held position on the direct shipping issue, which she said also is the American public's position, Duggan cited in her keynote speech a recent Second Circuit Court of Appeals statement, which declared: “Changes in marketing techniques or national consumer demand for a product do not alter the meaning of a constitutional amendment.”

The meaning of that constitutional amendment — the 21st Amendment — reads in part:

“The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

Duggan said this was not just an amendment to legalize alcohol by repealing the 18th Amendment. “It (the 21st Amendment) expressed the will of an entire nation — a country aghast at the conditions that lead to Prohibition in the first place,” she said. “There is absolutely no evidence of consumer demand for loosening the system of safeguards or de-emphasizing the responsible regulation of alcohol — as guaranteed under the 21st Amendment.”

The so-called demand for doing away with responsible regulation of alcohol is coming not from the public, Duggan said, but a very small group of people who don't want to play by the rules because they find themselves with too much product and not enough consumer demand.

“We must expose this attack for what it is — not the misnomer of ‘direct shipping of wine' — but rather the loosening of the responsible regulation of the sale and distribution of alcohol in all forms,” she said.

When it comes to responsible industry behavior, Duggan says all forms of alcohol are equivalent — beer, wine and spirits. Why?

“Because the public does not distinguish among forms of alcohol when it comes to the misuse or illegal sales of our products. And neither does the Constitution,” she said. “This debate is about alcohol — who can make it, how it can be distributed or delivered, and how it can be sold to consumers. And when it comes to industry behavior — it's not just about adhering to the law — although we know there are some bad actors who do not — it's about advocating for a responsible system. If part of the industry advocates for something that is inherently irresponsible, all the public service ads money can buy will not change the public's impression.   Access to alcohol is embedded inextricably in this argument. The fact is, the public does not want access to alcohol to be easy. This was true 70 years ago and it is true today.”

Invisible on the Internet

Some wholesalers have been outraged by linking underage access to the assault on the industry's alcohol safeguards, but the industry cannot be ignorant or dismissive of this concern, she said.

“There is nothing confusing about the 15-year-old in Michigan who ordered a bottle of tequila and had it delivered straight to his home.   What about the girl in Florida who was getting into her car to go to school but was asked to sign for a box of alcohol by a harried delivery driver anxious to make his route on time? Both boxes were unmarked and had vague return addresses from elusive characters called ‘Dave' and ‘John.'”

Statistics estimate that of those children who admit drinking, boys take their first drink at 11 and girls do so at 13, Duggan said. “This is not hypothetical or theoretical. Our kids are more technologically savvy than ever before,” she said.

The National Academies of Sciences says 10 percent of kids report obtaining alcohol through the Internet or home delivery and that statistic will likely grow, she said. “The NAS also said that an ‘argument can certainly be made to ban Internet and home delivery sales altogether,'” Duggan said. “Juxtapose that with what the Second Circuit ruled — that changes in marketing techniques do not alter the meaning of a constitutional amendment.

“What this says to me is that at a time we are so concerned as a country about the dangers of alcohol marketing to kids — when we know kids are surfing the Web far more skillfully than any of us … why would we want to make it harder for parents to restrict access to alcohol and easier for criminals to evade the laws that help parents and communities regulate alcohol access?”

According to Duggan, the same exemptions that some wine producers are asking for are the same exemptions that allow anonymous purveyors of alcohol — often operating in the dark corners of the Internet — to evade the alcohol safeguards endorsed overwhelmingly by the American public

“Who are Dave and John? And how would law enforcement track them down for selling to minors? The answer is, they can't,” she said.

Proven Solution

Kids are buying alcohol online precisely because they can, Duggan said. “The one deterrent that is present when they try to purchase alcohol at the corner retail store does not exist online — the face-to-face transaction –– a community's first line of defense in preventing access for minors. If they don't need a fake ID, there is literally nothing to stop them.   Sure they ask for a birth date, but it cannot be verified and kids simply make it up.”

What's the solution?  

“Buying through a retailer or on-site at a winery whose license is at stake for selling illegally, where local officials can enforce face-to-face transactions,” Duggan said. “Where we are all subjected to the same rules. Where the playing field is level.”

Consider what is demanded of wholesalers who sell and distribute beverage alcohol, she said.

“They must undergo a complete background check to ensure they are of the highest moral character. This includes rigorous business reviews and fingerprinting — yes, fingerprinting— every year. They are subjected to state and federal monitoring of the highest order. We are precluded from selling to consumers to prevent disorderly market conditions, as are suppliers. If a wholesaler violates any of the myriad laws we must obey, he risks everything his grandfather started. And you wouldn't see the strong family businesses we have today.”

Duggan said these stringent regulations ensure competitive price and selection for consumers and that there is a responsible distribution of alcohol as determined by local communities and provided for in the U.S. Constitution — valid and valuable public policy ideals.

“This is the right system,” she said. “Proven, accountable and responsible.”