Michael Giberson

In other FERC news, Platt’s is reporting that Chairman Pat Wood said the Commission would soon approve a policy statement to encourage transmission owners to either join regional transmission operators or completely divest their transmission to a third party. Wood told Platts Monday that the agency at its Dec 15 open meeting will release the finalized version of the transmission pricing policy statement it unveiled in early 2003.

Unfortunately I’ll miss the FERC meeting — the first regularly-scheduled FERC meeting that I will miss in about 3 years — because I’ll be at the Carnegie-Mellon/EPRI conference, “Electricity Transmission in Deregulated Markets,” with Lynne presenting our paper on public goods arguments in electric reliability.

Lynne Kiesling

The Supreme Court is hearing the interstate wine shipment case today. Two widely-read newspapers opine on the matter, and both agree: free the grapes!

From the USA Today:

The wine issue is not just a narrow legal one, but part of a broad pattern of state laws designed to shield well-connected industries from competition.

The wine laws protect powerful liquor distributors. Other industries, ranging from insurance brokers to car dealers, benefit from similar laws that shield them from out-of-state competition and Internet concerns that bypass the middlemen. When these laws are enacted, consumers are forced to pay more and have fewer choices. …

The distributors argue that wine is unique because it’s important to keep alcohol out of the mouths of minors.

In fact, underage drinking has hardly been a problem with wines shipped by mail. A 2003 study by the Federal Trade Commission found that the premium and niche wines ordered directly were not the type preferred by underage drinkers. What’s more, if teen drinkers were trying to buy wine directly, they could still do so by limiting their purchases to in-state wineries.

These wine statutes, as well as laws that protect other industries, do not get better with age. Case illustrates how industries keep profits, consumer costs high.

And from the Wall Street Journal (subscription):

If you’re wondering how ordering a bottle of wine for your uncle is any different from ordering him a shirt from L.L. Bean, the short answer is the 21st Amendment. The 1933 amendment that ended Prohibition also gave states the authority to regulate the importation and distribution of alcohol. The question for the Court is whether the 21st Amendment supersedes the Constitution’s Commerce Clause, under which the Founders gave Congress the sole right to regulate trade across state lines. Or, can states enact protectionist barriers to the importation of alcohol? …

Needless to say, the state liquor cartels aren’t happy at the prospect of being cut out as middlemen in this lucrative business. But the arguments they muster are as weak as a white wine spritzer. One is taxation; states may lose tax revenue if consumers can purchase wine over the Internet. Yes, that could happen since Congress has enacted a moratorium on taxes on Internet sales across state lines. But why should wine be any different from every other product sold online?

You know the liquor lobbies are really desperate, however, when they argue that direct wine sales would make it easier for minors to obtain alcohol. Kids these days are precocious, but it’s hard to imagine a teenager using dad’s credit card to order $20 bottles of wine for a party a couple of weeks from now. In any event, measures already in place for blocking intra-state wine shipments to minors could easily be extended to interstate sales.

If the Supreme Court lets states impose restrictions on wine sales, watch for curbs on other products sold online. A negative ruling could affect all Internet commerce in which a state can express a regulatory concern. Think automobiles or insurance or contact lenses.

UPDATE: The Progress and Freedom Foundation is one of the contributors to an amicus brief urging the Court to uphold interstate commerce:

“This case fundamentally is about the viability of interstate e-commerce in the United States,” says Tom Lenard, senior fellow and vice president for research at The Progress & Freedom Foundation. “The Internet is the quintessential interstate medium that overcomes the tyranny of distance, letting sellers in every state reach customers in every other state.”

Lynne Kiesling

The Supreme Court is hearing the interstate wine shipment case today. Two widely-read newspapers opine on the matter, and both agree: free the grapes!

From the USA Today:

The wine issue is not just a narrow legal one, but part of a broad pattern of state laws designed to shield well-connected industries from competition.

The wine laws protect powerful liquor distributors. Other industries, ranging from insurance brokers to car dealers, benefit from similar laws that shield them from out-of-state competition and Internet concerns that bypass the middlemen. When these laws are enacted, consumers are forced to pay more and have fewer choices. …

The distributors argue that wine is unique because it’s important to keep alcohol out of the mouths of minors.

In fact, underage drinking has hardly been a problem with wines shipped by mail. A 2003 study by the Federal Trade Commission found that the premium and niche wines ordered directly were not the type preferred by underage drinkers. What’s more, if teen drinkers were trying to buy wine directly, they could still do so by limiting their purchases to in-state wineries.

These wine statutes, as well as laws that protect other industries, do not get better with age. Case illustrates how industries keep profits, consumer costs high.

And from the Wall Street Journal (subscription):

If you’re wondering how ordering a bottle of wine for your uncle is any different from ordering him a shirt from L.L. Bean, the short answer is the 21st Amendment. The 1933 amendment that ended Prohibition also gave states the authority to regulate the importation and distribution of alcohol. The question for the Court is whether the 21st Amendment supersedes the Constitution’s Commerce Clause, under which the Founders gave Congress the sole right to regulate trade across state lines. Or, can states enact protectionist barriers to the importation of alcohol? …

Needless to say, the state liquor cartels aren’t happy at the prospect of being cut out as middlemen in this lucrative business. But the arguments they muster are as weak as a white wine spritzer. One is taxation; states may lose tax revenue if consumers can purchase wine over the Internet. Yes, that could happen since Congress has enacted a moratorium on taxes on Internet sales across state lines. But why should wine be any different from every other product sold online?

You know the liquor lobbies are really desperate, however, when they argue that direct wine sales would make it easier for minors to obtain alcohol. Kids these days are precocious, but it’s hard to imagine a teenager using dad’s credit card to order $20 bottles of wine for a party a couple of weeks from now. In any event, measures already in place for blocking intra-state wine shipments to minors could easily be extended to interstate sales.

If the Supreme Court lets states impose restrictions on wine sales, watch for curbs on other products sold online. A negative ruling could affect all Internet commerce in which a state can express a regulatory concern. Think automobiles or insurance or contact lenses.

UPDATE: The Progress and Freedom Foundation is one of the contributors to an amicus brief urging the Court to uphold interstate commerce:

“This case fundamentally is about the viability of interstate e-commerce in the United States,” says Tom Lenard, senior fellow and vice president for research at The Progress & Freedom Foundation. “The Internet is the quintessential interstate medium that overcomes the tyranny of distance, letting sellers in every state reach customers in every other state.”