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.
The business structure of companies like Lot18—companies that do not formally 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.
For more information on wine or alcohol law, third party providers, or direct shipping, please contact Lindsey Zahn.
DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.