FTC Staff: Proposed Ohio Wine Legislation Would Enhance COnsumer Welfare

Comment on Senate Bill 179 Filed Yesterday With State Senator Fingerhut

Staff of the Federal Trade Commission’s three bureaus – Competition, Consumer Protection, and Economics – together with the FTC’s Office of Policy Planning yesterday filed a comment with Ohio State Senator Eric Fingerhut, stating its support for Senate Bill (SB) 179, which would allow the direct shipment of wine to Ohio consumers from manufacturers either inside or outside the state, provided certain requirements are met. According to the comment, Ohio’s consumers would benefit from the increased competition the bill would provide, through access both to a greater variety of wines and many wines at lower prices.

The comment explains that SB 179 is designed to bring Ohio into compliance with a recent U.S. Supreme Court ruling (Granholm v. Heald) that laws in Michigan and New York discriminating against out-of-state wine manufacturers in the sale and shipping of wine violated the Commerce Clause of the U.S. Constitution.

In addition to promoting competition, which results in access to a greater variety of wine and lower prices for Ohio consumers, the comment states that the bill contains language that will ensure it does not result in the shipment of wine to underage consumers. Specifically, the consumer who orders the wine must be at least 21 years old and personally sign for the wine when it is delivered. The comment also reiterates the FTC staff’s finding that states that permit interstate direct wine shipments report few or no problems with tax collection. The bill contains language to ensure this is the case in Ohio by requiring the manufacturer either to collect all applicable taxes from the consumer and pay them, or notify consumers that they are liable for such taxes.

“Consumers benefit from the increased competition that direct shipping provides,” said Maureen Ohlhausen, Director of the FTC’s Office of Policy Planning. “This bill would give Ohio wine consumers greater choices and lower prices.”

Concluding its comment, the staff wrote, “[b]ased on our review, [we believe] that, if enacted, SB 179 would enhance consumer welfare and allow Ohio to meet its other public policy goals. By allowing interstate direct shipping, SB 179 likely would allow Ohio residents to purchase both a greater variety of wines and many wines at lower prices. In addition, by requiring manufacturers to comply with certain regulatory requirements, SB 179 would allow Ohio to prevent shipments to minors and to collect taxes on direct shipments.”

The Commission vote authorizing the staff to file the comment with State Senator Fingerhut was 5-0. The FTC staff based its comment in part on its extensive knowledge of the impact on competition of interstate online wine sales and shipping in the United States. In 2002, it conducted a study of wine prices and availability in McLean, Virginia. The results of the study, which can be found on the FTC’s Web site, are cited extensively in the comment issued today.

Copies of the comment are available on the FTC’s Web site at www.ftc.gov. The FTC’s Bureau of Competition, in conjunction with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

Media Contact:

Mitchell J. Katz
Office of Public Affairs
202-326-2161

Staff Contact:

Maureen K. Ohlhausen
Office of Policy Planning
202-326-2632

(FTC File No. V060010)

FTC Staff Comment to The Honorable Eric D. Fingerhut Concerning Ohio Senate Bill 179, Which Would Allow the Direct Shipment of Wine to Ohio Consumers From Manufacturers Inside or Outside Ohio (March 2006) (V060010)