NO NEED TO TARGET DIRECT ALCOHOL SALES

Liquor distributors are doing evil. They're pushing legislation in
Congress that could block direct sales from producers to consumers.
The problem, they say, is that out-of-control teens are buying beer
and wine by phone or over the Internet with parents' credit cards.

What lawmakers are promoting now is restricted competition of legal
commerce. In a turf war where wineries are seeking market access and
distributors are intoxicated by their monopoly, consumers are the
losers. Consider the profits in an industry where annual wine sales
are $17 billion, beer generates $174.9 billion and distilled spirits
$89 billion. Where the top distributor, with 11.8 percent of the
market, will earn revenue of $2.82 billion this year. Where sales and
excise taxes are in the billions. (In Georgia, excise taxes range from
$2.28 for a case of beer to $14.64 for a case of liquor.) And where
direct sales of wine, a mere $500 million now, will surge as
Americans' Internet comfort level grows.

The distributors, a powerful Washington lobby, have managed to get the
support of 21 state attorneys general with this claim.

U.S. Rep. Joe Scarborough (R-Fla.), the bill's chief sponsor, says the
legislation "is a great first step in helping parents keep illegal
alcohol out of their children's hands . . .The Internet will no longer
be a bootlegger's paradise."

Exactly how many teenagers have access to their parents' credit cards,
are willing to risk using them, wait patiently for the shipment to be
sent and hope that nobody's home when the shipment arrives?

While this scenario may work in a dramatic sting operation, in real
life this is rare. Certainly, it isn't frequent enough to warrant
federal intervention. California, which has allowed wine shipments to
its residents for 36 years, investigates 10,000 complaints a year of
minors trying to buy alcohol. Only one has involved an Internet attempt.

The liquor distributors are a legacy of the post-Prohibition era when,
amid fear of organized crime's takeover, states mandated a three-tier
system --- manufacturer to wholesaler/distributor to retailer --- and
barred investment in more than one tier. In the 1960s, more than
10,000 wholesalers distributed liquor. Today, through consolidation,
there are about 300. The top five own about about a third of the market.

And then, as now, they're protected by their very own constitutional
amendment: the 21st, passed in 1933 to make the repeal of Prohibition
more palatable. It bars "the transportation into any state . . . of
intoxicating liquors, in violation of the laws thereof." A state ban
on importation of any other legal product would violate the
Constitution's commerce clause, which forbids states to restrict
interstate commerce. Yet in Georgia, Florida, Kentucky, Maryland and
Tennessee, it's a felony to ship liquor to residents.

Meanwhile, distribution charges for alcohol are the highest of any
packaged-goods industry and twice as much as food distribution,
meaning higher consumer prices. For many small wineries unable to
afford the distributors' costs or too small to get the shelf space,
direct sales is their only means of survival.