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Interstate Trade Barriers and Potential Regulatory Competition

The Case of Virginia's Direct Wine Shipping Ban

By

Originally published in The Journal of Private Enterprise

The current controversy over interstate direct shipment of wine to consumers provides a timely context in which to investigate theories of regulatory competition. Commerce in wine, like other forms of alcohol, is heavily regulated at the state level. States commonly employ a three-tier system that vertically dis-integrates manufacturing, wholesaling, and retailing. Some states require that all wine must pass from winery to wholesaler to retailer before it is purchased by the consumer, while others permit wineries to circumvent wholesalers and sell directly to retailers. Some states even permit out-of-state as well as in-state wineries and retailers to sell directly to consumers. Since the Internet gives consumers access to hundreds of sellers nationwide, online wine sales could potentially increase competition between different states= regulatory systems.

The current controversy over interstate direct shipment of wine to consumers provides a timely context in which to investigate theories of regulatory competition. Commerce in wine, like other forms of alcohol, is heavily regulated at the state level. States commonly employ a three-tier system that vertically dis-integrates manufacturing, wholesaling, and retailing. Some states require that all wine must pass from winery to wholesaler to retailer before it is
purchased by the consumer, while others permit wineries to circumvent wholesalers and sell directly to retailers. Some states even permit out-of-state as well as in-state wineries and retailers to sell directly to consumers. Since the Internet gives consumers access to hundreds of sellers nationwide, online wine sales could potentially increase competition between different states= regulatory systems.

The current controversy over interstate direct shipment of wine to consumers provides a timely context in which to investigate theories of regulatory competition. Commerce in wine, like other forms of alcohol, is heavily regulated at the state level. States commonly employ a three-tier system that vertically dis-integrates manufacturing, wholesaling, and retailing. Some states require that all wine must pass from winery to wholesaler to retailer before it ispurchased by the consumer, while others permit wineries to circumvent wholesalers and sell directly to retailers. Some states even permit out-of-state as well as in-state wineries and retailers to sell directly to consumers. Since the Internet gives consumers access to hundreds of sellers nationwide, online wine sales could potentially increase competition between different states= regulatory systems.

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