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The Crime of WineHere's one industry the Internet won't revolutionize overnight.

By Fareed ZakariaPosted Friday, Oct. 1, 1999, at 3:30 AM ET

Illustration by Nina Frenkel As Internet companies spin into the financial stratosphere, Wall Street and the business press speak with awe of the revolutionary implications of the Web. Issue after issue of Forbes, Fortune, and Business Week detail in awe-struck tones the hundreds of millions (sometimes even billions) raised by Net companies. A new staple is the interview with the Internet expert (call him the I-guru). The editors will ask meekly, "Dr. Chopra, what industries do you think will be affected by the Internet?" To which the I-guru sighs, pauses, and explains, "The real question, Charlie, is what industries will not be affected. Frankly, I can't think of a single one."

Well, I can--wine. The booze business might well end up being one of the few areas of American life undisturbed by the great Internet revolution. The buying and selling of wine across state borders is still illegal in 28 states, including New York, where I live. It's a pity because the wine business is perfectly suited to e-commerce. No store could possibly stock even 10 percent of the 10,000-odd wines produced by America's 1,800 wineries, not to mention the vineyards of France, Italy, and Australia. It would be a godsend if wine buyers could do a Web search for bottles of, say, Cloudy Bay Sauvignon Blanc, a hard-to-find $16 world-class white wine from New Zealand. In my mind's eye, I see myself using a search engine similar to the Advanced Book Exchange, which allows readers to track down secondhand books at hundreds of shops across North America. I can just see myself clicking the mouse to comparison shop and then score a bottle from a San Francisco store, four from a Texas shop, and 12 from a New York outlet.

I'd settle for being able to buy wine from mainstream Internet merchants such as 1-800-WINE-SHOP or Wine.com (which used to be Virtual Vineyards). Alas, only 12 states--most of them in the West--have completely legalized such acts of capitalism between consenting adults. The laws regulating direct wine sales were rarely enforced until recently, but a new zeal is in the air. Buying a single bottle of wine from out-of-state is a third-degree felony in Kentucky, Georgia, and Florida and is punishable with fines of up to $2,000 and jail time. And Orrin Hatch, senior senator from the parched state of Utah, has introduced a bill that would allow federal courts to prosecute offenders. Indeed, Hatch was moved to federalize this crime precisely because new technologies like the Internet make it easier to buy wine nationally (horrors!). Rep. Joe Scarborough, R-Fla., introduced a similar bill in the House--which passed by a hefty margin.

At the risk of making a one-way trip to Rikers Island ("I must take the Fifth about my wine purchases, senator"), I spent a couple of weeks this summer surfing the Web for vino. Some wine stores keep their lists online, but none of New York City's big operations--Sherry Lehamn, Zachy's, and Morrell's--do. Many of the Web wine lists I browsed were so outdated that 20 percent of the wine I wanted to order was out of stock. One major California wine merchant I spoke to said that the Internet isn't having much effect on his business because people from most big states can't use it to order wines. If Internet wine buying was uniformly decriminalized and there was a genuine nationwide market, on the other hand, the system would be more creative and efficient.

I had better luck ordering from two shops outside New York, the Corkscrew in Springfield, Ill., and K&L Wine Merchants (a widely known and well-regarded place) of San Francisco, as well as Wine.com, an online-only store in Napa. The sites are pretty well run but, again, they simply don't compare with those selling books, CDs, clothes, and baby wares. The wines were shipped to a friend in Washington state, one of the enlightened places where e-wines are legal. Precisely how I obtained the wines is a matter of "don't ask, don't tell."

I deliberately chose wines that could travel badly--delicate white Bordeaux, Champagne, Pinot Grigio--and also some harder-to-find wines such as Californian Italian wines (Sangioveses). The wines were received in Seattle within a week of ordering. They were all very well packed in special thermacol wine molds. As a result, almost miraculously, most of the wines held up even though they were shipped in 90 degree weather. The Champagne (Billecart-Salmon's special K&L bottling, $26.99) went slightly off (losing fruit and gaining acidity); the cheaper white Bordeaux, Pont de Brion Blanc ($13.99), was a decent steely Sauvignon Blanc that stood up to the trip nicely. The more expensive Chateau Smith-Haut-Lafite ($22.95) was superb, delicate, flowery, and yet crisp. But in an hour or two it began fading; signs of jet lag. The Sangioveses were the most pleasant surprise--Shaffer ($15) and a Virtual Vineyards special bottling ($13): Both were delicious, with the pointed flavors of Italian Chianti and the ripeness of California's clime mixed together. American Chianti-style wines are going to be the next trend in Californian winemaking.

Back to Illustration by Nina Frenkel the puritans. Why do the new prohibitionists oppose Internet wine? They claim two concerns: First, like most new legislation in America, it has been passed for the benefit of the children. "States need to ensure that minors are not provided with unfettered access to alcohol," Hatch explained. He trots out the usual anecdote masquerading as evidence--a 13-year-old boy once ordered beer off the Internet. In fact, there is little danger that teen-agers are going to order unusual wines from distant wineries, wait days for them to arrive, arrange to have their parents out of the house when they do, and then ... what? Throw a Claret keg party? California's State Bureau of Alcohol has received exactly one complaint of an Internet sale to a minor in recent years.

Second, it's for the Constitution. The 21st Amendment, which repealed prohibition, allows states to regulate the transportation of "intoxicating liquors." Indeed, Hatch's bill is titled "The 21st Amendment Enforcement Act." But the protections of the 21st Amendment are actually quite thin. The language of most state laws would seem to violate the Constitution's interstate commerce clause, which facilitated the creation of a national economy. Judges are increasingly coming to this view. At the very least, it means that the restrictions do not have the halo of constitutional protection.

The 21st Amendment's intent was to give the states the power to prosecute the Mafia's involvement in the liquor trade. But because much of the Mafia's interest in booze died with the repeal of prohibition, what keeps these laws alive is politics. Liquor regulation is a case study in the manipulation of politics by powerful lobbies. The regulations in force are maintained and strengthened because distributors, wholesalers, and large wineries benefit from them, and they are organized and politically powerful. Over the years, their lobbies have been effective at working with local cranks to regulate the minutiae of the wine business. In 15 states in America, grocery stores can't sell wine. In Colorado, half-bottles of wine are illegal, but in Florida oversized bottles are illegal. And so on. (The single most bizarre law, which banned giving wine to dogs in Chicago, has recently been repealed.)

Those who lose out are small and up-and-coming wineries, specialty producers and, of course, consumers who would have more choice and lower prices. The entire setup has an anti-competitive, anti-entrepreneurial flavor that rewards political lobbying rather than good business practices. Sen. Hatch seems to recognize this when he says, "If there is a problem with the system we need to fix the system, not break the laws." For the moment, however, the fix is in for the consumer.

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Fareed Zakaria is editor of Newsweek International and the author of The Future of Freedom: Illiberal Democracy at Home and Abroad.
COMMENTS

The Fraymaster responds:

One reader offers this suggestion to help with age-checks for mail-order wine: Have the post office check ID's on receipt of the package. Another Fray poster offers this demurral to Zakaria's constitutional arguments:

It seems to me a little presumptuous to try to dismiss part of a constitutional amendment on the basis of its purported historical context. Half of our Bill of Rights was written as a reaction against the actions of British soldiers on American soil; does that mean that we should dispense with these amendments and demand that soldiers should be able to commandeer our houses? Of course not.

Furthermore, the argument that teenagers aren't going to throw a wine party is simply ludicrous. If wine is cheaper and more available to them than beer, then they will throw wine parties. If teens became a viable market for wine, then wine makers would create cheaper wines in larger quantities to meet the demand.

This reader says the state laws aren't about underage drinking at all:

Any one with common sense knows the states that ban sale of alcohol by mail do it for one reason: money--the taxes that in-state sales bring in and the money that distributors pay to politicians to support their reelection. Concern that children will be able to buy over the Internet is just more political B.S.

But a liquor store owner says it's not really about taxes--it's about liquor licenses:

As a liquor store owner, I'm not so concerned about my fair state losing out on millions of tax dollars through Internet sales. What does concern me greatly, however, is the fact that I pay $2,000 annually to my local selectmen for the privilege of selling wines in my town. Why should someone from across the country, having paid no licensing fees whatsoever, be able to take potential business away from me? Granted, some locations are state regulated, but for those of us who are privately operated, the idea of someone being allowed to compete with us for free is insulting. I have no problem with competition; just make sure that it's a level playing field.

Finally, this respondent sees a connection between Slate's business and editorial operations:

I find it very interesting that I see an editorial on liberalizing laws regarding mail-order wine sales about a week to the day after a marketing researcher's survey on internet wine sales finds space on your site ("Online Political Advertising"). I know that advertising and editorial department independence is a thing of the past, but do you have to shatter the illusion so obviously?

--Michael Brus (10/4)

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