Online Wine and Other Felonies

"My clients don't want people to buy wine on the Internet because it cuts into their profits," C. Boyden Gray, a former White House counsel who represents the Wine and Spirits Wholesalers of America, recently told The Washington Post. (Gray is also a member of the board of trustees of Reason Foundation, the nonprofit that publishes Reason magazine and Reason Online.)

OK, not really. What he actually said was, "States have a legitimate interest in trying to collect taxes and limit sales to minors or to people who shouldn't be buying alcohol." Those are the official reasons for state laws forbidding direct shipment of wine to consumers by out-of-state suppliers. But as the Federal Trade Commission (FTC) has implicitly recognized, such rationales are often a cover for protectionism.

This week the FTC is holding a public workshop "to explore possible anticompetitive efforts to restrict competition on the Internet." In addition to the limits on wine shipment, the workshop covers legal barriers to online sales of cars, caskets, contact lenses, legal services, heath care, education, and financial services. "While much of this regulation and conduct undoubtedly has pro-competitive and pro-consumer rationales," the FTC notes, "the restrictions may impose costs on consumers that, according to some estimates, may exceed $15 billion annually."

Critics of these restraints on trade include the Democratic Leadership Council's Progressive Policy Institute, which recently rated the states based on their friendliness to e-commerce, and the libertarian Institute for Justice, which has challenged limits on wine and casket sales in court. Last month the FTC filed a friend-of-the-court brief criticizing the Oklahoma regulations at issue in the latter case.

The FTC probably will not be able to do much about such barriers directly, but it could propose legislation to Congress. At the very least, the commission's interest in the issue will make it harder for people like C. Boyden Gray to claim that competition is against the public interest.