FTC Staff: New York Direct Shipment of Wine Bills Would Promote E-commerce and Consumer Welfare

In response to requests from three New York state legislators, the staffs of the Federal Trade Commission’s Office of Policy Planning, Northeast Regional Office, and Bureaus of Competition, Consumer Protection, and Economics have provided comments regarding three bills that would allow out-of-state vendors to ship wine directly to New York consumers if the vendors comply with certain regulatory requirements. According to the staff comments, the bills would promote e-commerce and give New York residents access to a greater variety of wines at lower prices, while allowing the state to satisfy its other public policy goals.

Todd Zywicki, Director of the FTC’s Office of Policy Planning, stressed that the bills would help consumers. “Based on our empirical research, the bills could allow consumers to save significantly on more expensive wines. The bills would also give consumers access to thousands of wines from around the country,” he said. Asheesh Agarwal, Assistant Director of the Office of Policy Planning, added that the bills would promote e-commerce. “By eliminating the requirement that out-of-state sellers maintain a physical presence in New York, the direct shipping bills would eliminate the single largest regulatory barrier to expanded e-commerce in the wine industry,” he said.

The comments, available on the Commission’s Web site, were sent to William Magee, Chairman of the State Assembly Agriculture Committee; John R. Kuhl, Jr., Chairman of the State Senate Committee on Transportation; and Dean G. Skelos, Deputy Majority Leader of the State Senate. The comments analyze three New York bills, Assembly bill 9560-A, Senate bills 6060-A and 1192.

The staff comments first summarize the FTC’s experience studying the direct shipment of wine to consumers, including a comprehensive report issued last July and congressional testimony delivered last October. The comments then analyze the pending bills, describing the regulatory requirements on shippers and common carriers. The comments conclude that the bills would allow consumers to purchase a greater variety of wines at lower prices.

The comments then summarize the experiences of states that currently allow interstate direct shipping of wine. The comments note that these states generally report few if any problems with direct shipments to minors, or with collecting taxes from those shipments. The comments also note that the bills contain all of the safeguards recommended by both the National Academy of Sciences and FTC staff, such as requiring an adult signature at the point of delivery. Finally, the comments discuss the implications of physical presence requirements for e-commerce generally, stating that “if extended to other industries, physical presence requirements could seriously imperil the growth of e-commerce.”

In concluding its comments, the FTC staff said, “Based on an extensive review of the evidence, FTC staff believes that, if enacted, any of the bills would enhance consumer welfare and would allow New York to meet its other public policy goals.”

The Commission vote authorizing staff to file the comments was 5-0. The comments represent the views of the staff of the FTC’s Office of Policy and Planning, Bureaus of Competition, Consumer Protection, and Economics, and Northeast Regional Office, and not necessarily those of the Commission or any individual Commissioner.

Copies of the document mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Call toll-free: 1-877-FTC-HELP.

(FTC File No. V040012)