August 2011

Third Party Providers and the Future of Wine Laws in America

by Lindsey A. Zahn on August 22, 2011

This summer I had the absolute pleasure of working with the legal and regulatory compliance department of Lot18, a dynamic and rising flash sale site for premium wines and epicurean products. Lot18 is a budding company stationed in New York City and embraces an enthusiastic—and highly admirable—dedication to customer service and the finest level of hospitality for its members. With this incredible opportunity came a true taste for wine law: I researched and perused all of the federal statutes relating to alcohol beverages—not just wine—and even learned a good portion of state regulations. But aside from reviewing regulations like the F.A.A., the I.R.C., and the 27 C.F.R., I was again met with a pattern that echos throughout the heart of the American wine industry: the antiquated laws regulating alcohol beverages in the States.

 Third Party Providers and the Future of Wine Laws in America

Lot18 Sign outside the Lot18 Office in midtown Manhattan.

The business structure of companies like Lot18—companies that do not sell alcohol beverages to customers, or ever obtain title to said alcohol beverages, but instead offer wineries and distilleries marketing services through access to their highly-defined customer basis via virtual mediums—is completely twenty-first century. Lot18 is considered a Third Party Provider (TPP) meaning that the company never sells, ships, owns, or obtains title to any of the products it sells; all products are shipped directly from the producer or manufacturer of the product to customers through legally-compliant, third-party shippers. Some alcohol products cannot even be shipped to particular states, as said states do not allow consumers to receive alcohol beverages directly from producers (and the Lot18 site reflects this). This type of business model is innovative and indicative of how quickly the Internet and virtual sales sites have emerged and flourished over the last decade; it is absolutely brilliant and an impressive way to connect a very specific and discerning customer profile with highly-esteemed producers.

The laws in this area, however, are not twenty-first century. State and federal laws do not outline the powers and the restrictions of TPPs—at least, not directly. These laws consider a more, arguably, twentieth-century (or perhaps even more backdated) business model of a traditional three-tier system sans TPP. The laws regulate businesses with licenses or permits, i.e. retailers, wholesalers, and producers. At no point are Internet sales, or providers of professional services via virtual means, considered.

It seems that with the rise of Internet flash sale sites, along with what is yet to come, the laws must eventually change to accommodate this alteration. The question is, however, when will this occur? And, until then, what are the legal rights and obligations of TPPs? There are numerous legal professionals examining this issue right now, but there is yet to be a definite answer. Hopefully, within time, the permissions and restrictions of TPPs will be more distinct and, perhaps, even legislated.

Thank you everyone at Lot18 for a fantastic professional journey this summer; I could not possibly be more grateful to your assistance, time, questions, and energy. Special thanks is owed to Ed Lynch and Ed Brown for their continued guidance. Congratulations on the sprouting of what is truly a commendable venture and one that I am certain will continue to grow remarkably over time.

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Reprinted with the permission of Kate Connors of the Center for Wine Origins and the Champagne Bureau, United States.

In just three weeks, Australia will become the latest country to join the global movement toward robust truth-in-labeling laws that protect consumers by requiring that wine growing place names are reserved exclusively for the regions where the wines come from.

DSC 1028 Australia Completes Final Step in Protecting Wine Place NamesMost Australian wine producers stopped using Champagne and other misleading wine growing place names many years ago. On September 1, 2011, Australian law will officially reserve “Champagne” exclusively for wines from Champagne, France. Like the majority of countries in the world, Australia will recognize that when consumers buy a bottle of wine, they should be able to rely on the truthfulness of the bottle’s label.

Winemaking regions around the world rely on their place name, or “Geographic Indication,” to differentiate themselves from other areas. Consumers also rely on those place names because when it comes to wine, there is no ingredient more important than location. The land, air, water, and weather where grapes are grown are a big part of what makes each wine unique.

DSC 0768 Australia Completes Final Step in Protecting Wine Place NamesWith Australia’s change in law, there are very few remaining countries that fail to adequately protect the name of Champagne and other winemaking regions. Of particular surprise is the United States’ reluctance to stand with the rest of the world and ban mislabeled wines. The United States is joined by only Russia, Vietnam, and a few other countries in not reserving the name “Champagne” for wines from Champagne, France.

Learn more and track the countdown at countdown.champagne.us—then encourage your readers to sign the petition to protect wine place and origin names at petition.champagne.us.

About the Champagne Bureau

The Champagne Bureau is the official U.S. representative of the Comité Interprofessionnel du Vin de Champagne (CIVC), a trade association which represents the grape growers and houses of Champagne, France. The bureau works to educate U.S. consumers about the uniqueness of the wines of Champagne and expand their understanding of the need to protect the Champagne name. For more information, visit us online at www.champagne.us. Follow us on Twitter at ChampagneBureau.

Contact: Kate Connors at kconnors@clsdc.com.

Photographs property of Lindsey A. Zahn.

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Domitian’s Vine Edict: The Story of the First Wine Law

by Lindsey A. Zahn on August 9, 2011

Wine Law. Is it of contemporary origin? Or does it have a past as complex as its present? Does it predate written history? Is there a story behind this unique field of law? Indeed, there is—and it is one that is just as distinctive as its present-day overtones.

The research I’ve come across in the last two years suggests that wine law—at least, the first recorded version of legislation regulating the production or consumption of wine—dates back to the days of the Roman empire. As such fieldwork conveys, the first written wine laws derived from Domitian, the Roman emperor from 81 A.D. to 96 A.D. His notoriety outlives him, as during his reign he charged and sentenced his blood relatives, and many others he concluded guilty of conspiracy, for Atheism and Jewish manners, deductively unethical during his prevalence. Domitian additionally allegedly slayed his brother and executed many Roman senators to confiscate estates or for other malicious purposes. However, despite this collection of rather explicit illustrations, Domitian also succeeded in generating the first wine law in the world.

domitian Domitians Vine Edict: The Story of the First Wine LawThe vine edict of Domitian in 92, which directed the interests of Italian wine growers, banned the planting of any new vineyards and ordered “half the vineyards in Asia Minor and other provinces to be uprooted” in Roman provinces. (See The Latter Rain Page: Domitian.) The vine edict “constitutes the only instance . . . of Domitian legislating for the entire Roman empire rather than for an individual province . . . .” (Brian W. Jones, The Emperor Domitian, 78.) The edict was created because of a strong outbreak of famine in the Empire and was designed to increase the production of corn in the Roman Empire by eliminating “mediocre vines occupying land that could be ploughed and was better suited for corn crops than wine-growing.” (Maguelonne Toussaint-Samat, A History of Food, 287.) Despite this early attempt to regulate the wine industry, “[t]he opposition was so strong that [the edict regulating wine]  . . . could not be [properly] enforced.” (See The Latter Rain Page: Domitian.) History suggests the edict was ignored by the Roman provinces, as “the Gaulish wine-growers took their sacrifice with a very bad grace, and the legions had to be brought to enforce obedience . . . [but] the vineyards of Bordeaux survived this holocaust without suffering too much damage.” (Toussiant-Samat, supra.) However “Domitian’s edict, while probably not followed to any greater extent, stayed in effect for 188 years until [the Roman] Emperor [Marcus Aurelius] Probus repealed the measure in 280 AD.” (International Wine Regulations: An Understanding of the Challenges for Indian Wine Industry; see also Roman Times: Trade Protectionism in the Roman Empire.) Additionally, many wine historians believe the edict largely impacted the growth of the wine industries in Spain and Gaul.

This first notable attempt to regulate wine is predated by another legal issue affecting the wine industry. Accordingly, before Domitian’s edict, wine growers in Minervois “in the south-west of the province of Gallia Narbonensis, although in a privileged position, were already complaining of the pressure put on them (even more than on their grapes) by the proconsul of Narbonne.” (Toussiant-Samat, supra.) The proconsul, Fonteius, illicitly imposed dues on the wines from Minervois that were shipped from his quays. (Id.) “The wines then had to be sold below their proper price to remain competitive. Fonteius used the stolen money to pay for the services of a famous lawyer, none other than Cicero, who made one of his famous defence speeches on his behalf.” (Id.)domitian 1 Domitians Vine Edict: The Story of the First Wine Law

The examples above display a remarkable picture of the unremitting regulation of wine, prior to the attempt of colonial Americans to even grow wine. The patterns are evident: the legal connotations that exist today were born long ago. From regulation of yields and production to taxation to combatting wine fraud, the legal issues pertaining to wine unfolded centuries prior to contemporary regulations. Whereas past directives defined some of the matters in contemporary wine societies, our legislative measures have become increasingly more complex and forceful over time. However compounded, our modern wine laws owe their existence to the influences of historical powers, and always will.

(Image Credit: Domitian’s Evil Hour! The Nero Prediction and Domitian from ‘The Twelve Caesars’ by Suetonius, respectively.)

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The Volstead Act: the legislative measure whose primary intent was to frame the execution of the Eighteenth Amendment, a curt and inexorable constitutional revision whose overtones still reside in contemporary American society even upon its repeal almost one hundred years ago.  The legal supremacy of the Eighteenth Amendment, however, often overshadows the real authority hidden within the Volstead Act of 1919. In actuality, the Eighteenth Amendment displays limited vigor and certainly lacks appropriate legislative clauses and actions that permit its objective to flourish. Its text, which remains in our present-day Constitution, reads as follows:

The manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.

The vagueness of the Eighteenth Amendment leaves the reader with a multiplicity of questions, some of which include:  What are “intoxicating liquors”? What is meant by “for beverage purposes”? And what, exactly, entails the “manufacture” or the “sale” or the “transportation” of such substances for such purposes? The ambiguity of the Eighteenth Amendment would have, on its face, left the amendment void for vagueness. However, the United States Congress passed the National Prohibition Act, or the Volstead Act, on October 28, 1919 despite the veto of the then-President Wilson. The answers to the aforesaid questions lie within the text of the extended Volstead Act.

newspaper1 Revisiting the Volstead Act: The Power Behind the Eighteenth Amendment for Prohibition

The Eighteenth Amendment became effective on January 16, 1920, a year after the Nebraska State Legislature ratified the Amendment and triggered the required two-thirds majority support for the Amendment to become law in the States. The Volstead Act was passed on October 28, 1919, shortly after Nebraska’s ratification, its name attributive to Andrew Volstead, a Republican congressman from Minnesota who reportedly drafted the bill. (It is also claimed that Wayne B. Wheeler, legal counsel for the Anti-Saloon League of America, was the creator and force behind the bill.)

The Act itself is divided into two Titles: (1) To Provide for the Enforcement of War Prohibition; and (2) Prohibition of Intoxicating Beverages. For the purposes of alcohol prohibition (or Prohibition), the greater focus remains on the second title of the act, which is in turn divided into subsequent sections. However, the first title does define exactly what is meant by “intoxicating liquors.”

What are the key provisions of the Act?

The Volstead Act refines the intentions of the Eighteenth Amendment, although it is not without its own imperfections. Title II, Section 3 of the Act maintains that, “[n]o person shall . . . manufacture, sell, barter, transport import, export, deliver, furnish or possess any intoxicating liquor except as authorized in this Act, and all the provisions of this Act shall be liberally construed to the end that the use of intoxicating liquor as a beverage may be prevented.”  The Act did not prohibit the consumption of intoxicating beverages, at least not directly and not entirely. In fact, the Volstead Act did explicitly exempt wine for sacramental purposes and liquor or alcohol proscribed by a physician for medicine (see infra.).

volstead act 5a88f473ef Revisiting the Volstead Act: The Power Behind the Eighteenth Amendment for Prohibition

Most importantly, however, the Volstead Act clarifies the Eighteenth Amendment’s indistinct phrase of “intoxicating liquors.” Title I of the Volstead Act states, “[t]he words ‘beer, wine, or other intoxicating malt or vinous liquors’ . . . shall be hereafter construed to mean any such beverages which contain one-half of 1 per centum or more of alcohol by volume . . .” Before the Eighteenth Amendment was enacted, many producers of  fermented beverages like wine and beer, thought their products would be precluded from the Amendment and that the Amendment would only restrict alcoholic beverages with higher alcohol per volume, such as distilled spirits (hard liquor). During the push for the ratification of the Eighteenth Amendment, congressmen and the media particularly focused on the more “evil” and most alcoholic distilled spirits, thus allowing producers of wine and beer to believe they might not only evade the financial misfortunes of the Eighteenth Amendment but also flourish from the elimination of the distilled spirits market share. With the addition of the Volstead Act, however, these beliefs became misguided; Title I includes wine and beer under its definition of  “intoxicating liquors,” as both wine and beer contain more than .5% alcohol by volume.

What are the exceptions of the Act?

Despite the restrictive measures of the Volstead Act, it allows for some deviations from its control. Section 3 of Title II reads, “[l]iquor for non beverage purposes and wine or sacramental purposes may be manufactured, purchased, sold, bartered transported, imported, exported, delivered, furnished and possessed, but only as herein provided . . .” Additionally, section 6 of Title II reads, “a person may, without a permit, purchase and use liquor for medicinal purposes when prescribed by a physician . . . and except that any person who in the opinion of the commissioner is conducting a bona fide hospital or sanitarium engaged in the treatment of persons suffering from alcoholism, may . . . purchase and use . . . liquor . . .” Additional exceptions include the use of alcohol for “non-beverage” purposes (i.e. industrial use), such as for paints, chemicals, in manufacturing other products, etc.

NOTE: The Eighteenth Amendment was repealed by the ratification of the Twenty-First Amendment in 1933. The National Prohibition Act, or the Volstead Act, is—to this day—unconstitutional.

(Image Credit: The 18th Amendment and Greenwich Village History, respectively.)

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