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Online merchants fight to get their wine flowing: California retailers cite interstate commerce in suit against TABC
(Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) Apr. 17--AUSTIN -- Once-forbidden acts of the alcoholic beverage trade are now commonplace in Internet-age Texas: Out-of state wineries ship here; in-state liquor stores send overnight packages across county lines with not just wine, but hard stuff, too.
But, by law, non-Texas wine stores cannot send their wares here -- a provision long supported by the state's powerful liquor sales lobby.
A trio of Texas wine lovers has joined forces with online California merchants to challenge the ban, under the Constitution's interstate commerce clause and -- they don't crack a smile when they say this -- every adult Texan's "importation right."
Ronald D. Parrish, a retired RadioShack executive who lives in Fort Worth, is one of the named plaintiffs in a federal lawsuit filed in Fort Worth against Texas Alcoholic Beverage Commission administrator Alan Steen. A TABC spokeswoman and a spokesman for the Texas attorney general declined to comment on the case, which was filed last week.
Mr. Parrish, who "knows just enough about wine to make a fool of myself in front of somebody who really knows wine," said he ran into the restriction when he recently tried to ship a birthday champagne bottle from an online California dealer to a friend across town.
It's more than just sour grapes, he said, citing the Internet's broader product selection, availability and price competition.
"I'm of age, and I live in a wet area, and I can purchase wine locally," Mr. Parrish said. "Why can't I purchase it from an out-of-state retailer if I choose to? I think it is discriminatory to Texas residents."
Mr. Parrish, two other Fort Worth men and three California stores come to the courthouse armed with a U.S. Supreme Court decision from last year that wiped out longstanding restrictions on state-to-state direct sales by wineries. By the time of that decision, a lower federal court had stopped Texas from enforcing the anti-shipping laws.
The courts endorsed the free-commerce argument and dismissed out-of-hand one of the liquor lobby's central arguments: that online sales would lead to increased underage drinking. The justices also deemed the risk of sales-tax loss "insufficient" to justify an infringement on interstate commerce.
A 2003 Federal Trade Commission report cited by the Supreme Court said online wine sales are a small but growing percentage of the wine market, expected to reach 10 percent of the market within a few years. From 1994 to 1999, consumers doubled the amount of money they spent having wine shipped directly to them to around $500 million, about 3 percent of the total spent on wine, the report said.
Until judges started ruling against the bans, Texas liquor wholesalers and retailers always took the position that they'd endorse interstate online sales only when judges pried their cold, dead fingers off the cash registers.
But, by last May, they joined with wineries to craft a new law that acknowledged the new legal landscape: the bill allowed the wine makers -- and nobody else -- to ship across state lines into Texas.
The law, which officials began enforcing last month, requires packages to be clearly labeled, insists that shipping companies make adults to sign for shipments, and orders wineries to pay Texas sales tax on their shipments to the state. Under the rule, only domestic vineyards may ship to Texans; foreign wineries may not.
Contacted this week about the new lawsuit, lobbyists for the wholesalers and retailers declined to comment or to rebut the plaintiffs' arguments that the interstate commerce principles endorsed by the Supreme Court should apply equally to nonwinery sellers.
Using records from shipping companies, Texas authorities sent cease-and-desist letters last month to dozens of out-of-state wine stores that had been allowed to ship to Texas while the winery litigation was pending.
"We had Texas customers with orders pending," said Todd Zucker, co-owner of K&L Wine Merchants, a lawsuit plaintiff. "We made this offer: If you want, we'll give you a refund. Or if you want, we'll hold the merchandise at no charge, until we can ship. You can pick it up. Or, we will ship to a state where we are allowed."
The lawyers who filed the case include former U.S. Solicitor General Kenneth Starr, another attorney in his firm who owns a small winery and two Texas lawyers who successfully brought the earlier challenge on behalf of wineries, Mark C. Harwell of Houston and Sterling W. Steves of Fort Worth.
"The losers under the current law are Texas consumers, who have less wine available to them and pay more," said James Shannon, another attorney in Mr. Starr's firm. "Every state has middle men who want to protect their fat margins. The whole point of the commerce clause is to prevent that kind of economic protectionism."
E-mail pslover@dallasnews.com
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