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Indiana Reverts to Face-to-Face Wine Sales

Direct shipping takes a blow in the Hoosier state as residents will be required to visit a winery in person before having wine shipped to their homes

Robert Taylor

Posted: Monday, August 11, 2008

After one year of unrestricted direct-shipping privileges, Indiana residents are again being required to fill out an age-verification form in person at any winery from which they wish to receive wine shipments.

This past week, the U.S. 7th Court of Appeals in Chicago reinstated the face-to-face clause in Indiana, ruling that the unrestricted sales made it easier for minors to obtain alcohol.

Indiana residents have been on a roller coaster ride when it comes to direct shipment of wine—and it isn't over yet. Following the Supreme Court's Granholm decision in 2005, Indiana lawmakers needed to enact new legislation specifically granting Indiana wineries the right to ship wine to in-state residents (something they'd been doing for nearly 30 years). In 2006, they passed a bill requiring Indiana residents to fill out an age-verification form, in person, at any winery (in-state or out-of-state) from which they wished to order wine. The 2006 law also virtually excluded all out-of-state wineries from shipping to residents by prohibiting wineries with wholesale privileges in their home states from receiving an Indiana wine-shipping permit. (California, Oregon and Washington all grant wholesale privileges to their wineries.)

In late August 2007, a federal judge ruled Indiana's wine shipping laws to be unconstitutional, and abolished the face-to-face verification requirement as well as the wholesale restriction on obtaining wine-shipping permits. The court declared that the burden of traveling across the country to have wine shipped directly to a resident provided an unfair advantage for Indiana's in-state wineries (who were nevertheless also hurt by the face-to-face requirement), a violation of the Constitution's commerce clause. "Forcing nearly all out-of-state wineries to use a wholesaler or come to Indiana to sell gives in-state wineries a distinct competitive advantage," the court wrote. "Indeed, virtually the entire direct shipping market is limited to in-state wineries."

But a three-judge panel disagreed with the 2007 ruling, reinstating the face-to-face verification provision in a decision handed down on Aug. 7 (arguments were heard Feb. 22). "It is important to remember that we are dealing with effects on the margin," the court's ruling explained. "Make it easier for minors to get wine by phone or Internet, and sales to minors will increase."

While the latest rule change is a setback, it does not completely reverse the previous ruling. "Quite frankly, we won the big one—that out-of-state wineries are not excluded," said Ed O'Keefe, CEO of Michigan's Grand Traverse winery, who was a driving force behind the 2007 repeal. "This face-to-face thing is not such a bad deal. There's always some way [to legally ship wine]."

The appeals court's decision to reinstate face-to-face age verification may have been influenced by a U.S. Supreme Court ruling earlier this year. In Rowe vs. New Hampshire Motor Transport Association, the court ruled unanimously this past February that states did not have the right to require shipping companies to conduct age verifications for deliveries of tobacco products.

Many legal analysts believe the court would rule similarly on wine sales were they to be challenged, as the justices stated in their ruling: "Many products create 'public health' risks of differing kind and degree. … Given the number of states through which carriers travel, the number of products, the variety of potential adverse public health effects, the many different kinds of regulatory rules potentially available, and the difficulty of finding a legal criterion for separating permissible from impermissible public-health-oriented regulations, Congress is unlikely to have intended an implicit general 'public health' exception broad enough to cover even the shipments at issue here." Many states that do allow direct shipping of wine ask that shippers conduct age verifications upon delivery; there are also several online age-verification services that a winery can use to determine legal age before the sale takes place.

The legal challenges, in Indiana and elsewhere, will continue. "[Direct shipping is] a running battle," said O'Keefe. "It keeps going and we keep winning the tactical battles, and eventually the whole situation will be solved in a few years."

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