Time for the FTC to reemerge on the spirits issue
Recently, I was reading the Granholm case and came across part of the decision that intrigued me. In Granholm the Supreme Court cited to an FTC Report on wine shipping. One particular part of Granholm, specifically intrigued me when the Court stated:
The increasing winery-to-wholesaler ratio means that many small wineries do not produce enough wine or have sufficient consumer demand for their wine to make it economical for wholesalers to carry their products. FTC Report 6. This has led many small wineries to rely on direct shipping to reach new markets. Technological improvements, in particular the ability of wineries to sell wine over the Internet, have helped make direct shipments an attractive sales channel. Granholm v. Heald, 544 U.S. 460, 467 (2005)
The Court via the FTC report recognized for many small wine producers, they could not reach many markets across the country via the traditional three-tier system. Even Pre-Granholm, Granholm was decided in 2005, the FTC recognized the failure of the three-tier system to adequately service the market.
Since 2005, the problem has grown more acute as wholesaler consolidation has limited the number of wholesalers in the marketplace and the number of wineries has increased rapidly in the marketplace.
Thanks to Granholm the number of wineries has nearly doubled since 2005. Because of Granholm small wineries could reach markets without the burden of trying to obtain in-state distribution they may never get.
But what about spirts! Similar to wineries, many small spirits producers face the problem of being too small to obtain in-state distribution. Similar to wineries, they desire to ship DTC as a means to accessing markets. However, the status quo, unlike for wineries, shuts distillers out of the marketplace.
The FTC wrote a report recognizing the failure of the traditional three-tier system to allow access to competitive marketplace for small wineries. The solution turned out to be DTC spirits shipping.
Now is the time for the FTC report to write a report on the status quo’s impact on small distiller. It is time for the FTC to step into the breach! If the Treasury Report is about enhancing competition, we will not get there by breaking up major distributors, but we will get there by enhancing market access.
FTC it is time!