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The states unleashed the digital marketplace, but then they fight to resist its evolution

There are numerous cases going through the federal court system, which challenges state discriminatory wine retailer shipping laws. In these states, an in-state retailer can ship to an in-state consumer, but an out-of-state retailer is denied these same privileges.

The essence of these suits comes down to one basic factor, in a digital marketplace physical presence is not necessary to perfect a sale with the consumer, yet sometimes it is necessary. Sounds confusing right!

Let me illustrate.

Cairo, Illinois is an economically depressed town in a region with an underperforming economy. Cairo, Illinois is located 370 miles from downtown Chicago.

Chances are Cairo residents will not have a great wine selection available in its local stores.

However, the digital marketplace allows a Cairo resident suffering from the lack of choices in its own retail stores to access Chicago’s great wine selection without needing to travel 370 miles to downtown Chicago.

A Chicago retailer can make a sale to a Cairo resident, even though it is not necessary for a retailer to maintain a physical presence in a town to make a sale to that town’s residents.

By making laws not requiring a retailer maintain a physical presence, the states have provided consumer convenience and greater choice.

Obviously from the character of the federal lawsuits, the Cairo consumer is denied this same privilege when it desires to access an out-of-state retailer’s inventory.

The same law that does not require physical presence in-state, makes physical presence a necessity for out-of-state retailers.

In other words, the state created the convenience and benefits of a digital marketplace and bottlenecked its benefits by restricting a consumer from accessing a greater digital marketplace.

But this goes to a deeper principle, why is in-state physical presence necessary?

The states have advanced the argument that it would somehow undermine their three-tier system. How? Fifteen states and the District of Columbia allow out-of-state retailers to ship into the state, and still maintain a well-regulated three-tier system, there is simply no evidence that the three-tier system would become undermined by out-of-state wine retailer shipping.

The absurdity to this all is physical presence does not matter, but then it does. The states when they created the digital marketplace, created an avenue for consumers to purchase from a store without physically visiting that store, if the states don’t want out-of-state retailers to sell to its consumers, then it should have never created a digital marketplace.

But the ship has sailed, states no longer require a physical presence for selling and the digital marketplace is never going away, time for the states to stop the shenanigans and allow the digital marketplace to thrive.