House limits online liquor sales

By Maria Seminerio, ZDNN - August 3, 1999 1:43 PM PT

New law would allow states to prosecute out-of-state firms that sell alcohol over the Web to minors and residents of dry counties.  A bill to limit online alcohol sales passed the House late Tuesday by a vote of 310-112, troubling small Web merchants who say the law will hamper them from competing against big national rivals.

The measure, sponsored by Rep. Joe Scarborough, R-Fla., would allow states to prosecute online wine, beer and spirits retailers who violate their liquor sales laws. For the first time, the states would be able to sue out-of-state alcohol merchants in federal courts.

Online wine merchants such as VirtualVineyard.com think the law actually "protect the monopoly" held by big liquor wholesalers.

Squeezing the little guy?

"This flies in the face of the reality of what e-commerce is and will become," said Kennedy Brooks, senior vice president of business development at VirtualVineyard, in an interview. Rather than protecting states' rights, the measure will erect unnecessary roadblocks to startup merchants hoping to compete nationally and will limit choice for consumers, Brooks said.

Under the law, the states can prosecute out-of-state firms selling alcohol over the Web to minors. The states can also bring federal lawsuits against online merchants selling liquor to those living in "dry" areas where all alcohol sales are prohibited.

Now, consumers in the 20 states that permit alcohol sales from out of state companies can buy wine, beer or spirits from any online retailer, but in the rest of the country, such sales are illegal, with alcohol allowed to be sold only by state-approved wholesalers.

Liquor is the only consumer product exempt from the Interstate Commerce Clause in the Constitution, which says that states cannot restrict interstate commerce.

The bill's proponents, including the Wine and Spirits Wholesalers of America, say it simply gives states a tool to combat underage drinking.

"We support it because we support legal alcohol sales," WSWA spokesman David Dickerson said in an interview. "The bill gives each state a pathway to better enforcement of existing laws against underage drinking."

VirtualVineyard's Brooks said the underage drinking argument makes little sense.

"I doubt there are many teenagers out there who want to use the Internet to buy a $40 bottle of cabernet," he said. The company also takes multiple steps to ensure that its buyers are over 21, Brooks added.

The WSWA's Dickerson denied that the measure would make it tougher for small wine, beer and spirits sellers to compete online, pointing to the success of merchants such as VirtualVineyard.com and Geerlings and Wade.

The House Judiciary Committee approved the bill 22 to 9 last month, at the same time as a similar measure was passed by the full Senate. Now a conference committee must reconcile the House and Senate versions of the measure before it can go on to President Clinton for his signature.

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