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01.04.2008

Wine.Com Gives Retailers (and Consumers) The Finger

Vinography may be the last place you expect to see discussions about the esoterica of interstate wine shipping laws and the ongoing legal battles around them. But once in a while, dear readers, someone in the industry does something so outrageous that even I have to dip my toe into the pool, and start yelling "bullshit" along with all the other folks.

The latest offenders? Wine.Com, the internet wine retailing giant, whose lawyers have just sent tattle-tale letters to state governments around the country trying to convince them to take legal action against Wine.Com's competitors.

First, a little background.

Most of you know, some of you painfully so, how much the American interstate shipping laws are screwed up when it comes to alcohol. Because regulations are set on a state-by-state basis, and because many states run government-controlled liquor distribution monopolies, it's effectively impossible for a winery or a retailer to sell wine to every customer that wants it around the country. Indeed, a whole industry has sprung up of companies that do nothing but help those who want to ship wine across state lines manage the red tape for each and every state, or at least those states which don't expressly forbid shipping wine across their borders.

But the wine industry has a bit of a dirty little secret -- people break the rules all the time. Wineries and retailers (especially retailers) and the consumers that buy from them have all sorts of ways of getting around the shipping regulations. From shipping wines labeled as "samples" to using third party shipping companies, to simply "forgetting" to label their boxes with the required "Contains Alcoholic Beverages" stickers, among other things.

And you know what I say? Good for them. If the state governments of this country are too close minded to pass sensible laws that let adults buy wine on the Internet from out of state AND they are too bureaucratically challenged to enforce those laws, then screw 'em. Which is precisely what thousands of retailers, and in particular, Internet retailers have been doing for years -- discreetly helping wine lovers buy the wine they want to buy.

Those who don't want to break the rules, however, must be resigned to opening operations (distribution centers, offices, etc.) in every restrictive state in order to be able to sell wine to consumers in that state legally.

Which brings us to Wine.Com, which has, of the course of many years, gone to the trouble and expense of opening distribution centers all over the country in order to be able to completely abide by the letter of the law when it comes to shipping wine. As a large corporation, backed by heavy institutional investors, that would certainly be the prudent thing to do.

But now, like the goodie-two-shoes kid on the playground, Wine.Com is sending letters to state government agencies telling them the names of specific retailers who they claim are breaking the aforementioned state laws, and requesting that the state take legal action on those companies. Which is sort of like taking down the license plate numbers of cars that are going more than 65 miles per hour on the freeway and reporting them to the highway patrol. Can you imagine?

To quote a letter sent by Wine.Com's lawyers, Davis Wright Tremaine, LLP, to the Washington State Liquor Control Board:

"...the following retailers continue to state on their websites that they can sell and ship wine directly to Washington State residents. In some cases these retailers have indeed sold wine again: [names retailers directly].... As these retailers are dismissing [your] earlier direction to cease sales and shipments into Washington without a license, we respectfully request that you consider taking further action against them.

In addition, during the past few days, the following retailers sold wine over the internet that has been or will be shipped to a Washington resident. Copies of the shipping confirmation e-mails are attached.... [names retailers]...."

Yes, you read that correctly, Wine.Com or their friends are ordering wine from these retailers, having it sent to them in Washington and then turning the retailers in to the government. It's their own private sting operation against their competition.

The wine industry, while competitive, is generally marked by a real collegiality, and it's despicable to see such shallow, backstabbing behavior on the part of Wine.Com. Shame on them. It's mean spirited from a competitive standpoint, and it has the indirect effect of screwing ordinary consumers.

While I have purchased wine from them in the past, especially as corporate gifts for my clients, Wine.Com can no longer consider me a customer moving forward.

For more on this topic, please see the report today from the Specialty Wine Retailer's Association, which is a reprinting of an article from the Wine Market Report (8k PDF)



Comments (134)

ScottS wrote:
01.04.08 at 1:51 PM

Thanks for the info, Alder. Anyone that makes it harder to obtain wine is evil and should be punished. The shipping laws are insane. At least the UPS guy decided to ship my "olive oil" so I could share some good bottles with my family over Christmas. Sheesh.

01.04.08 at 1:51 PM

This is crazy. May say more later, but yeah, it's crazy.

Eudaimo wrote:
01.04.08 at 1:53 PM

I frequently use wine.com, but I will not be purchasing from them in the future, either. I will be discussing this (over wine) with my fellow grape-fans.

Ward Kadel wrote:
01.04.08 at 2:27 PM

This is terrible. Man...and I've really come to respect wine.com over the last few years as their site has improved as well as their prices. Unfortunately, I can't put up with this crap either and now I'll have to reconsider ever purchasing from them again, as well!

Jill wrote:
01.04.08 at 3:34 PM

Wow. This is stooping pretty low. It kinda smacks of desperation.

Yesterday I had a looksie at Wine.com's traffic stats compared to a certain other large retailer that wasn't so much on the interstate shipping radar before a year or two ago. I noticed that said other retailer's traffic has recently overtaken Wine.com's figures. I wouldn't be surprised to find out this sting operation is targeted at very specific competitors (and maybe even just one).

Alder wrote:
01.04.08 at 3:54 PM

Jill,

Thanks for the comments. Actually I can confirm that Wine.Com is targeting at least 29 different internet retailers with this campaign, all across the country.

01.04.08 at 4:06 PM

Hi there,
Thanks for the spirited comments. I thought I should respond with our perspective on this, since it's a complex issue and there's no shortage of passion around it!

Here's the situation as we see it:
1) You're right, Wine.com does play by the interstate shipping rules. We don't do this for the fun of it, but because states have come after us and required us to own and operate licensed retail facilities in order to be able to ship to consumers in the state. And it's not like a speeding ticket (your analogy is a little off) - in some states it's a felony.
2) Complying with the rules not only hurts us, but our customers as well. We have additional cost and complexity of our operations, and our customers don't get the best possible product selection. I'd love to be able to ship from one central warehouse where our selection is the largest. And this doesn't even cover the consumers in 25 states that we can't even serve.
3) You're right, it appears that many retailers are ignoring the interstate shipping laws. But trust us, this is not sustainable. Once these companies reach a certain size they will have the same difficulties we have had.
4) It is also clear that, after years of trying, lobbying efforts by these same retailers to open up interstate shipping have been ineffective.

SO...we think it's time for answers on this topic by the state regulators to either:
1) enforce their laws uniformly and fairly OR
2) open up to interstate shipping

We're ok with either outcome, though the second would be the best for the health of the online wine market. Keep in mind that online wine is still tiny compared to overall wine. The biggest barrier to growth in online wine is the current stalemate on state laws. If we can use our legal standing in a state to get their attention to the issue, maybe we can bring about changes that will benefit the online wine business. (By the way, your calling Wine.com a "giant" made me smile -- we're still tiny in the grand scheme of things, just trying to navigate this issue like everyone else).

We're just as frustrated with state laws as you are. Try to resist judging us on this too soon -- we know consumers need the best possible access to the best wine can offer, and we've already seen a couple states head in the direction of opening up!

Thanks for listening,

Rich Bergsund
CEO, Wine.com

Dan wrote:
01.04.08 at 4:28 PM

"3) You're right, it appears that many retailers are ignoring the interstate shipping laws. But trust us, this is not sustainable. Once these companies reach a certain size they will have the same difficulties we have had."

In that case why not let them get punished on their own instead of playing national wine police, spending your own companies time and money going after other companies in the trying to catch them breaking laws.

I for one will never buy from wine.com again for this sole reason.

Alder wrote:
01.04.08 at 4:41 PM

Rich,

It seems to me that if you indeed believe what you state above, your current actions are at cross purposes to your philosophy. If you think life would be better for everyone if the interstate shipping rules were changed then why aren't you spending the time and money to get them changed? You're probably paying a lot of money to those lawyers to send those letters, and you seem to be ordering a bit of wine as part of these private sting operations (which you conveniently don't address in your response below). Why not spend that money lobbying representatives in those states to change the laws?

And correct me if I'm wrong, but haven't several states that used to be off limits to retailers now been opened up to limited or full reciprocal shipping? It would seem your claim of lobbying efforts being ineffective is weakened by the facts.

OK, so speeding tickets aren't felonies. The point of the analogy is not the federal penalty for the offense, the point is that you're trying to get people busted for something that EVERYONE does, simply because YOU'VE chosen to comply with the law. And that's where the mean-spirited part comes in, no matter how much you might throw around phrases like "level the playing field" etc. Not to mention the fact that you're doing a LOT of harm to consumers in the process.

The 29 retailers that you've targeted in your campaign collectively ship a heck of a lot of wine to consumers in the states that you're prompting enforcement in. Your actions, if they are successful, will cut thousands maybe even tens of thousands consumers off from ordering wine. There's no possible way you can argue that is a good thing.

As another commenter on my site pointed out, why on Earth do you think it is your job to play police here? I think you will find that this effort is going to do you a LOT of harm from a PR perspective.

Joe wrote:
01.04.08 at 4:45 PM

wine.com, a company that has bled red ink since the days of P.Granhoff, cares about one thing only, thier personal bottom line, to the exclusion of anyone, or anything else, but be careful lest someone poke around in wine.com's dirty laundry hamper, and rase any red flags, most things look diffrently under a microscope.........you naughty, naughty boys!!!

Alder wrote:
01.04.08 at 5:07 PM

Joe, your comments almost (but not quite) cross the line into defamatory. While I'm perfectly happy to have you express your distaste for their current actions, I'd appreciate it if you (and other commenters going forward) tried to keep away from sweeping statements implying corporate malfeasance, which I'm sure you're not wanting to suggest.

Thanks,

Alder

Anonymous Retailer wrote:
01.04.08 at 5:46 PM

Rich,

Your comment that you'd be happy to ship from a central warehouse doesn't ring true as Wine.com is NOT supporting industry efforts to change the discriminatory and antiquated shipping laws that would make this a reality.

For example, Wine.com is NOT a member of the Specialty Wine Retailers Association (SWRA). The SWRA is the first-ever and only organized effort directly supporting retailers' right to ship to consumers nationwide.

Your point #4 is wrong on multiple counts. Retailers have not been "years" trying to change the laws (you're implying a long time). The SWRA itself is only 2 years old! If the SWRA had more retailer members like Wine.com, then perhaps the resulting larger budget would allow it to be more effective against the enormous political spending of the wine wholesalers seeking to protect their monopolistic profits at the expense of consumers.

Moreover, it seems to me that the SWRA has been remarkably effective where it has been able to bring sufficient resources to bear such as in its litigation in Texas. Legal battles are expensive and the only way they are affordable to retailers is through collective action (consumers can help too by donating directly on the site: www.specialitywineretailers.org).

If you believe the laws are wrong or are happy with either outcome as you claim, why not support ALL tactics to achieve the desired end? The only reasons I can think of is that either:

(a) you really DO want to preserve the status quo because Wine.com has huge sunk costs in a network of warehouses across the country, or
(b) you're afraid if Wine.com had to compete head-to-head with other retailers on mainstream factors like selection, service, and pricing that Wine.com would be unable to successfully differentiate itself.

Direct Wine Merchant Since 1993 wrote:
01.04.08 at 6:08 PM

I have been in this business for 15 years now, and my experience is that there are two types of direct wine merchants. The majority look to collaborate and compete fairly while working together to change the playing field, note the SWRA. Then there are the occassional merchants who are too cozy with the monopolist distributors to do so. Sadly, Wine.com has "distinguished" themselves as one of the few that would rather employ "dirty" tactics akin to the liquor wholesalers(engaging in turf wars to gain control over markets) vs. playing fair and letting the free market decide who wins.

Let's just hope that this bad karma sinks Wine.com -- again.

joe wrote:
01.04.08 at 7:12 PM

Joe, your comments almost (but not quite) cross the line into defamatory. While I'm perfectly happy to have you express your distaste for their current actions, I'd appreciate it if you (and other commenters going forward) tried to keep away from sweeping statements implying corporate malfeasance, which I'm sure you're not wanting to suggest.

Thanks,

Alder

Alder, sorry if i gave that impression, im not sure what (almost) sweeping defamatory statements I made, but only voiced my opinion based previous general public information, and observations. Im not assigning a motive to them other than one of self interest. Ive followed the checkered history of wine.com in its many incarnations, over the years, as many have, and am not suggesting wrongdoing on wine.com's part at all, what i was implying, was, however unfortunate, is that:

1. Wine.com feels the need to pursue such tactics, in the name of "leveling the playing field" . It appears they are the only retailer on record employing this. If in fact, EVERY retailer did follow the same compliance as wine.com is … would this make them happy??? Even if they had the same amount of competition in each market?? I feel, they see it as a way to eliminate competition, because they know many retailers will not adhere to states requirements, and, by putting pressure on the states to crack down on these retailers they will eliminate them from the playing field, just as the wholesalers would like to do. Less competition = more revenue. That’s tilting the playing field.

2. Wine.com feels the need to be the moral watchdog of the industry, but at he expense of competitors, and in its own self interest. Fair enough. Business is business, but at least come out and say that; “we want a larger share of the marketplace, and we are going to do what it takes to accomplish it”, that id respect more! What wine.com is saying, closely resembles the smokescreen mantra chanted by the wholesalers and the anti shipping lobby. “we must control shipping because, its better for the product, its safer for our children, it’s a way to insure tax collection, et al;” when in fact, the reason boils down to, one thing, money, and the monopoly of the alcohol industry. We can all read between the lines, folks, and I think we can see what wine.com is up to.

In the end, this type of in-fighting and cannibalizing each other is counter productive, and must have the wholesalers, and anti shipping lobby jumping up and down with glee….now how can that be a good thing???

01.04.08 at 7:38 PM

Since there are no contrarians here, I'll volunteer.

Alder, I’m not sure why you are promoting anarchy. The proper way to get a law changed is not by breaking it. Surely, Wine.com should be commended for having “chosen” (as you put it) to comply with the law.

How can they compete with other retailers who enjoy lower costs by virtue of ignoring the law? Wine.com could either beat them (which involves snitching) or join them (in breaking the law). While their choice might be deemed repugnant by some, I don’t see how this is morally worse than basing a business on knowingly and repeatedly breaking the law.

Wine.com could also join lobbying efforts and, until laws are eventually changed, quietly suffer losses while their lunch is being eaten by unethical, law-breaking, competitors – but this is not good business.

The real villains here are those states who not only have archaic anti-consumer laws on their books, but choose to reward offenders by turning a blind eye to their offenses.

Justin S. wrote:
01.04.08 at 7:49 PM

Mr. Bergsund, you are indeed correct. Alder's speeding ticket analogy was a weak one, but not for the reason you suggested. People who exceed the speed limits endanger others. Retailers who ship wines to consumers do not.

Jack wrote:
01.04.08 at 11:26 PM

Daniel: I disagree with you. The people in those states with the archaic wine laws did not get to choose or vote on these laws. No, they're enacted/kept in place by their local, all-powerful, big wine distributors (which would make THEM the villains, according to your brand of logic).

Rich Bergsund: Wow, that's some (exit?) strategy you have there. 1) Make many high-level wine consumers (and bellwethers) extremely mad at you. 2) Make 29 high-level wine stores extremely mad at you. 3) Pray that THIS new strategy for Wine.com is finally THE ONE that makes Wine.com kaboodles of money.

Is it not true that Wine.com made these moves solely to increase their own sales at the expense of their competitors? (A very cutthroat move in a non-cutthroat field.) I can't recall something like this happening in wine sales...and I can't see why it had to happen. I mean, aren't you saying that Wine.com's business plan has failed (again) and that this is a desperate move on your part? Or am I mistaken?

Alder wrote:
01.04.08 at 11:33 PM

Daniel,

Thanks for taking the time to offer a dissenting view. As you might imagine, I'm going to strongly disagree.

I hadn't thought that what I was promoting was anarchy. The last thing I want to do is compare this struggle to civil rights, because there's just no comparison on the moral level, but the only analogy I can think of is when people readily broke the law to marry across racial boundaries when the laws were precisely the opposite. Or when Rosa Parks sat on the bus breaking the law. Or, I know !! When lots of California wineries shipped grapes to New York during prohibition with warnings on the side of the train cars saying, "Danger: Grapes left alone will ferment to alcohol." There are laws and then there are stupid laws that are engineered by greedy bureaucrats and the corporate pigs that line their pockets to ensure their own wealth. The second need to be thrown off the books, and while we're working on that, I suggest that there is no harm, nay, there is even good to be done in breaking them.

As far as a business being based on knowingly and repeatedly breaking the law, you can't evaluate that on strict black and white terms. It's purely got to be evaluated on ethics. How about a business of providing aid to refugees when such aid has been deemed illegal by the government? Seems like a pretty good business to me!

And as for Wine.Com getting their lunch eaten by unethical companies, welcome to the marketplace which is anything but fair. Certainly you're not suggesting that there is a commercial industry in this country that doesn't have exactly the same issue in some form or another?

The real villains here, as Jack suggests, are the state run liquor monopolies and the liquor wholesalers and the politicians that support them. Which means, really, just like in any political environment, the villain is US. We voted these bastards into existence. It's our job to vote them out, and to support organizations that "change their minds" by applying the only type of pressure they seem to understand.

Alder

EB wrote:
01.05.08 at 8:50 AM
Jim wrote:
01.05.08 at 8:52 AM

Well, if you believe in the "circular world" theory, watch "My Name Is Earl", and believe "The Love You Take Is Equal To The Love You Make", then wine.com will eventually "reap what they sow". Definitely not a good way to make friends and neighbors or even be a reasonable competitor. Some might even call their sorry moves a bit vaginal. Please pass the vinegar and water to Rich Bergsund. Win the battles on the field, Rich. Enjoy your new reputation as a big fat tattle-tale. Worry about your own business and the states will eventually catch the offenders.

Tom Cole wrote:
01.05.08 at 10:33 AM

Well, Mr. Bergsund, here is what you have managed to immediately accomplish if you are still monitoring this blog. I have just cancelled an $11,000+ order to wine.com that I still was not through completing and I will no longer be ordering any wine from your business in the future, and I order a LOT of wine. Additionally, I have contributed $1,000 to the Specialty Wine Retailers Association in order for them to combat the laws that you are so cleverly using to punish your competition. If there are any of you who feel the same way, go to the SWRA website and contribute as well.

If you are really serious that you are "as frustrated with state laws as you(we) are", then match my donation to the Specialty Wine Retailers Association so that we can create a level playing field the "American Way", rather than conducting a sting operation against other internet wine retailers.

Your preferred way, apparently, is the way many businesses circumvent a level playing field by getting legislatures to pass laws favoring certain businesses or by crippling others. It is clear that you have not been involved in passing laws of this nature, but it appears to me that you are certainly willing to take advantage of the ones that are on the books rather than assisting in eliminating these types of laws to the benefit of the consumer.

If anyone has a hard time following my previous logic, do a Google search on Ayn Rand and, more specifically, John Gault.

Or, I could be wrong.

Jack wrote:
01.05.08 at 12:56 PM

What a surprise: Mark Squires has closed/censored the thread on this subject, stating "Since a certain member has quite deliberately gone way over the line, it is time for this thread, and its repetitive back and forth to go to closure..."

I could not figure out which member did this, but why not just delete his comment? WHY CLOSE THE THREAD? Closing it removes it from the front page of Wine Talk, effectively eliminating this great thread from view.

01.05.08 at 1:39 PM

As I have stated in my own articles I feel this is the sort of discrimination that makes people do things that the powers that be consider criminal. Just as prohibition did not work these vestiges of old laws serve only the states coffers at the expense of the individual rights of their residents!
There needs to be one federal law that allows all to ship from state to state with one standard of taxation. If the states insist this revenue can go to them but the law should be universal this should be a basic consumer right to consume wine in their home without interference or prosecution!

Alder wrote:
01.05.08 at 2:00 PM

Jack,

I presume that Squires thinks that the thread had devolved into personal back and forths rather than further discussion relevant to the topic, but I share your frustration. His action presumes that everything relevant has already been shared, but the thread has only been open for less than 24 hours. Seems to me that he's cut off a lot of potential good conversation, not to mention the ability for others to find out about it.

Oh well. The conversation can continue here!

Alder wrote:
01.05.08 at 2:26 PM

While not exactly 100% parallel, I was struck this morning when I read this article on the Motley Fool website about the Recording Industry of America and their continued actions to sue people who they say are violating (the archaic) copyright laws under which they make their money. The analyst at the Motley Fool basically says: Sell the RIAA short. Litigation as a business model is the sign of a failing business. It will not work long term.

joe wrote:
01.05.08 at 2:33 PM

"As I have stated in my own articles I feel this is the sort of discrimination that makes people do things that the powers that be consider criminal. Just as prohibition did not work these vestiges of old laws serve only the states coffers at the expense of the individual rights of their residents!
There needs to be one federal law that allows all to ship from state to state with one standard of taxation. If the states insist this revenue can go to them but the law should be universal this should be a basic consumer right to consume wine in their home without interference or prosecution!"

Exactly, if compliance to taxation, and legal age consumption is the desire, isn't it as easy as allowing all shipments into every state be taxed at prevailing states tax rate, and mandatory adult of drinking age signature required upon release. That would level the playing field, collect the requisite taxes for the states, and prevent the under age consumption issue. Some would still argue that even then, some retailers would try to skirt the laws, but if all the shipping laws were written in such a way to make compliance relatively easy, and not written to be so convoluted as to dissuade compliance, I would guess the majority of retailers would rather do the right thing, and not have to worry about illegal practices. Why would this not work??? oh yeh, its excludes the profit filtering by the wholesalers, shucks.

Anonymous Retailer wrote:
01.05.08 at 3:43 PM

Joe, your suggestion would work fine as it creates the desired "level playing field" for all retailers. The only problem is whether this shipping issue can pragmatically be extracted out of the states' hands and moved to the federal level. If not, a "model shipping bill" containing these components that could be adopted by each state would also achieve the same end (but take longer and be subject to tweaking in every state legislature and efforts by wholesalers to distort it).

Tom, I'm sure the SWRA greatly appreciates your individual contribution which is really quite generous but the typical retailer, and certainly one of Wine.com's larger size (whatever that is), should be paying significantly more money on an annual basis. Here is a link (see below) to the joining page for retail supporters and the SWRA application is a downloadable PDF on that page.
http://www.specialtywineretailers.org/retail.html

joe wrote:
01.05.08 at 5:31 PM

The proper way to get a law changed is not by breaking it. To Daniel Dreymann, let me just say, I don’t think anyone wants anarchy. But lets consider the world we live in, more precisely, lets look at the wine world.

In the beginning, there was the Illegal immigrant, they come into this country, and are knowingly hired by a whole host of wine related business, starting with the grape growers. Why is this done? To benefit from cheap labor, which equates to greater profits. This is the first law broken in the chain of wine. Next, the grapes are made into wine, with the help of, you guessed it, many un-documented laborers. Lots of labor laws broken in the production of wine. Then, because wineries / alcohol producers need to pay taxes on many aspects of their business, from production, to percentage of alcohol, to quantity produced, to inventory warehoused, etc, some producers MAY fudge (lie) on some figures, to save on paying taxes, trust me, it happens! More laws broken in the chain of wine.

Now the wine is in the bottle, and in the wholesalers warehouse, being stacked and moved by possibly un-documents workers, (law broken) then taken out to restaurants and retailers to sell, via their sales force. This “sales force”, often move and place their products above, or in place of other producers products to enhance their visibility, (illegal) they give, or gift free promotional items to lobby retailer and restaurateurs to carry their products, again, more laws being broken in the chain of wine.

In an attempt to sell slow moving products, wholesalers often require what is known as “tie-in” sales, requiring purchase of one product to acquire another. Highly Illegal, but done with great regularity. Up until now, most of this “law breaking anarchy” has taken place “in the shadows”, but now its retailers time to step into the spotlight, and shipping wine into states without the proper compliance is but the final leg of many illegal activities that takes place in the wine business. And, psssst, ive known of a few big wine retailers who have had illegal workers in their warehouses too. These examples just scratch the surface of what goes on in the wine business. So, Daniel, where do we start to correct the problem in the wine industry? Id say, lets start at the beginning, and work our way to the end. Lets start with a no-nonsense streamlined immigration policy, and end with a no-nonsense streamlined wine shipping policy, and fix and correct all the illegal, and coercive issues in-between. Deal??

Jack wrote:
01.05.08 at 6:16 PM

Changing em mass the laws for shipping wine in the US is next-to-impossible (in a way favorable to consumers). You see, the amount of money that interested consumers/retailers/US wineries have that could be spent on this effort is less 1% that the liquor wholesalers can spend ("donate") to their pocket congressmen.

Anonymous Retailer wrote:
01.05.08 at 6:47 PM

Jack, the big difference between the wholesalers' and retailers' efforts is that retailers have long established legal principles on their side -- the most basic of which is open competition in a single economic union. Retailers are not trying to prop up an inherently biased, monopolistic system with political bribes and graft money. Therefore, far less money should be necessary than the wholesalers are spending and it should be spent on litigation against states supporting the discriminatory laws (which is essentially the SWRA's approach as I understand it).

If one were to go even further and attempt to dismantle the entire antiquated 3-tier system, then your money point is probably valid.

Marco wrote:
01.05.08 at 11:36 PM

This is a very interesting discussion. I am a WA state resident which works in the wine business. I believe that changes will happen and sooner then we think. Most wine-laws are certainly obsolete, however I don't see the three-tier system being hurt any time soon. It is a shame (and also absurd) that a product which spells history, tradition and terroir is in the middle of a discussion like this. Cheers!

Anonymous retailer wrote:
01.06.08 at 12:06 AM

Wow. I have been in the friendly (til now!) wine business for more than 20 years and this is the most underhanded, despicable, slithering snakelike thing I have ever heard of! I hope that individual wineries consider a boycott of wine.com, as well, because of the harm they are trying to inflict on retailers.

When you wine.com boys attend trade events and tastings in the future, you'd better be hiding your wine.com nametags! Shame on you!

Eric wrote:
01.06.08 at 3:26 AM

While in principle I had hoped wine.com would succeed, I'm glad you published their attorney's letter. They can spin it all they want. All the consumer needs to see is that letter to come to conclusion as to whether they want to do business with them or not. Some will agree with such a practice but I imagine many won't.

Wine.com has the right to send such a letter and take action as they have done. But they must live with the consequences good or bad. When they sent that letter they probably didn't anticipate it getting public...amateur. Many consumers have close relationships with a number of cavistes. This is why it is rare for the reputable retailers to disparage or discuss each other. Their energy is better spent cultivating relationships on the supply side and retail side, building trust and offering value.

This is a piece of excellent reporting Alder. I'm curious, who was first to report this? It appears the Mark Squire's thread was subsequent to your report. If so, they should have credited you and linked to you in the thread.

Jeremy wrote:
01.06.08 at 9:02 AM

Sorry to weigh in so late here but felt compelled...

The wine.com affair is an indication of how the post-prohibition-era alcohol legislation in this country needs to be revised and updated. In Europe, a Brit (whose country isn't even on the Euro!) can buy and ship wine directly from Chianti Classico. How is it possible that retailers can't ship wine from NY to Tennessee (even though we all know that many do on a regular basis with the couriers policing the system -- not the government!

Retailers should not be punished for anachronistic, obsolete legislation.

Alder wrote:
01.06.08 at 10:22 AM

Eric,

Thanks for the comments. The letters first came to light in Rich Cartiere's Wine Market Report, which is where I discovered the issue. The Squires thread was indeed based on my post, and the person who started it, did put a link to my article, but didn't mention Vinography by name. I'm not worried about credit, I just want the news to get out.

ScottS wrote:
01.06.08 at 10:48 AM

I was the one who started the Squires thread.

For the record, I once tried to start a thread about great wine blogs at Squire's and mentioned Vinography and the whole thread was shut down in short order. Being a new member over there, I was confused, but I was informed by a notable winemaker that that sort of arbitrary moderation was par for the course; apparently they view blogs as competition (?) Thus, I refrained from crediting this blog or Alder by name but figured that people would see the quality here once they clicked over. So it goes.

John wrote:
01.06.08 at 12:32 PM

Dear All,

Perhaps the most interesting exchange I have read in some time. Somehow, the wine trade has become the forum for how does one change a foolish (or worse) law? Certainly, civil disobedience is a time tested option, but as a "civil disobedient" one must be willing to accept the consequences; otherwise, the disobedience is without grounds -- it is simply breaking the law.

Despite its own hype, my guess is that Wine.com is in deep kimchee. Its prices range from non-competitive to exorbitant, and it is simply trying to squelch the competition by using the laws as they are now written -- however foolish or backasswards these laws might be.

The real question to me is what would Wine.com do if it were hemorrhaging money? My guess is nothing. Their indignity is transparent, and all the more pathetic because of it. I suggest a new corporate logo:

"Mommmy, mommy, Billy took my ball and he won't let me play with it. Make Billy give it back"

or, just man up and say its about the money.

Cheers,

John

01.06.08 at 12:41 PM

It sure looks like Mr. Bergsund has created a bleep-storm of negative PR for his company, but that is stating the obvious. More to the point, with regard to the comment that "the proper way to get a law changed is not by breaking it", one wonders if wine.com's actions are a response to what appears to be a form of civil disobedience against unjust laws controlling the sale of wine in the United States. Your thoughts por favor?

Alder wrote:
01.06.08 at 1:19 PM

David,

In my opinion Wine.Com's actions are a response to their perception that they are not as competitive as they could be in this marketplace. Which certainly may be true, but may not have anything to do with what their competitors are doing. I'm sure they're not doing this on principle, since corporations so rarely do. The motivation most certainly has to be money.

wine dot com wrote:
01.06.08 at 3:56 PM

Despite the negative PR for Wine.com, we can see there’s a lot of energy on this issue. Maybe there’s a way to channel it into some positive change.

Wine.com has taken a lot of criticism over the last few days, some of it very personal and unprofessional, and most from anonymous sources who do not disclose their full name or the companies they represent. Remember that behind Wine.com is a team of good people who are passionate about wine and how the Internet can help people enjoy it. The Wine.com team spends incredible time and energy trying to better understand our customers and how we can serve them. That is the foundation of our business strategy. Our strategy has never counted on state shipping laws changing, because while that would be nice if it happened, it is not something on which we can depend.

Also, remember that there are two sides to every story, so here is ours. Wine.com wants two things:

First and foremost, open markets. We’d like to see all states open up to interstate shipping of wine. This would be best for consumers, best for the health of the online wine business and best for Wine.com and our customers. As an example, Virginia recently did this, and we applied for and received a direct shipper’s license from the state and immediately closed our Virginia warehouse. We now serve Virginia customers from our Florida warehouse, which offers a better product selection and lower prices than we were able to offer from within Virginia. We collect and pay sales tax to the state of Virginia. We’d like to see other states follow suit, but are concerned with the developments in Illinois and Texas, which appear to be headed the opposite direction. (People often confuse wineries with retailers when discussing state shipping laws – we’re focusing here just on the issues pertaining to retailers).

Second, we want fair competition. How would you feel if the government required you to spend millions of dollars every year to comply with its laws, while letting your competitors play for free? Whether markets are open or closed, we believe all retailers should be playing by the same rules. It is not right for states to selectively enforce their laws, causing increased cost and complexity to some while others fly under the radar. It is also not good for our customers, as the costs of compliance and collecting and paying state sales tax makes us uncompetitive in many states. As an example, in 1999 Washington notified Wine.com (then operating as eVineyard), that it must stop selling and shipping to Washington consumers from outside Washington. Wine.com ceased selling to Washington consumers, then opened up a warehouse in Washington and applied for and received a retail license to sell wine in Washington. We buy from Washington wholesalers, collect and pay Washington sales tax and service Washington customers in this way. We have patiently waited for eight years for the state to either open up to out-of-state shipping or enforce their laws with other retailers, but nothing has happened. With the exception of a handful of reputable retailers, nearly all others ship into Washington without a license, local store or sales tax. This is not fair, and puts our customers and stakeholders at a disadvantage.

Today, Wine.com finds itself with neither open markets nor fair competition – most states are both closed to outside shipping and unfair in their enforcement of the laws on their books. After nearly a decade of waiting for and asking states to either open up or fairly enforce their laws, incurring literally millions in extra costs not incurred by our competitors, we’re ready for change. The status quo is no longer an option. So what can we do?

One option is to play by the same rules as most other online retailers – ship illegally and don’t charge sales tax. We don’t like the state laws and they’re rarely enforced, so let’s ignore them, close all our local distribution centers, ship from a central location to a larger number of states and not charge sales tax. Selling to more markets, and at lower prices without sales tax, we’d instantly grow our revenues. And without all the local warehouses and the complexity of running separate inventory and websites for each state, our costs would decrease and our profitability would improve. Believe me, there are days when this looks like a pretty good option. But we haven’t gone there, because if wine is going to be a viable and legitimate online category and grow and thrive in the long run, we think it’s got to be done the right way. This means operating within the law to serve our customers, while working to change the laws with which we all seem to disagree.

Some have suggested we join lobbying efforts by other retailers, specifically the Specialty Wine Retailers Association. While we encourage those efforts and don’t begrudge people donating to that cause, we believe it’s fundamentally flawed to lobby for changing laws you are currently breaking. We don’t buy the argument that it’s okay to ignore the laws just because they’re outdated, not consumer-friendly and difficult/costly to implement. If we throw our hat in that ring, we lose the opportunity, as a licensed, tax paying retailer in a given state, to have a meaningful and productive dialog with that state. We will join the SWRA the minute they establish a code of conduct that requires its members to operate within the law. Only then can that organization gain the credibility it needs to make a difference.

Others have suggested we launch our own lobbying efforts, and that is the path we have chosen. We have approached several states, in which we have legal standing, and asked regulators to consider our situation. We have described our operating model and costs of compliance with their laws, and we have pointed out that we are one of a small number of companies who comply with those laws. The only way to base this argument on facts was to place orders from other online retailers who are actively and publicly soliciting customers in other states (see Google), in order to confirm they do in fact ship to those states. We did not single out or target any particular retailers, because the list of illegal shippers is large. (We need to correct a mistake in an earlier article from Wine Market Report, who stated erroneously that BevMo! ships illegally. That is not our belief – in fact they appear to be one of the few companies who, like Wine.com, are working within the law). We also did not approach states anonymously, but made it clear who we are and why we feel the need to take action, even if that means some negative PR or response from others with a vested interest in the status quo. We have asked the states to either: 1) open up to out-of-state shippers, so we too can do business without the costs of compliance, or at the very least 2) fairly and consistently enforce the laws they currently have. We have made it clear that we’ll accept either outcome. The only thing we can’t accept any longer is the status quo -- closed markets and unfair enforcement.

We can’t predict whether a state will take action or which course they’ll follow. Some appear to be interested in opening up, others in fairly enforcing their current laws. While we understand our actions will not be popular with folks who are benefiting from the current state of affairs, we owe it to our customers and shareholders to take a more proactive approach than we have in years past. We are willing to take risks to challenge the status quo, including negative PR. But we also suspect a lot of consumers may be unaware they are currently buying from companies who ship illegally, and when they find out, they may prefer to buy from someone who is compliant with state laws. For example, many of our customers are corporate gift givers, and we think they deserve to have a legal way to purchase wine gifts for their clients.

Wine.com has been accused of and called a lot of things over the last couple days. That can be expected from those who currently benefit from illegal shipping. But if you’re going to criticize us so vehemently, at least have the courage to disclose your full name and the company you represent, rather than hiding in anonymity and throwing in grenades from the sidelines.

We don’t expect everyone to rally around the cause of fair enforcement of the current state shipping laws. But we should be on the same side with regard to opening up more states to out-of-state retailers, so take some of the energy we’ve seen over the last couple days and focus it on your state regulators.

Rich Bergsund
CEO, Wine.com

Mike Osborn
Founder, Wine.com

Tom Wark wrote:
01.06.08 at 6:38 PM

Rich Bergsund Wrote:

"First and foremost, open markets. We’d like to see all states open up to interstate shipping of wine. This would be best for consumers, best for the health of the online wine business and best for Wine.com and our customers."

On this Mr. Burgsund and I agree. There is no question that what's best for Wine.com, the American Wine and industry and, most importantly, the American wine consumer, would be an open national market where consumers could seek out, purchase and have shipped to them the wines they want.

So allow me to educate you, Mr. Burgsund, on exactly how that is going to happen.

Only rarely will it happen via lobbying efforts. For example, in Oregon lobbying by retailers and wineries helped prevent a move by wholesalers from prohibiting Oregonians from purchasing wine from out of state retailers. It was a shame that Wine.com did not show up to lobby on behalf of consumers in Oregon. Meanwhile, Specialty Wine Retailers was there, testifying before committees, communicating with the media and reaching out to consumers.

Where was Wine.com?

But lobbying usually won't help the effort to allow consumers to buy directly from out of state retailers. Illinois is perfect example. The power of the wholesalers was on display in Illinois last year when they were able to ram through legislation that will prohibit Illinoisans from purchasing wine from out of state retailers.

Nevertheless, Specialty Wine Retailers Association was there testifying in front of committees, getting amendments to the legislation introduced, working the media, generating letters from consumers to legislators and working with local retailers. At the very least, we certainly raised the awareness of this issue.

Unfortunately Wine.com was no where to be seen during the Illinois battle. It would have been nice to have you there. It would have been nice to have Wine.com alert its Illinois customer base of the issue at hand. It would have been nice to have Wine.com urge its customers to write their state representatives.

But Wine.com was not there.

The fact is, if the laws are going to be changed in America to allow the growing number of wine lovers to purchase wine and have it shipped to them from retailers across the country, it's going to take a well crafted legal strategy that leads to a federal appeals court explaining to the wholesalers and the states that the principle of non discrimination announced in the Granholm Supreme Court decision does indeed apply to retailers as well as wineries.

If Wine.Com would really "like to see all states open up to interstate shipping of wine" the only way it will happen is though a litigation strategy.

The only organization carrying through on that strategy is Specialty Wine Retailers Association, an organization of brick and mortar retailers, wine clubs, auction houses and, yes, Internet based wine retailers.

This is the same organization, Mr. Burgsund, that Wine.com is very familiar with. It is the organization that Wine.com said "NO" to when asked to join and asked to donate to the cause just like MANY of your peers in the wine retailing business have done.

So despite Wine.com's absence from the fight we go forward with a critical lawsuit in Texas. Whether we win or lose a the district court level, the case will be appealed and SWRA will be there to continue this important fight.

Now, I would not presume to question your belief that an open market for wine is best for consumers. And I would not presume to think that your company's reason for not helping in this cause is due to the fact that the more states that do pass restrictive shipping legislation is actually good for Wine.com's bottom line given that it lessons the competition you face.

However, I will presume one thing:

When Specialty Wine Retailers Association is successful in using the courts to overturn the restrictive and unconstitutional laws that prohibit consumers from purchasing and having wine shipped to them, that Wine.com will give a hearty thanks to those OTHER wine retailers that ponied up the money to make it happen.

After all, as you point out such a turn of events would be "best for the health of ...Wine.com."

If by chance you are willing to pay your fair share of this effort now, rather than waiting for other wine retailers to contribute the millions of dollars it will take to pursue a change in the laws in a way that would be "best for the health of Wine.com", I'd be happy to have a conversation with you to determine just exactly how much Wine.com can contribute to the effort.

My contact information is below.

Tom Wark
Executive Director
Specialty Wine Retailers Association
twark@specialtywineretailers.org
707-935-4424

Tom Cole wrote:
01.07.08 at 6:31 AM

A couple of points from a consumer's viewpoint as in no way am I affiliated with any aspect of the wine trade. I love seeking out and drinking good wine, period.

First, wine.com raises valid points - they are indeed playing on an unlevel playing field and I actually do have some sympathies with their position. In the final analysis, they are, after all, just trying to follow the laws. However, as they apparently see it based on their two posts to this blog, there are two MUTUALLY EXCLUSIVE methods in which they can attempt to level the playing field - 1) use discriminatory laws to their benefit and to the DETRIMENT of the consumer or 2) attempt to change the laws to their benefit and to the BENEFIT of the consumer.

One question to Mr. Bergsund and Mr. Osborn - why are these routes mutually exclusive? From my viewpoint, your position would be much more tenable and I would be much more sympathetic to your cause if you had taken both routes to attempt to achieve a level playing field. You continue to have the opportunity to contribute to SWRA, but apparently still refuse to recognize it as an alternative that is not mutally exclusive to the method you have chosen.

Second, I posted a thread on Mark Squires Bulletin Board mentioning my contribution to the Specialty Wine Retailers Association and requested matching contributions from a community that apparently seemed as up-in-arms as I was after hearing about wine.com's approach to establishing a level playing field for internet wine retailers. NOT A SINGLE RESPONSE. After one day my post is now on page 3 of the bulletin board and rapidly sinking into oblivion.

In my viewpoint, this is just as sad, if not sadder, than wine.com's attempts to create a level playing field through the use of discriminatory laws to their advantage. Members of Squire's bulletin board had a chance to make themselves heard concerning this issue with something more than words, and, given a chance to put their money where the mouth is, not ONE SINGLE PERSON has currently stepped up to the plate. All of the vast majority of the posters' apparent indignation as to wine.com's tactics as expressed in the closed thread started by ScottS now ring hollow, in my opinion.

01.07.08 at 9:13 AM

Tom Cole's's point about the need for consumers to speak up is a good one. I wrote a post in my own blog on Friday about this very topic called "The missing involvement of consumers in rewriting wine shipping laws." Here's the link: http://www.vinfolio.com/thewinecollector/2008/01/the-missing-involvement-of-con.jsp

Coindidentally, today's LA Times is running a story called "Putting a cork in Internet wine sales". Here's the link: http://www.latimes.com/business/la-fi-wine7jan07,1,604733.story?coll=la-mininav-business&ctrack=3&cset=true

SoCal Retailer wrote:
01.07.08 at 9:51 AM

Mr. Bergsund,
In your lengthy treatise, you question why retailers post annonymously. This from the CEO of the very same company that is being the playground snitch and turning in retailers that it feels need to be reported to "the authorities"? Obviously, retailers that weren't turned into the state regulators by Wine.com in the first round of your companies vigilante writing campaign don't wish to be retaliated against by you and yours in the future!

Tom Cole wrote:
01.07.08 at 11:44 AM

I have one more question for Mr. Bergsun and Mr. Osborn. Was it, or was it not, a violation of Washington laws requesting that wine be shipped to YOU when you were obviously well aware that the shipments of wine to Washington State was illegal?

It seems to me that you and your company have acknowleged that you were willing participants in a supposedly illegal transaction. I am not a lawyer, but it appears to me that it takes two to tango in this "illegal" interprise.

Others with more knowledge of the laws may care to chime in on the legality of wine.com's role in what they claim to be illegal transactions regarding the sale of wine in interstate transactions.

chambolle wrote:
01.07.08 at 12:54 PM

I have never purchased wine from wine.com, as far as I can recall, and for one simple reason: it fails to compete on selection, service and price. As a serious wine collector, I must search many sources to find the limited production wines I want (particularly my passion of the last 30 years or so, Burgundy). If wine.com wants to "level the playing field," it can do so by succeeding as a bona fide competitor -- by offering selection, service and price that meet the competition. I've looked at wine.com's selection of Burgundy (and Champagne) -- and conclude that my relatively small local grocery store has a more comprehensive and more fairly priced offering than wine.com. Wine.com simply has nothing to sell me.

But wine.com would like to see to it that my only options are my local state store, my local grocery, and local retailers who can sell only whatever local wholesalers choose to stock and sell to the local retailers. And, of course, I could also order on the internet from wine.com, which, as we have seen, has nothing of interest to sell. In the world wine.com would like to make, I would rarely, if ever again, be able to purchase wine from Roumier, Lafon, Grivot, Mugnier, Roty, Chevillon, Gouges, Amiot... you fill in the rest of the blanks. And the burgeoning secondary (auction) market in such wines would cease to exist.

Instead of competing on the merits, it appears wine.com is attempting to compete by soliciting the assistance of law enforcement officials to drive its competitors off the playing field entirely; and by terrorizing the customers of its competitors with the thinly veiled threat of state action against them for doing nothing more than pursuing their passionate interest in wine, in the face of arcane and most likely unconstitutional regulations that impermissibly attempt to restrain free interstate trade and protect the three tier distribution network.

If wine.com wants to "level the playing field," it has a number of options it can pursue in good faith, including funding the ongoing effort to open interstate markets. Instead, it is funding an effort to terrorize its competitors and the overwhelming majority of serious wine buyers who vote with their feet and buy elsewhere.

Shame.

01.07.08 at 2:54 PM

Great post Mr. Wark. We appreciate your effort and we're pleased to be part of the SWRA. K&L shares your belief that SWRA is the most important and effective approach toward opening up interstate shipping. We'd love it if Wine.com would join the rest of us there, rather than trying to attack us in the manner that Alder has brought to light. What do you say Rich and Mike? Ready to commit to SWRA?

Wilfried wrote:
01.07.08 at 4:07 PM

Denouncement aromas at wine.com... Bad smell!

wine dot com wrote:
01.07.08 at 4:30 PM

Some have asked why Wine.com hasn't joined up with the Specialty Wine Retailers Association. As we stated in our earlier post, and as we've said whenever asked this in the past, we will join the SWRA the minute they establish a code of conduct that requires their members to operate within the law. Tom and Brian – can you do that?

There is precedent for this. Free the Grapes, the coalition of wineries who are pushing for opening up markets for interstate shipping, and an offshoot of the effort that won the Supreme Court case to the benefit of wineries, has such a code of conduct for its own members. They have chosen to work within the law as they try, with a lot of success, to change it. Here is their Wine Industry Code for Direct Shipping – all the SWRA has to do is implement the same thing: http://www.freethegrapes.org/wineries.html

joe wrote:
01.07.08 at 5:08 PM

Tom Cole wrote:
“A couple of points from a consumer's viewpoint as in no way am I affiliated with any aspect of the wine trade. I love seeking out and drinking good wine, period.
First, wine.com raises valid points - they are indeed playing on an unlevel playing field and I actually do have some sympathies with their position. In the final analysis, they are, after all, just trying to follow the laws.”

And then:
“I have one more question for Mr. Bergsun and Mr. Osborn. Was it, or was it not, a violation of Washington laws requesting that wine be shipped to YOU when you were obviously well aware that the shipments of wine to Washington State was illegal?”

Maybe the act of exposing someone else breaking the law is in itself a legal act???. Or maybe they were already operating under the auspices of the local law enforcement agencies. Hey, a new wine.com tag line; “to protect and serve”. (tongue in cheek) I cant imagine wine.com committing an illegal act, whilst screaming from the rooftops about the illegal wine shippers.

The bottom line here is this, the good folks at wine.com feel the need to pursue this in order to “level the playing field” so all other retailers would incur the same expenses. Im assuming they feel this would in turn lead to either, fewer retailers, or retailers with higher operating costs that would make wine.com more competitive (profitable). Neither of which is guaranteed even if accomplished. As even on this so called level playing field, there are plenty of wine retailers who would still be more competitive, due to selection, pricing, service, etc. So, ultimately it may not amount to a hill of beans more money in the wine.com coffers, and the shipping laws would STILL be antiquated, and cumbersome. So in the long run, what’s the benefit? Ok, ok, we all know many retailers are breaking the law, so are people smoking pot, and speeding, and driving without their seatbelts on, and ad nausea. But in the inimitable words of my young daughter, “who died and made you queen”.

“Wine.com has taken a lot of criticism over the last few days, some of it very personal and unprofessional, and most from anonymous sources who do not disclose their full name or the companies they represent.” Wine.com

How about you tell us who is participating in your ordering sting program first, or are their names secret? Fair is fair!!!

I think wine.com’s time would be better spent fine tuning their business model to increase their competitiveness, than taking it upon themselves to become the whistle blowing conscience of the wine retailing industry. And I think participating in efforts to change the outdated shipping nightmare would be a much better and more positive move, than accepting the notion that ultimately its easier to try to eliminate the competition.

Tom Cole wrote:
01.07.08 at 7:07 PM

Posted by Wine.com

"Some have asked why Wine.com hasn't joined up with the Specialty Wine Retailers Association. As we stated in our earlier post, and as we've said whenever asked this in the past, we will join the SWRA the minute they establish a code of conduct that requires their members to operate within the law. Tom and Brian – can you do that?

There is precedent for this. Free the Grapes, the coalition of wineries who are pushing for opening up markets for interstate shipping, and an offshoot of the effort that won the Supreme Court case to the benefit of wineries, has such a code of conduct for its own members. They have chosen to work within the law as they try, with a lot of success, to change it. Here is their Wine Industry Code for Direct Shipping – all the SWRA has to do is implement the same thing: http://www.freethegrapes.org/wineries.html"

Okay, let's get a few things straight from my point of view as a consumer who ACTUALLY HAS BOUGHT WINE FROM YOUR BUSINESS previously, but will never do so in the future. I do not care one whit about your internecine war with WRSA. I only care about what service you can provide me above and beyond other retailers out there in the internet world. I strongly suspect most other wine consumers feel the exact same way.

If the current laws put a damper on your ability to provide me with the best possible services, then I expect you to use all possible means available to provide me with the best product possible. If this involves contributions to WRSA in order to provide me with a decent product, then get on the bandwagon and stop providing excuses why you cannot, particularly when it deals with your supposed ethical stances.

It has become abundantly clear to me, and, I suspect, most other readers of these posts, that all your posts are mere rationalizations as to why you have taken the tact that you have - conduct sting operations in which you have apparently knowingly conducted illegal transactions in order to ultimately punish your competitors.

As I said previously, I actually sympthasize with the position you are in. However, if you cared one bit about your customers, you would do everything in your power to change the laws to our benefit.

As a consumer, you can chose to listen to me or not. From my perspective, you have abandoned the consumer. I have contributed $1,000 to WRSA - you continue to make excuses why you will not.

Tom Wark wrote:
01.07.08 at 7:53 PM

Wine.com Wrote:

"Some have asked why Wine.com hasn't joined up with the Specialty Wine Retailers Association. As we stated in our earlier post, and as we've said whenever asked this in the past, we will join the SWRA the minute they establish a code of conduct that requires their members to operate within the law. Tom and Brian – can you do that?...Here is their Wine Industry Code for Direct Shipping – all the SWRA has to do is implement the same thing"


I'm unsure what you are asking of Specialty Wine Retailers. Do you want a "code of conduct" that members are "Required" to adhere to? Or do you want a "code of conduct" that is "the same thing" as Free The Grapes' code—which is a VOLUNTARY code?

Why do you think the members of SWRA, who have together contributed large sums of money to pay for lobbying, litigation and education efforts, started the organization and continue to fund it? Very simply so that there will be no opportunity to break laws and so consumers can get the wines they want, not just those that wholesalers choose to deliver to in-state retailers.

This is both a noble effort and a smart business move. It's also an effort that will lift every single boat in the retail waters once the job is done—including Wine.com's.

I suspect this discussion is coming to an end. Wine.com will have to decide if it wants to continue to go after its fellow retailers and consumers just as the Wine & Spirit Wholesalers Association does or if it wants to go after the unconstitutional laws that prevent its customers from accessing wine.

It really shouldn't be a tough decision.

01.07.08 at 11:01 PM

The first measure in the code of conduct: No retailer will conduct an intra-industry sting operation

A. Brilliant Mind wrote:
01.07.08 at 11:23 PM

i just thought of a win/win for wine.com AND the specialty retailers!

I think in the opinion of many (myself included), wine.com has a problem competing in the market place NOT due to other retailers' failure to comply with the shipping laws, but because their selection and pricing is bottom-of-the-heap.

However, wine.com does have one thing the retailers they are targeting don't have: a compliant infrastructure. So, instead of flogging the dead horse that is their present business model of direct-to-consumer wine sales, why not change it to be a broker to all those presently non-compliant retailers that all of us consumers actually WANT to patronize based on core principles of selection, value, and service? A buck-a-bottle!!! Retailers unite for the good of the consumer! Wine.com, protect your investors before your imminent death rattle is the last faint sound e-wine consumers hear (but likely ignore, because, really: what have you done for US lately?)

i think i'll go get me a business-method patent so i can afford some of those 05 burgs that.....I can't find at wine.com! :D

Matt Mann wrote:
01.08.08 at 8:50 AM

I haven't read every post on this board but I've read enough to make a couple of points. First, I believe Wine.com has made a huge tactical error in their attempt to level the playing field by conducting a sting operation. It's probably a mistake to turn in a competitor who is violating a relatively trivial statute (we're not talking murder here) because it makes you look petty but its entirely another thing to put all of the effort into a sting operation. Engendering the enmity of your own industry is usually bad business. Additionally, the notion that there is not a level playing field is simply not true. There are costs involved in every decision. All retailers are required to play by the same laws. The cost for following them is increased shipping costs and limited market access. The cost for not following them is potential fines and/or license suspension. Second, I disagree with the proposition that the best way to get rid of a law is to violate it. Certainly civil disobedience was effective in mass movements against laws with strong moral opprobrium repugnant to many such as racial discrimination. Direct shipping laws don't carry such a high moral imperative. Violating the laws will merely play into the hands of wholesaler arguments that granting shipping privileges to retailers will result in wine being shipped to minors et al. They will point to the fact that everyone is violating the laws and they will have the proof. States will react by closing down shipping altogether. The reason progress has been made in the last few years is because the industry has been able to convince legislators that permit systems are the best way to ensure compliance.

I believe Wine.com's strategy is flawed. Their premise that lobbying isn't working appears to fly in the face of facts. Turning in their competition only creates enemies and is bad business. They should help with lobbying efforts to open states to wine shipping by retailers.

Another Anonymous Retailer wrote:
01.08.08 at 11:30 AM

Wow, this is insane. I have to be as brief as possible because wine.com has come after me before regarding a different issue which cost me time, and a lot of money having to hire lawyers for a frivolous claim.

I have a feeling that I will be one of the named retailers and will probably find out in the next day or so.

If this is the case, I will surely be put out of business since I am very small retailer, and will not be able to afford to hire a law firm to battle these issues.

My question is this, (and maybe someone has already posted this) since wine.com knew what they were doing was illegal, aren’t they also breaking the law?

I was under the impression that only Law Enforcement officials were able to arrange “stings” of any sort?

Matt Mann wrote:
01.08.08 at 11:49 AM

Another Anonymous Retailer makes an interesting observation. I am not aware of any criminal penalty relating to conducting a private sting operation although that will vary by state. While vigilantism is generally discouraged in the law, the fact that Wine.com did not mete out any punishment but rather just turned the alleged offenders into the authorities would seem to keep them off the hook. The only other possible violation I can think of would be if any of their "consumers" were ordering wine to be shipped into a state wherein the consumer bears at least some of the responsibility for violating the law. That would be very few states. Wine.com's greatest punishment will be the sullying of their name in the industry. Reputations are hard to build and easily destroyed.

Jack wrote:
01.08.08 at 12:45 PM

The more I think about this, the more Wine.com doing this Doesn't Make Any Sense...

If you look at what Wine.com sells, they sell mass market wines that are commonly available everywhere. Yet, their sting targeted specialty wine retailers that ship wines that can't be found everywhere. So, there was NO BENEFIT for Wine.com to do what they did, as this is NOT Wine.com's market.

Who DOES benefit? The WSWA - the Wine & Spirits Wholesales of America, who, as Tom Wark points out, have "only" contributed $50 million in campaign contributions to further their goals of closing all states to wine shipping.

So, isn't everything else here Smoke & Mirrors?

Think About It wrote:
01.08.08 at 1:08 PM

Wine.com, where do you buy your wine? Do you think wineries want you reducing the number of bottles of wine they sell? If a wine maker sells wine to 10 companies (you being one of them) and you close down or make it impossible for other companies to sell wine then the winery is now faced with selling their wine through a reduced channel. This equals less sales and less profit as their wine is now less saturated in the market.

So if I owned a winery I would stop allowing you to sell my wine immediately. We can only hope some wineries get a clue and cut you off entirely.

another contrarian wrote:
01.08.08 at 5:04 PM

Back here on planet Earth... even though all the idealists on this list--plus my friend Tom Wark who is paid to respond--don't like it, wine.com did what any other corporation would do and does daily (which is why we have so many attorneys). They took action against competitors who have an unfair (=illegal) advantage in the marketplace.

The high tech field is rife with these sorts of scuffles.

How can it be that only David Dreymann understands core business behavior which is so well expressed by wine.com's CEO?

Ohio Retailer wrote:
01.08.08 at 6:23 PM

I have had a very hard time reading about how Wine.com obeys all the state laws. In Ohio, this is what I know…

At first, I was impressed and perhaps even admired wine.com for playing "by the rules." As any smart retailer would do I monitored them and their competition closely. In Ohio, we have a very rigid 3-tier system including state minimum prices. I appreciated that an online retailer of their size was playing fair. They even maintained the state minimum price. They also only shipped State-Approved labels. All was fair in Ohio. Even though there were many other retailers out there that were breaking they rules I honestly thought they had class for fighting the good fight. The rules are horrible, but rules are rules.

They did all of this out of a warehouse in Hilliard, Ohio. They did all their shipping from that location to conform to the 3-tier system.

A few weeks into October I noticed that all their prices dropped well below state minimum.

As a retailer, I was outraged. I called several of the Wholesalers that we both do business with and asked them how they could be selling their wine under the state minimum price. I was told by one Wholesaler that wine.com informed them that they would not be ordering form them anymore and they would now be shipping out of California.

Nothing has changed with Ohio law in regard to shipping into the state. If anything, it has become stricter for wineries. They went through the trouble and expense of creating a warehouse operation within the state. This clearly indicates they understand the law. They just packed up and moved back to California to ship their wines, as I understand it, against the rules and below state minimum prices. This is totally unfair to Ohio retailers. I would like to do the same, but guess what, I can’t. It’s against the law. I would lose my permission to operate and be shut down.

Now, there is my operation. I am a small retailer. I have bound by all the horribly archaic wine laws in Ohio. I can’t wait for them to be over turned. But now wine.com, my self proclaimed friend and ally, is breaking the rules and unfairly hurting those of us that are playing by the rules. If I have to be bound by the rules so should they. But they chose to circumvent those rules.

You can imagine my horror to hear of this latest fiasco. How unbelievable.

Now to hear them proclaim in several postings how wonderful they are and how everyone else is evil makes me only surmise that these are definitely acts of desperation.

I will however maintain the high ground and play by the rules and wait for the laws to change.

Tish wrote:
01.09.08 at 6:44 AM

This will go down as a huge, HUGE gaffe on wine.com's part. My take is that the direct-shipping issue has lost steam since the Supreme Court (non-)decision, mainly because the past few years have brought an explosion both in the wine market and web commerce in general. It is simply not hard to get more and better wine than ever before in the history of fermented grapes. Without hardship -- whether defined as Joe Collector not being able to get his $100 Cab, or Aunt Minnie not being able to ship a twinpack of Bolla to her nephew in Seattle -- there is likely never going to be much citizen traction for change.

Now, however, we have a sexy angle to the story -- America's largest online retailer dissing its peers(and, to an extent, suppliers) while climbing into bed with the dastardly, pol-greasing wholesalers. And dozens of upright, dedicated retailers fudging some unbelievably archaic and complex laws to get a demanded product into the hands of earnest, well-meaning adults. This story has it all: corporate greed, legal hair-splitting, industry backbiting, political lobbying, alcohol, state rights vs. free trade, modern lifestyle choices, internet buzz...

What will the consumer wine magazines make of it? Will Wine SPectator rally to the defense of independent, web-savvy retailers who parrot their numbers while shipping loads of 90-point wines to thristy Americans regardless of residency? Will Wine Enthusiast Companies chime in, knowing they stand the risk of further exposing their shady retail operation? Will Robert Parker and Wine & Spirits say anything at all, or is this just not as important as churning out tasting notes for the highly evolved wine consumers who, even if they live in Pennsylvania, have figured out ways to get the good stuff?

Even more important: will national non-wine media finally start to take notice of direct shipping, thanks to the fresh angle of wine-com essentially telling the principal who's doing what in the bathroom. Maybe this will develop into a Prohibition-era type issue, where retailers take the role that speakeasies did. I don't know, but the spirited comments on this blog are probably a good indication that this is a story with legs.

Kudos to you Alder, for getting it out there!

Don Chappas wrote:
01.09.08 at 10:39 AM

I'm a consumer and I came across this news. It makes me sick that a industry would fight so dirty and insulting to each other.

Wine.com should be ashamed of themselves. and I hope that you 29 retailers that were targeted for this pathetic tactic file a lawsuit against Wine.com for unfair trade competition, deceptive practices and defamation.

They dont deserve any customers after this.

01.09.08 at 11:50 AM

To Wine.com:
As a fellow online retailer who abides by the rules and pays dearly for it every day, we do understand your frustration with those who take illegal shortcuts. We also cannot side with those who call for civil disobedience in this matter. It is an uncomfortable fact of life that our social contract comes with a set of rules that are put down as laws, which at times do grow to be outdated, senseless, archaic and only remain in place to benefit the selfish interests of a few. Freeing the grapes, promoting free trade, and freeing bottles of wine from their legally imposed incarceration are all noble quests, but they hardly constitute a good case for civil disobedience. Furthermore, breaking these laws does, as has been pointed out, only play into the hands of those that profit from them (and pay millions to keep them in place).

However, this argument against those retailers who choose to break the rules has to be kept strictly separate from the path you have chosen. Going vigilante and taking action against those retailers by setting up a sting operation is not only a well-deserved act of PR self-mutilation, it is also just a despicable thing to do. Let's take Alder's freeway example a step further. Your action is like tossing nails out onto the freeway and then speeding away ahead of them. All of us online retailers who rely on markets to stay open will get to feel the repercussions of your selfish action.

You state that fairness was the goal. Where then is the fair open letter to all online wine retailers asking them to abide by the rules so we can strip this market from its medieval chastity belt together? You could have even gone so far as to invite everyone to get on board by a certain date and announced your plan to be the monitor of this club of white hat retailers, and then this group of dandy lads could then have jointly approached the authorities and asked to be recognized as those who abide by the rules voluntarily. By process of elimination the trade enforcement authorities (not you but those other guys who actually work for the government) would have then known where to look. You could have been the leader of this noble band of brothers and come out of your quest for a level playing field smelling like a rose (or at least like a carnation). Instead, you chose the way of the sneaky tattle-tailer that everyone couldn't stand at school and you pissed on yourself.

We adhere to the rules and ship only where we can legally ship to. We are probably one of the smaller online retailers by virtue of importing the wines we sell ourselves rather than buying them from wholesalers who bought from other importers. We, as you, do also work with wholesalers at times, only they are our customers and not our vendors. Meaning we too have an interest in getting along with them. BUT, we will not side with those who have no love for wine and no interest in allowing the free trade of it. Fortunately there are a lot of good distributors out there with their wine hearts beating loudly for those amazing wines that some producers make for the world to enjoy.

So apparently you were the Washington customer that we recently had to refuse to sell wine to. We do want to help you get the wine you requested, and here is a way around the law that is perfectly legal. Instead of shipping your wines to yourself in Washington, send it to your aunt in California or any of the other 26 states we can legally ship to. Then have your dear auntie bring those bottles along the next time she visits you.

In fact, we have put together a special flight of wines for you. It's called the "Sting Op 007" (http://www.winemonger.com/catalog/product_info.php?products_id=1379) and is comprised of some of our best Gruner Veltliners, Rieslings, red wines and award winning dessert wines. And if you act now, you will enjoy a special 15% discount, PLUS we will give 10% of the proceeds for all the Sting Op 007 cases ordered by anyone to the SWRA. Just enter ISUCK as a discount code at checkout. Enjoy.

Cheers from Stephan and Emily at Winemonger.com

Maude Glenn wrote:
01.09.08 at 12:29 PM

Wine.com deserves to catch as much sh@# on this as they are getting. Rather than taking the high road and actually changing the laws, they remind me of scumbags in prisons or camps that rat on fellow prisoners for their own gain. The lowest of the low.

Tom Cole wrote:
01.09.08 at 12:50 PM

Emily and Stephan:

I stand in awe of your post - one of the most intelligent and well written posts I have ever seen placed on the internet. Aside from your piercing arguments in which you cut right to the heart of wine.com's actions, this post is one of the most brilliant marketing strategies I have ever been witness to. Let us hope that this story does indeed have legs and that whoever covers it in the press will give you a prominent role.

You are going to have a WHOLE lot of business from me in the future. I hope others feel the same way.

My last post on this issue. There is nowhere to go after yours.

joe wrote:
01.09.08 at 2:22 PM

As ive alluded to in my couple of previous posts. Wine.coms tactics are motivated out of increasing their market share, and effectively eliminating as much of the competition as possible. Unsavory as it may seem, this is not anything illegal as has been said already, but when they couch it in such a sanctimonious fashion, of upholding laws, and fair play, or level playing field, it smacks of hypocritical. Particularly when you hear of some of their possible non-level playing field practices relayed by other posters here. So, please wine.com, if it walks like a duck, and sounds like a duck, it’s a duck!! Do your thing, but at least be man enough to fess up to your dirty tricks, and not hiding behind the apron strings of law and order.
From my perspective, what wine.com is doing is both tattling on other retailers, AND, possibly cozying up to the wholesalers consortium, as it seems their activities are more aligned with them, than they care to admit. In one of their own posts they made the statement that: “Our strategy has never counted on state shipping laws changing, because while that would be nice if it happened, it is not something on which we can depend.” And as might be obvious to some, getting behind the movement to pass positive shipping legislation throughout the country might even be MORE detrimental than positive for wine.com.
Now they can say all they want about a level the playing field, but in reality, as we all know, in a truly level playing field, be it with everyone in compliance, or everyone without….wine.com would still not be competitive, and would in no way shape or form benefit from that. Once again unless they eliminate the competition, plain and simple, would be the best way to achieve their goal.
So, why has wine.com taken this approach, when other wine retailers have not? I think it’s a valid question, regardless of its worth. Money, and lots of it. since its earliest inception, wine.com was never really a wine merchant that we typically would think of, it was a MARKETING company. Wine just happened to be the product it marketed. Run at times by MBA’s and Harvard grads, they salted its ranks with wine folks, some just as figureheads, while others had some responsibility
This meant their competitive nature could be compromised, just as a winery that is taken over by a corporation that makes car tires, and then brings in tire experts to strategize on how to sell the wine.
For the most part the retail wine business is a pretty friendly group of folks, and im sure guys at K & L, know guys at Sams, who know guys at the wine club, who know guys at high time, who know guys at Wine Cask, who know guys at Rare Wine Co, who know….etc. Id be shocked to find out any of these guys would do anything similar to what wine.com has done. But, these guys are wine merchants to the core, and didn’t spring up out of the ether of the internet, to be funded several times to the tune of millions and millions of dollars, having to answer tough questions to their venture capital taskmasters. Now, nothing wrong with that, it just happens to be the by-product of a business that was blessed/doomed with the advantage of having the wine.com URL.
But here is an interesting observation from one who has spent 20+ years in all aspects of the wine trade, from production, wholesale, importing, and retail, etc. I can tell you with great certainty, that any large on-line retail wine merchant would tell you they could make wine.com hugely successful in short order, without resorting to wine.com’s dirty tactics. But yet, the good folks at wine.com seem to still be struggling on finding their way to do this, and this latest form of vigilante justice is not going to help them, or the retail wine industry a bit. So while none of this may matter a hill of beans, and there is no debating the fact that illegal wine shipping is happening, and those shipping are still breaking the law, it may shine some light on why wine.com seems to have taken these steps that will both alienate itself within the industry, and ultimately with consumers, who if wine.com had its way, could see either higher prices, less selection, or both.

Alder wrote:
01.09.08 at 4:47 PM

Emily and Stephan,

Ordinarily all such self promoting/marketing tpe comments like this would get deleted, but not only is this one of the most cogent and well reasoned responses to this whole affair that I have seen, it is also a brilliant idea.

I hope everyone buys a case.

This may be the only time I ever let someone hawk a product or service in the Vinography comments. Imitators beware.

Alder

Grape King wrote:
01.09.08 at 9:53 PM

The actions performed by wine.com seem so transparent I don't know how anyone could percieve them as anything but purely in their own interests and for profit. Definitely NOT for the consumer. I can only echo the beautiful and articulate responses given by Alder, Tom Cole, Emily, Stephen, etc. Swine.com has never received any of my business and never will.

I have a feeling wine.com was invited to join the SWRA long before they performed their sting ops. I wonder why they chose not to?

While we're talking about outdated and archaic laws, I found a few that could be considered on the same level and surely would not cause the country to fall into anarchy or be contsrued as civil disobedience:

The Utah state code holds that birds have the right of way on public highways.

It is illegal for anyone to ride his or her bicycle backward on the main streets of Forgan, Oklahoma.

It is illegal in Nebraska to picnic twice on the same spot within any thirty-day period.

It is illegal to fish on the Chicago breakwater in pajamas.

A Virginia law forbids bathtubes in the house; tubs must be kept in the yard.

It is against the law to gargle in public in Louisiana.

These are the kinds of laws we're talking about, people. No matter if the consumer is getting their bottle from a warehouse in their own state, or a tiny retailer across the country, the only difference seems to be the lining of a lawmakers pocket, and the price and availablity given to us, the consumers.

Tish wrote:
01.10.08 at 6:29 AM

Interesting to see that Wine Spectator has indeed chirped up on the wine.com sting, but in typically myopic, self-important fashion. Eric Arnold writes in a piece at WS online about the sting: "Most of the hostile response has come online, with consumers, retailers and at least one lobbying group making impassioned posts in wine-related forums, including that of WineSpectator.com." Of course, the article includes a link to said WS forums. Click through you find vinography's post referenced in the VERY FIRST post on the topic, then a whole lot of poster-vs.-poster sniping for 8 pages.

A more reputable media outlet would have credited vinography for having brought the sting to the light of the Web, and/or Rich Cartiere's Wine Market Report with breaking the story (as you did, Alder).

Now let's see if any of WS's columnist/bloggers have anything to say...or if they are muzzled. And let's see at what point WS names retailers involved; Cartiere mentioned a few, and the rest are llikely available as public record. (Granted, this angle of the story is something bloggers like you will have to weigh as well. Personally, I dont think most wine consumers are going to boycott a retailer who got snared in the sting; though I doubt they'll earn much sympathy either.)

This story will get much bigger before it fades, because it is emblematic of what a mess the entire wine distribution system is, and the system's dysfunction has come to include wine mainstream wine media.

01.10.08 at 3:28 PM

Tish: while Wine Specator ignored the debate here (if one can call 66:4 a debate), Wine Enthusiast gave Vinography due credit:

Ratting Out Is Rational for Wine.com
Thursday, January 10th, 2008 at 2:47:45 PM
by Jim Gordon

I may hate myself in the morning, but here goes: There’s another way to look at Wine.com’s practice of ratting out other retailers than the scathing treatment I’ve read in Vinography and elsewhere, condemning the flailing Internet wine retailer as anti-consumer for its admittedly hardball tactic of reporting to authorities the direct-shipping transgressions of some of its fellow retailers around the country.

See: http://blog.winemag.com/index.php/2008/01/10/ratting-out-is-rational-for-winecom

Tish wrote:
01.10.08 at 7:10 PM

I give Jim credit for not shying away, though I think his take is skewed by the fact that he was in the thick of wine e-commerce back in the day when multiple, well-heeled sites were trying to find the Golden Model that would allow them to beat the three-tier system legally and still make a profit. Maybe he still feels that trying to work within the system is somehow noble? History suggests that an Amazon-like site for wine is just not attainable at competitive prices given the current laws.

Odd that Jim doesn't state his hands-on involvement in drinks.com; he was their founding editor as I recall. And yet he goes out of his way to "disclose" Wine Express as "the exclusive wine shop partner" of the catalog (nice parsing there: it is owned outright by the magazine's publisher).

I did see that Jim also came out and expressed support for unfettered shipping. Will the mags themselves do the same? My hunch is that Wine & SPirits would support this principle before the others. W&S strikes me as a genuine advocate for consumers, in direct contrast to the self-inflated, ratings-fueled WS and curry-to-the-industry-first WE...

One more thought: I don't think any legislators at any level are going to get much mileage out of condemning the retailers who broke the law in this entrapment scenario. Seems risky, as it could backfire; after all, they were not selling guns to kids. The incident itself will be enough cold water on retailers everywhere to stop it. Meanwhile, let's hope the debate keeps moving forward, with an eye on the ultimate goal, which is maximizing availability of wine for the Americans who want to sell it and buy it.

edward hannah wrote:
01.10.08 at 10:24 PM


Since when is it ok to break the law to try to it change it ok ?
I hope you dont teach your children this way !
Wine.com most likely has done their 'sting" because of lack of enforcement up until now,

If all of you neighbors were constantly stealing I think in time you may report them .....


Tom Wark wrote:
01.10.08 at 10:46 PM

"Since when is it ok to break the law to try to it change it ok?"

I don't think anyone is breaking the law in any attempt to change the law. But to answer your question, there is a very long tradition of folks protesting unethical and immoral laws by breaking them. In our own country there is Thoreau and King that we can look at as examples.

However retailers are not Thoreaus or Kings.

What is necessary to note is that strictly speaking, the only people that can be held responsible under the law when wine is shipped from an out of state retailer to a Washingtonian is the citizen who receives the wine, who could be prosecuted for "importing untaxed alcohol". The Washington State Liquor Control Board has been quite clear that they have no jurisdiction over out of state retailers. This is why in addition to sending letters to the retailers that Wine.com alerted them to, they also sent letters to the retailers' own local liquor control regulators in the hopes that the authorities in the state where the retailer resides would take some action.

Tom Wark
Specialty Wine Retailers Association

Tom Cole wrote:
01.11.08 at 4:28 AM

Edward Hannah wrote:

"Since when is it ok to break the law to try to it change it ok?"

A little shindig in Boston comes immediately to mind. The parallels to the current topic, on both sides of the aisle, are really quite remarkable.

http://en.wikipedia.org/wiki/Boston_Tea_Party

My 2 Cents wrote:
01.11.08 at 8:33 AM

It seems to me that Wine.com has thrown the baby out with the bath water. They've laid open for everyone to see where they stand and it's on the side of the wholesaler and the status quo. It's sad, because Wine.com - who has never been profitable on several hundred million dollars in investment capital - had a chance to support fellow retailers and grow the pie for everyone. Now they've isolated themselves, and murdered their reputation. Its one thing to be honest - and every retailer who is part of SWRA is trying to better the space for all - but its another thing to be a snitch.

kelly wrote:
01.11.08 at 12:58 PM

Spin this however you want wine.com, but the fact remains YOU SNITCHED OUT OTHERS! And that's what everyone is going to remember. Nobody likes a RAT and your stings have only exacerbated the situation. Enjoy the bad pr and losses - you've earned it!

Oenophilus wrote:
01.11.08 at 1:10 PM

No one likes a bully or snitch. A whistleblower stops acts of injustice not disobedience to unjust laws and tyranny. wine.com is only looking out for their own profit and is seeking to put their competition out of business. Karma Wheel, start your spinning!

Steve wrote:
01.12.08 at 8:09 AM

It is one thing to report a crime you witness. It is quite another to encourage someone to break a crime and then turn them in. I understand the competitive pressures, and that they have invested a lot of money to be legal. But to setup your own sting operation. I personally find such behavior disappointing.

steve

Taster A wrote:
01.12.08 at 2:17 PM

Living in a "Ship here at your own risk" state of Massachusetts, I have no sympathy for Wine.com. Nor do I have sympathy for an organization that would violate the laws of the land, no matter how aberrated they are. Violating laws will open the door for an attack and weaken the positions of those who are trying to effect change in a positive direction.

Brian wrote:
01.12.08 at 3:42 PM

"Taster A" - do a little research on the little tea party that happened several years back in your home state. What are your thoughts on that event in the context of your opinion with today's issue?

Tony wrote:
01.13.08 at 11:47 AM

Taster A is right. If you violate stupid wine laws, the terrorists win.

george wrote:
01.13.08 at 12:48 PM

frankly, if you've been bending the rules by shipping to states you're not legally permitted to, and you just got called on it, tough. this strikes me as so much whining. man up, deal with it.

the speeding analogy is bogus as your driving speed is independant of my ability to drive. two different retailers targetting the same consumers is not independent, however--if retailer A has an unfair competitive advantage, and gets the sale, this harms B. A better analogy is a 100m sprint, with some athletes doping up, and some not. again, if the clean athletes call you out, tough.

i'm a consumer, and do 95% of my wine purchasing online. i've used K&L and never used wine.com (and don't really expect to in the future).


Tom Farella wrote:
01.15.08 at 10:06 AM

I'm still kinda in shock that this went down. Wine.com has struggled through this issue for so long, now they turn and bite EVERYONE without helping wrest contol of our daily beverage from the mafiosi and their ilk. If you think I'm being alarmist, who benefitted from the laws of Repeal? The folks with the booze, ready to ship. It blows my mind how entrenched the WSWA is within the world of lobbies and, one can only guess, kickbacks and the like. The DEMON Zinfandel is on the streets!!!! I can only imagine that wine.com is a member of WSWA with 0% interest in us little guys. Rock on, Alder!

john wrote:
01.15.08 at 12:39 PM

they sure wont see any of my money the rat bastads

01.17.08 at 3:57 PM

FYI -- There are press releases now going out, as well as posts on blogs, that erroneously attribute this web site to "breaking" the wine.com story.

That should be corrected.

Too often Internet blogs in general take copyrighted material and reproduce some or even much of it without adequate attribution in an attempt to make it seem that the blog authors did more original reporting than is the case.

For the record, my newsletter produced the first and original report on this controversy on SUNDAY, Dec. 27 after having spent a week working on it--even on Xmas eve and Day--in order to get this story into the public arena as soon as possible. We also are the source of the original wine.com document -- namely the wine.com attorney's letter. The letter was part of materials that we made available for others at no cost, even though we are subscription based and generally limit the redistribution of such documents to paid subscribers. State regulators confirmed that as of the date of this blog's Jan. 4 posting and even as of today we are the only ones to have requested copies based upon our view that they were critical to understanding the nature of this event.

I have been involved in establishing computer online services/wine business web sites since the early 1990s. I know how they work and I am familiar with the business models used.

Proper credit should be prominently displayed at all times. Otherwise, the ones doing the original hard dirty work out there won't bother the next time. And then the blogs might not have all the materials to write about that they once did.

Richard Cartiere
editor/publisher
in the wine business reporting business full-time since 1992
Rich Cartiere's Wine Market Report

Alder wrote:
01.17.08 at 9:34 PM

Rich,

I'm a little disappointed by your comments. I find it really hard to believe that you seem to be choosing to be upset with the fact that I wrote about this issue. I've been very clear to everyone that I've spoken with about this that I learned about this story from the Wine Market Report (though you should also know that the very first thing that I got was a forwarded copy of one of the letters that had been written to the Washington State Liquor Board). And you did see that I credited you in my original post waaaay up there at the top of this blog page, right?

Unfortunately you didn't have an online version of your (fabulous) story to link to, so I was relegated to linking to the version that the SWRA posted, which is very clearly attributed to you, I might add.

Finally, I'm not sure, but are you suggesting that any part of my post is a reproduction of copyrighted material from your newsletter? I have made NO reproduction of ANY of your material, and take exception to the intimation that I may have. Can you please clarify?

If anything, you should be pissed at the Wine Spectator who seem to have quoted directly from your newsletter (or from the comments on this blog - I can't tell which) without any attribution whatsoever.

Benjamin wrote:
01.18.08 at 10:33 AM

Dear Alder
I can not believe what they did and why they did it.

Wine.com has been through chapter 11 I don't know how many times. Of course they could not make a profitable business out of a market where shipping is a nightmare. In addition, they were not clever enough to manage their selection careful enough to watch their operating assets.
This all summed up in huge losses over years.

Are they so desperate to finally get any return on the all so patient investors?

I was a customer with wine.com for many years (out of Switzerland), but such a stupid behaviour will not be supported by the philosophy of romazini.com.

Shame on them.

01.21.08 at 5:04 AM

An example of US' problems ;o)

01.21.08 at 9:41 AM

I'd like to thank Alder for shining a light on this topic. ClassicWines.com has decided to remove Wine.com from it's site due to these kinds of business practices. Furthermore, we joined the SWRA.

We consulted with experts like Alder, Richard Cartiere, and Tom Wark, and ultimately decided this move was in the best interest of the wine community.

To view the complete press release on this subject, visit here - http://www.classicwines.com/shipping-laws.php

J. F. Kadlec wrote:
01.23.08 at 11:05 AM

i have ordered wine from wine.com in the past, but this is so sleazy that i will remember not to do so in the future.

shred wrote:
01.23.08 at 3:04 PM

No more wine.com for me.

Their wine is more expensive because they have to pay the $500 per hour lawyers at Davis Wright and Tremaine. If they stopped hiring lawyers and instead passed on the savings to the customer, I'd shop with them in teh first place.

Jewels wrote:
01.23.08 at 9:39 PM

As a frequent shopper at Wine.com, I think their actions are underhanded and (obviously) intended to hurt their competitors, regardless of the fallout to wine lovers across the country.

Being so blatantly disrespected and disregarded by a company I've given so much business to is not something I will willingly accept and continue to support.

I must say, the most disgusting part is having the CEO show up here to try to spin their bullshit backstabbing of wine lovers everywhere as some positive move that's intended to support their customers, instead of just admitting to scraping the bottom of the barrel, if you will, and stomping on the very people who have supported them in order to keep from drowning.

Wine.com, you've just lost another loyal customer.

a longtime customer wrote:
01.24.08 at 9:42 AM

They just lost me as a customer. I purchase about 300.00 a month in wine from them. They are pathetic.

Alder wrote:
01.27.08 at 10:35 PM

For anyone continuing to follow this fiasco, you may find it interesting (or ironic) to read the following press release published moments ago (http://www.pr-usa.net/index.php?option=com_content&task=view&id=61813&Itemid=9) in which Wine.Com speaks about its "full support" of a pending piece of legislation in Washington State that would change the very laws that they were requesting be enforced against their competitors.

Of course, this isn't inconsistent with CEO Rich Bergsund's statements that Wine.Com favors changing the shipping laws, but one has to wonder just exactly what "full support" really means.

01.28.08 at 11:21 AM

As a now former customer of wine.com, I encourage all on this message board to voice their disgust by calling the wine.com customer service line at 800-592-5870

Peter Dent wrote:
02.04.08 at 10:53 AM

Too many comments by people here about "civil disobedience" or breaking to law is NOT the way to solve the problem of these outrageous laws.

As an Australian who has lived here now for 10 years must I be the one to respond to this "argument" with the following:

THE UNITED STATES WAS FORMED BY PEOPLE BREAKING THE LAW! The second those 55 (?) guys signed the Declaration they committed TREASON. What part of that concept did you not figure out in school?

David Vergari wrote:
02.05.08 at 12:39 PM

Mr. Dent,
You, sir, are a major dude! Well said, mate.

Tim Raniere wrote:
06.03.08 at 5:39 PM

Nobody likes a RAT. BOYCOTT wine.com try wineaccess.com, of course I always have a helluva time getting my shipments signed for especially fedex!

Wine Bloke wrote:
06.08.08 at 5:53 PM

I'm glad I live in Australia where you can ship, transport, trade, consume wine anywhere, anytime, with anyone.

I find the whole fiasco madening, and hope it can be sorted out fairly for all concerned.

Jennifer wrote:
10.13.08 at 4:42 PM

I've not been a huge fan of theirs for sometime... Being in a dry county state (yes... they still exist believe it or not).. no one ships to Arkansas... I'm looking at relocating though. ha! Thanks for the great information!

Madeira wrote:
10.27.08 at 5:23 PM

This is something similar to what I have read about that is happening in India. The import taxes are high and each state has its own law. I do not get it, people just want to drinks wine - the ingredient is grapes and is natural substance but yet in places like the US you have to have all this red tape?

Alder wrote:
10.27.08 at 5:47 PM

People just want to drink wine, and governments and businesses just want to make money.

10.28.08 at 11:39 AM

Roger that, Alder, and by practically any means be it through taxation, the printing press, etc.

waylan choy wrote:
11.10.08 at 8:31 AM

I would like to offer this seminal 1994 essay written by John Perry Barlow (founder, Electronic Frontier Foundation), called "The Economy of Ideas", where he likens the transmission of ideas on the Internet to selling wine without the bottle.

http://homes.eff.org/~barlow/EconomyOfIdeas.html

Basically, where the laws of old (patents/copyright) protected the physical conveyance of an idea (book, product, the bottle), the idea itself was not protected. Some of the philosophies and principles in this wine.com discussion touch on the very same principles of ownership and access of ideas, as well as archaic laws that require an update.

It's very good reading from one of the pioneers of freedom of exchange and open source access. I think the wine world understands these things.

W

waylan choy wrote:
11.10.08 at 8:39 AM

Also. On a related note (just for perspective - different industry), Google, of all companies, has backed the regulation of its industry in a way that is not dissimilar to wine.com's. I wonder if that is any more interesting to the people on this thread.

http://www.theregister.co.uk/2008/10/15/neutrality_in_europe_analysis/print.html

Article is a bit technical in nature, but the premise is the same: regulation to protect self-interest, but that hurts the little guy fighting for access. "Given the general difficulty of monetizing web content, you can see how Google feels it needs a helping hand from bureaucrats."

Viviane Reding, the Commissioner for Information Society & Media:
"A cynical observer may note that in the end this whole Net Neutrality debate is about hard cash. Dollars and Euros. That it is about trying to use regulation as a means to get a better position around the negotiation table. That this is just about arm wrestling between big network providers and successful providers of internet services," she said, accurately."

Google, like wine.com, is the heavyweight in the industry.

Here, wine.com:Google :: SWRA:Foundation for a Free Information Infrastructure.

W

PS. Sorry to bring it so off topic.

waylan choy wrote:
11.10.08 at 9:12 AM

Google didn't specifically out its competitors. But such regulation presents difficulty for any that do exist or are trying to exist.

It seems intent on setting the rules BEFORE the old guard adapts, evolves and tries to move into this space. Very tricky, but Google knows how to play this game. Ok last post on this, bye.

W

Michael wrote:
12.15.08 at 5:39 PM

Wine.com is now acting like Google :)

BaroloDude wrote:
04.09.09 at 3:12 PM

Mr Peter Dent... "THE UNITED STATES WAS FORMED BY PEOPLE BREAKING THE LAW!" Indeed! And if I change the words 'United States' to 'Australia' and 'breaking' to 'who broke'... that statement kinda works too. Ta. Just having fun.

Alder, I know I am reading this chain VERY late indeed, but what a great article and back and forth on the blog comments. THanks for providing the forum.

Anonymous wrote:
12.07.09 at 4:30 PM

I hear this is still going on somewhat. Talk about "sour grapes".

10.22.10 at 12:42 PM

its 2010 and nothing has changed still....really ridiculous about these laws. Although changing these laws would have a bad impact on the local wineries however....

Mark wrote:
01.18.11 at 2:07 PM

Jake-Yup....make that 2011 and we're still struggling to get any sort of traction on a realistic set of state by state shipping regulations, let alone HR 5034 which casts a black shadow over the entire industry.

Heck even NH which is often pointed to as the shining example of regulatory ease raised the cost of their permit so high this past year, that a ton of people are dropping out.

Anonymous wrote:
01.31.11 at 10:05 AM

Wow. This is stooping pretty low. It kinda smacks of desperation.

Yesterday I had a looksie at Wine.com's traffic stats compared to a certain other large retailer that wasn't so much on the interstate shipping radar before a year or two ago. I noticed that said other retailer's traffic has recently overtaken Wine.com's figures. I wouldn't be surprised to find out this sting operation is targeted at very specific competitors (and maybe even just one

Michael wrote:
03.20.12 at 3:18 PM

Dang, this was a good read, and I especially loved the WineMonger's comments.

The wine industry is a tight-knit one, and it's surprising that this sort of tactic was approved by the Wine.com higher ups. They must have known people would find out, and oust them for it.

They took a wrong approach, for sure, and I'm glad I read this because I was just about to sign up for their affiliate program. But after reading this, and seeing their measly 5% payout rate, I'll be looking to the other retailers.

David Niederauer wrote:
03.18.13 at 3:52 PM

I haven't read this all the way through but I do want to voice my opinion.

Who chooses who can break what laws? If a person is breaking the law it should be reported! In order to compete in any market place everybody (and I mean (EVERYBODY) must follow the law.

I guess some of these people feel that because they are so small they are above the law. I say "Kudos" to WineBid for reporting people that break the law.

You notice a van out in front of your neighbors house and a couple of guys are carrying a couch out the from door and load it into their van. What do you do? Do you run out and ask them what they are doing? They say we only want this old broken down couch. Do you say, "That's not a lot. I won't report you to the police"?

Give me a break! And whoever condemns another person for not breaking a law is just simply f'ing nuts!

Alder wrote:
03.18.13 at 4:40 PM

David,

Two things:

1. The retaliers aren't breaking the law, the people who ordered the wine are (in this case, Wine.Com. Which means by doing what they were doing Wine.Com broke the law first, and then reported the companies who shipped them the wine to the "authorities" for not stopping them.

2. Have you ever crossed the street as a pedestrian against a red light or in the middle of the block, or seen anyone else doing so? Did you report yourself or them for jaywalking? Why not?

Anonymous wrote:
03.31.13 at 11:19 AM

In the UK there is huge rumblings with regard to Internet retailers such as myself. Basically lots of the shops are up in arms that we sell wines a a lesser price then them and are making such a noise that the suppliers are even considering stopping selling completely to Internet retailers!

Some restaurants will now only buy wines that are exclusively on trade only and will immediately delete a wine that they can buy either online or in shops. The problems in the trade continue to grow in many ways

Rich wrote:
10.24.13 at 7:01 AM

WOW really shocking, free enterprise is not a zero sum game.
Some of the subterfuge reminds me of the California grape growers that shipped must during the years of the Volstead Act with careful instructions on how not to let the juice ferment and accidently become wine.

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