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December 1933

21st Amendment Ratified, Prohibition Ended

 

December 5, 2017 marks 84 years since the United States ratified the 21st Amendment to the U.S. Constitution and paved the way for the modern three-tier beverage alcohol system.

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The importance of regulatory oversight

By Craig Wolf, President and CEO, Wine & Spirits Wholesaler of America

You may have seen recent media coverage about the ongoing New York State Liquor Authority (NYSLA) action against Empire Wine, a retailer that has for years shipped alcohol to consumers across state lines in violation of recipient states’ tax and licensing laws.

WSWA recently took action to support and defend the NYSLA. The agency has come under heavy fire in the media, from a rogue retailer group and an ersatz consumer coalition for pursuing the revocation, cancellation or suspension of Empire’s license for engaging in “improper conduct” by making those illegal crossborder sales.

As an aside, that so-called “consumer” coalition is in reality a front for a small minority of fringe retailers that believe they should be able to ship alcohol at will—regardless of the recipient states’ laws or their obligations to their licensing authority.

The NYSLA took this action under its broad authority to ensure that its licensees act appropriately. For its part, Empire Wine has argued that the term “improper conduct” is vague and does not encompass illegal out of state conduct. Empire also says it is only acting as a willing seller to a willing buyer, that the practice has been ongoing for many years and because recipient states have not gone after Empire, neither should the NYSLA.

One of the issues that unites the three tiers of the beverage alcohol industry — and defines the relationship and mutual commitment between beverage licensees—is a shared commitment to social responsibility and licensee accountability.

This is a commitment that must be sustained—and to which we must each hold one another accountable. The Empire Wine case raises an important point that shouldn’t be controversial: effective state oversight of licensees is a critical element of beverage alcohol regulation and has been since the repeal of Prohibition when the Twenty-First Amendment put in place the system that empowered states to determine the rules under which their licensees may operate.

Empire sought out and obtained a license in New York. In doing so, it voluntarily accepted the jurisdiction and rules of the NYSLA, which included the condition that it not engage in “improper conduct.” But now their essential argument is “We can violate the laws in 49 other states, but NY is prohibited from taking notice – and taking action - against us.”

WSWA has pointed out to the public, the media, and to the industry, the absurdity of the arguments made by Empire. Imagine if a doctor, licensed in New York, engaged in malpractice in another state. What do you think the New York medical licensing authority would say to an argument that it had no authority to revoke that doctor’s license since the malpractice happened in another state?

Or imagine if a driver licensed in New York committed serial drunk driving offenses in another state and argued that New York had no authority to revoke his New York license based upon those violations. Those arguments would be rejected out of hand – and would certainly not be given support by the media – because a license is a privilege, not a right. It is a contract between the regulatory authority and the licensee conditioned on adherence to the rules and standards set by the licensing authority.

Our industry’s rules and regulations are stricter than for other consumer products because alcohol is unlike other consumer products. And the authority to regulate licensees is integral to a state’s ability to prevent underage access, maintain regulatory control, collect tax revenue, and sustain a market virtually devoid of counterfeit and tainted product.

The Empire case isn’t about whether I or anyone else approves or disapproves of certain state laws. Working within the three-tier system means we all need to play by the existing rules – and support our regulators who work to ensure compliance with those rules. If you don’t agree with a law or regulation, you work within the legislative or regulatory process to change it – but you do not have the right to ignore it.

For generations, there has been a consensus within the industry – a commitment to doing the right thing – even when no one is looking. Empire and its lawless cheerleaders have abandoned that commitment and are seeking to emasculate state regulatory authority and render it irrelevant.

We believe the NYSLA is doing the right thing, and we hope that this particular retailer and others like it will be held accountable for their brazenly lawless actions. And a responsible and law abiding industry and regulatory community must demand it.

Craig Wolf is President and CEO of the Wine & Spirits Wholesalers of America (WSWA). This column appears quarterly in the American Beverage Licensee "Insider" newsletter. 

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