“ Workgroup initiatives have allowed states to share their investigative tools and techniques involving illegal shipping investigations which has led to a more efficient means to investigate cases that cross state lines .”
DIRECT TO CONSUMERS
Educate and bring into compliance those that are illegally shipping alcohol . Enforce and penalize those that ignore cease and desist requests to stop illegal shipping of alcohol . Bring awareness to lawmakers on the increased efforts involved in investigating illegal shipping and loss of tax revenue for states for prevention and public health programming .
Highlight public health concerns of alcohol being delivered to those under the age of 21 through compliance initiatives .
OPERATING WITH LIMITED RESOURCES Michigan recently received additional state funding , and still only counts a handful of dedicated agents .
“ Five to six years ago we got funding for an illegal shipping team ,” McGehee says . “ That certainly helps , because a lot of states do not have those resources . It ’ s a difficult task .”
And it ’ s a task upon which may depend the future of public safety and economic stability regarding the alcohol industry . Mahoney urges investigators to stress this fact when seeking state resources and legal authorizations .
“ In terms of getting affidavits and more action from the legal side ,” he says , “ we ’ ve had success when we ’ ve pointed out our need to take enforcement action to protect our tax-paying businesses and our public safety .”
THE MIDDLE TIER RESPONDS A large part of what helps protect public safety in the alcohol industry is the middle tier . Circumventing wholesalers and distributors through illegal shipping is a danger for consumers .
“ WSWA is against the shipping of alcohol to consumers ,” says Jo Moak , senior vice president and general counsel for Wine & Spirits Wholesalers of America . “ It presents a lot of challenges . It ’ s hidden , not transparent . Regulators cannot see the products or what is happening with them . This creates problems with public health and safety . Underage access is still a huge issue with shipping . It promotes the sale of counterfeit products . And unregulated sales mean lost taxes .”
“ It creates an uneven playing field ,” she adds . “ Everything that the three-tier system upholds , shipping undermines a lot of that .”
WSWA sees the same issues in stopping shipping as the state regulators largely tasked with the effort .
“ Unfortunately , it ’ s a game of Whac-A-Mole ,” Moak says . “ The tools to stop it require a lot of resources , a lot of time and a lot of manpower . Unfortunately , there ’ s no easy way .”
WSWA ( which has an investment in Drizly ) stresses the difference between shipping and local delivery services .
“ Localized licensed delivery is okay , because the states are well equipped to regulate that ,” Moak says . “ That is business that helps the community . That system is highly successful .”
“ We can be confident in the structure of the local licensed delivery system ,” adds Jake Hegeman , WSWA assistant general counsel , legal and regulatory . “ There ’ s predictability to it . It ’ s much more challenging when products are flowing across state lines . There ’ s too many levels of unpredictability in that .” Including the loss of taxes at the retail level . “ That ’ s one element of the unlevel competitive landscape ,” Hegeman says , “ illegally shipped products without proper taxes paid versus someone who has paid for the proper license and taxes . This is where the fairness question sets in . Someone shipping without paying taxes , that brings up fundamental questions about whether this is a marketplace of fairness ; a marketplace of parity .”
Circumnavigating beverage alcohol retailers presents another batch of public safety hazards .
“ If you ’ re a licensed retailer , you ’ re paying rent or own your building , you care about your community and you know your customers by name ,” says Michael Bilello , WSWA senior vice president for communications and marketing . “ You ’ re not going to sell underage
“ Workgroup initiatives have allowed states to share their investigative tools and techniques involving illegal shipping investigations which has led to a more efficient means to investigate cases that cross state lines .”
– NLLEA EXECUTIVE DIRECTOR CARRIE CHRISTOFES
kids alcohol because you know their parents , you know their family and you know they ’ re underage kids .”
Same logic goes for local bars and restaurants .
“ Think about the TIPS training that bartenders go through ,” Bilello says . “ That bartender is held accountable if someone is intoxicated . If someone is intoxicated and stumbles into a retail store , store employees are not going to sell that person product .”
“ But when you have a box sent to a doorstep , someone is not there to ascertain the totality of the situation ,” he adds . “ Minimizing contact with consumers could create unintended consequences . There ’ s billions put into all these public safety measures in the alcohol industry , and all of that is upended by out-of-state direct-to-consumer shipping .” BW
18 Beverage Wholesaler • Winter 2022