Ohio’s 21st Amendment Enforcement Action, is there more than meets the eye?
A great Wine Spectator piece covered Ohio’s lawsuit against out-of-state retailers shipping wine to Ohio consumers. Ohio filed a lawsuit under the 21st Amendment Enforcement Act, seeking an injunction to stop these out of-state retailers from shipping to Ohio consumers.
Ohio’s wine shipping law allows in-state retailers to ship wine to Ohio consumers but denies this privilege to out-of-state retailers. The injunction if successful, would render a federal court judgment requiring that these out-of-state retailers stop shipping into Ohio
The State of Ohio filed its injunction against-Wine.com, Inc. (“Wine.com”), U.S. Beverage Advertising Corp. (“ReserveBar”), Pacific Wine & Spirits, LLC (“Pacific Wine & Spirits”), ShakeStir, LLC (“Cocktail Courier”), Winc, Inc. (“Winc”), Houdini, Inc. (“Wine Country Gift Baskets”), and AWS Hopkins, LLC (“Ace Spirits”).
Ohio’s action against these retailers is unique, because it is probably the first time the 21st Amendment Enforcement Act has been used against wine retailers.
What also is unique is the reaction of certain retailers.
Wine.com told Wine Spectator, “the company is now working in good faith with Yost’s office to resolve the issue.” And Winc believed they were incorrectly named in the lawsuit and they have the permits necessary to ship wine in Ohio.
These statements raise questions about the Ohio investigation. Anyone who has ever represented a complex DTC model knows there is more than meets the eye. What sometimes looks like a transaction that violates the law on the surface, does indeed comply with the law when one digs deeper.
There are many unanswered questions based on the statements from the retailers. If Winc has the permits necessity to ship wine into Ohio, then why were they targeted?
Further, Wine.com states it is working in good faith to resolve the issue with the State of Ohio. Interestingly, it does not seem there is anything that blocks a consumer from ordering wine as an Ohio consumer from wine.com.
If Wine.com and Winc are compliant as they assert, one needs to ask the question whether the State of Ohio reached out to the likes of Wine.com and Winc before filing the injunction?
I am wondering if they worked with the retailers to determine whether their operations violated the law? Doing so may have headed off legal action.
Bold actions make headlines, but bold actions may also raise questions. We assume the Ohio Attorney General did his homework, completely understood the business model, previously reached out to the retailers that shipped and had conversations with them, and as a last resort filed this action.
But the fact is we don’t know! And if they did not go through the proper and complete steps, aren’t they putting the cart before the horse?
Time will tell what happens here, but things look different in this lawsuit and quite frankly there may be more than meets the eye!
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