Wine Law By The Case: Amazon.com Faces Jungle of Regs

This is the first column for Midwest Wine Press by Jamie J. Cox, an associate with the law firm Brydon, Swearengen & England P.C. in Jefferson City, Missouri. Jamie practices primarily administrative law and represents professionals before the Administrative Hearing Commission, as well as a number of Missouri licensing boards. In this column Jamie takes a look at online retailer Amazon’s entry into the wine business.

Hello! I’m excited about the opportunity to contribute to Midwest Wine Press, and looking forward to exploring topics of interest and concern to the Midwest wine industry.

My involvement in alcohol beverage law did not follow a direct path, and it was certainly not the career I envisioned during law school. I began my career working as an Assistant Attorney General with the Missouri Attorney General’s Office practicing primarily professional licensure. In 2005, after two years as an Assistant Attorney General, I joined the firm.

I continue to practice primarily in the professional licensure context. I also routinely assist Charlie Smarr, a former Supervisor of Alcohol and Tobacco Control who has significant experience with Missouri alcohol beverage law.

Probably the most interesting aspect of the legal issues that arise in the industry is the diversity of clients and subject matter. For instance, we represent large corporations, as well as local businesses.  We address cases involving regulatory or licensure issues before the Division of Alcohol and Tobacco Control, as well as constitutional cases before the federal courts.

“…given Amazon’s size and dominance, any arrangement with it by a winery may be subject to greater scrutiny by state regulators”

It is not uncommon for our clients to have questions about corporate structure, taxation, or advertising as they relate to the alcohol industry. Some days we’re surprised by the varied topics we are asked to consider. In spite of the fact that alcohol regulation has been in place for a long time, there are frequently cutting edge issues being litigated or addressed in the media.

For example, a recent hot topic has been Amazon.com’s attempts to enter the wine business.  Amazon has made two prior failed attempts, but its online wine shop officially opened November 8, 2012. From a legal perspective, the primary challenges to participating in such an arrangement with any third party marketer, including Amazon, will most likely fall on the individual wineries.

These challenges include contending with the three-tier alcohol distribution system of manufacturers, wholesalers and retailers and complying with each state’s complex system of regulating alcohol distribution and shipping. The third party arrangement has the effect of bypassing the middle wholesale tier and raises issues regarding direct shipment to consumers – another hot topic with rules varying state to state.

Amazon’s approach is reflective of the modern consumer and a popular method of purchase, and it will expand the market for wineries. However, given Amazon’s size and dominance, any arrangement with it by a winery may be subject to greater scrutiny by state regulators. Before committing to an agreement with a third party marketer, wineries would be well served to consult with state alcohol beverage regulators and/or their own legal counsel. This would ensure compliance and protect their license, particularly if the winery is going to be shipping into a number of states.

An advisory regarding unlicensed third party providers issued last fall by the California Department of Alcoholic Beverage Control provides insight into areas of concern, especially the winery’s control over pricing, distribution of funds and fulfillment. In addition, Jeff Carroll, Vice President, Compliance, for ShipCompliant, warns that wineries ‘have to be careful about the way the marketers they work with accept orders, structure marketing fees, and manage the payments.”

This new mechanism for selling wine is one of many current issues being addressed in the industry. It’s an example of attempts to mesh new concepts with age old alcohol beverage regulation. In upcoming columns, we will continue to explore the legal issues impacting the industry and the array of issues that our office routinely encounters. Cheers from Missouri!

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