Outdated Prohibition Era Rules Penalize Small Wineries

Prohibition Era Rules

 

Many Prohibition-era regulations codified in 1935 to address the ills that lead to the all-out ban on alcohol production, importation, transportation, and sale are still in place today! Specifically, Alcohol and Tobacco Tax and Trade Bureau (TBB) trade practice regulations have not been updated to reflect today’s modern marketplace.

 

The intent of many TTB policies in the 1930s was to address competition within a two or three-tier system where those in upper tiers (wholesalers, distributors and retailers) were prevented from dominating lower tiers (suppliers), and threatening their independence. But, in today’s modern marketplace, are the original goals of TTB provisions actually achieved through TTB’s current investigation initiatives?

 

A perfect example of this issue is seen in the practice of consignment sales. The TTB has applied the notion that large distributors and retailers cannot compel smaller sellers to supply alcohol on a consignment basis and accept returns of unsold items (or overstock), and vice-versa. The enforcement of FAA (Federal Alcohol Administration Act) rules prohibiting consignment in these situations are in concurrence with TTB’s original goals of protecting independence within the three-tier system, prohibiting big players with more capital from taking advantage of those with less.

 

But, when looking at small wineries, the enforcement of FAA’s consignment regulations comes at the price of a fair marketplace. Small wineries rely on wholesalers to get their wine stock to distributors, and many do so on an agreed consignment basis. Both the supplier and wholesaler mutually agree on a sale and credit arrangement that is beneficial to both parties. Through this method, a small winery in California is able to work within the three-tier system and make their wine available to retailers outside of the region and reach a wider marketplace. If a family-run winery was unable to provide a wholesaler with wine on consignment, they would be confined to sales to distributors within their local area only. This business model is not a situation where one tier is exacting influence on another, but instead, parties are working together to bring a bigger market to small suppliers. This is innovation in the marketplace which is not considered by the TTB, and the enforcement of the FAA’s prohibition on consignment sales should not apply.

 

A few amendments were made to Prohibition-era regulations in 1980, to modernize and better reflect marketplace business practices. But they have not gone far enough, and do not reflect today’s quick, competitive, and expansive marketplace. The TTB has instead taken their increased funding to initiate an aggressive stance on trade practice investigations and enforcement, with outdated rules and regulations.

 

As the leading door-to-door wine transportation expert, Xpeditr ensures that every wine shipment is done safely, in accordance with the laws of the State or Province, and abides by all regulatory standards.