Tennessee legislation represents the biggest attack on DTC shipping in our lifetime

Tennessee legislation, HB 0742 and SB 0705, represents the biggest attack on direct-to-consumer (DTC) wine shipping in our lifetime. Unlike many state laws which are aimed at curtailing or prohibiting wine retailer shipping, these bills are aimed at winery shipping.

In 2005 the Supreme Court in Granholm decided that a state could not discriminate against out-of-state wineries shipping into a state. That decision opened up the markets for out-of-state wineries and allowed greater consumer choice.

However, the legislation (each bill has identical language) introduced in Tennessee would turn the clock back to days where wineries were shut out of the market and consumers were left with less choice.

Tennessee’s legislation intends to severely restrict how wine is delivered to Tennessee residents. Under the legislation, wine can only be shipped into the state if it is shipped directly from the winery’s premises and shipping wine from a fulfillment house becomes an illegal act.

Additionally, this legislation proposes to limit how wine can be manufactured.

The real world and how it exists

A fulfillment house serves an important role in the wine industry, they help facilitate the sale and shipment of wine. Additionally, the fulfillment houses also play an important role in helping wineries comply with tax and legal requirements.

It is costly and difficult for a winery to direct ship and comply with the different state tax and legal requirements, especially for small wineries. The fulfillment house takes care of these functions for many small wineries.

Without the presence of a fulfillment houses, many small wineries could not enter the DTC market. In essence, the Tennessee law effectively acts to prohibit small wineries from shipping to Tennessee residents.

But it is not just small wineries that reap the benefits of a fulfillment house. Basically, every winery in America utilizes a fulfillment house. The fact remains, many wineries do not have the capacity to store wine on premise and utilize a fulfillment house’s services.

The role of fulfillment houses is indispensable to the wine industry. Without fulfillment houses much of the American wine does not get to market and consumers suffer from a lack of choice.

Another fictitious policy reason for a law

This legislation, which effectively shuts off a large part of the winery shipping market, bases its benevolence on serving the public welfare.

Yes, this legislation will protect Tennessee’s citizens from the harm caused by fulfillment houses shipping wine.

Interesting how the legislature determines what harms require the state to step in and save its residents.

It is ironic that these legislators worry about the harms caused by wine coming from a fulfillment house, yet, a Tennessee resident can go onto an app, order product and someone who may not even be an employee of the retailer, shows up in a Ford pinto and brings a six pack of beer to the customer’s house.

Further, Tennessee residents can utilize Delivery Dudes (yes, a real service) have someone show up that purchased alcohol from someone else and deliver the beer. Of course, the general welfare requirement of age verification needs to be performed.

Let’s juxtapose this to delivery by the fulfillment house. The fulfillment house has packages delivered by a common carrier like Fed Ex and UPS. The fulfillment house pays for adult signature and a common carrier employs well trained individual to obtain adult signature and maintains a database verifying that an adult signature was obtained.

I have nothing against Delivery Dudes, in fact I think it is positive thing that they are in the market. What makes me laugh is not the name Delivery Dudes, but that two Tennessee legislators are going to protect the general welfare by banning fulfillment houses from the state, yet Delivery Dudes with less safeguards, does not have the same draconian measures apply to it.

The answer is why? And that answer is simple, the deliveries through Delivery Dudes goes through the three-tier system, whereas the shipments from fulfillment houses do not go through the three-tier system.

In concluding, I respectfully request that the legislators who authored this legislation be straightforward with us. Just tell us that requiring everything going through the three-tier system somehow serves the general welfare, and please tell us why! By not doing so, the camouflage they put over the law is so clear that we can see through it.