New York Liquor Authority Scandal Has Consequences for Wine Stores and Consumers

What happens when you combine self-serving legal theories with delusions of grandeur?

Beginning almost immediately after the U.S. Supreme Court warned states in 2005 that they may not interfere with interstate commerce by discriminating against in-state or out-of-state wine sellers, a move to exclude the primary American wine sellers (wine stores and wine retailers) from that foundational constitutional principle was set afoot. Wholesalers, producers, most competition-adverse wine retailers, alcohol regulators and the lawmakers that live and die by campaign contributions all decided that somehow, despite no court commentary to support their claims, wine retailers had none of the very straightforward protections against state-based economic discrimination that were so clearly laid out in the Granholm v. Heald Supreme Court decision.

Today, with the actions of the Chairman of the New York State Liquor authority, we are seeing the impact of taking that kind of illicit and unfounded interpretation of the Supreme Court’s words to its logical and absurd conclusion.

Chairman Dennis Rosen of the New York State Liquor Authority has once again stated to a Wine Spectator reporter Robert Taylor that he and he alone has the authority to fine a New York wine retailer who has shipped wine out of New York to another state.

Despite the fact that this retailer, Empire Wine in Albany, has not been judged guilty of any infraction of the law in any state, despite the fact that there has been no accusations of wrong doing by anyone in any of the states the NY retailer has shipped to and despite the fact that no state has sent Empire Wine a cease and desist order to stop shipping, Chairman Rosen claims that he has the authority to fine this NY wine merchant $100,000 for “improper conduct”.

This is what happens when contrived and self-serving legal theories are combined with delusions of grandeur.

If you want a sense of just how entitled Chairman Rosen feels he is, consider that Rosen has told The Wine Spectator that he is upset wine retailers are talking to their elected representatives about his out of control behavior: “[Empire Wine] has been calling politicians and trying to exert political influence over this office. That won’t work with me.”

Furthermore, consider that when asked what prompted him to go after Empire Wine, Rosen refused to offer any reasons, saying there are reasons “I won’t go into”.

In fact, many people think the charges against Empire Wine are trumped up by a vindictive chairman who has a soiled ego. Again, from today’s Wine Spectator article:

“Multiple sources within the industry say they believe that the out-of-state wine-shipping charges against Empire Wine stem directly from the upstate retailer’s refusal to cooperate in the 2011 investigation of distributor Winebow. A source with knowledge of that investigation confirmed that Empire Wine was the recipient of an illegal discount, not offered to other retailers, on Winebow’s allotment of Duckhorn Napa Cabernet, and that the NYSLA was displeased with Empire’s insufficient cooperation. “This appears to be somewhat of a retribution situation,” the source said.”

According to Rosen, all he is doing is trying to address “an unfair marketplace.”

But consider that Rosen, after getting a law degree, has constantly worked for the state. He hasn’t ever operated in a marketplace. He hasn’t run a business, let alone worked inside the alcohol beverage marketplace. What he’s demonstrating is that having zero experience actually working anywhere near the industry he regulates can have dire consequences for those entities he regulates.

But there are other consequences to the Rosen Scandal.

It’s precedent setting. When other regulators see one of their own overreach and claim authority they have never possessed in encourages them to do the same. Over the next 12 months, Rosen will surely appear at gatherings of alcohol regulators where he will get a standing ovation from his peers. He will encourage them to overreach as he has. He will encourage them to claim authority they have no business claiming. This is both dangerous for retailers and very bad news for consumers.

Empire Wine has refused to pay Rosen’s arbitrary $100,000 fine and has sued the state of New York claiming that Rosen has overreached, claimed authority he does not have, unconstitutionally interfered with interstate commerce and used an overly vague piece of New York regulatory code to try and impose his $100,000 fine and go after Empire Wine.

Good!

Still, New York-based wine retailers as well as progressive retailers across the country had better prepare themselves for more Rosens to emerge. Because you can bet they will. America’s wholesalers, traditional wine retailers, wineries and other producers, regulators and many lawmakers will not be there to take up the progressive retailers case when Rosen and others come after them. All these entities have proven they have no interest in properly applying the lessons of the Granholm v. Heald Supreme Court case that is very clear a state may not discriminate against wine sellers.

It’s going to take lobbying, protests, lawsuits, constant attention paid to regulatory overreach by retailers alone, and the cleansing light of the media, to make buying and selling wine safe for wine retailers and consumers in the digital age. Without this effort similar Rosen Scandals will arise.