The Cabinet

of Dr. Callegari

The Three-Tier System

As anyone who has done a bit of traveling across these great United States will know, Americans feel about alcohol much the way we feel about overbreeding dogs and making children compete on television cooking shows: we love it, but we know we should feel bad about it. From dry counties and blue laws to open-container states and drive-thru daquiri windows, there are some deeply conflicted feelings on how to handle your liquor in this country. The notorious experiment with Prohibition, which resulted in crime syndicates building vertical empires on the back of bootleg booze, only left us with further unresolved issues and a bizarre maze of regulations attempting to solve the problem of how to monitor the alcohol trade once it wasn't outright illegal anymore. Among such attempts to heal the wound of Prohibition was the so-called "Three-Tier System": a means of creating distance between the producers of alcohol and its consumers. Now, every true patriot/anyone who has driven behind a car registered in New Hampshire knows, if you're not living free, you're dying, so it's clear that any meddling in our alcohol producer-alcohol consumer relationship is generally unAmerican, but there are some other fairly good reasons you should care about the Three-Tier System and its effects on your access to wine. 

If you've heard of the Three-Tier System, you've probably thought it sounded strangely complicated and obscure, and to be sure, that's the point. The multi-step process that makes it illegal except under certain circumstances for producers (aka Tier 1) to sell their products to consumers (aka Tier 3) without the use of a middleman (aka Tier 2), is designed to make the process of selling and purchasing alcohol more difficult. The system was introduced in the wake of Prohibition, taking advantage of Section 2 of the 21st Amendment which repealed the prohibition of alcohol but gave states sweeping jurisdiction over how, when and how much alcohol is sold and consumed in their territory. 

Why is any of this important? First, and most simply, cost—wine is expensive in America and a significant contributor to price point is this inefficient multi-step system that creates mark-ups and added cost at several intervals. Second, Tier 2, aka the wholesale buyer and distributor, can ultimately dictate pricing to both the producer and the consumer; the Tier 2 party also de facto controls what you drink, as you can’t get wine they don’t have, and you have to drink what they do have. Third, in states where the state is both the wholesaler and retailer (both Tiers 2 and 3), there is some pretty serious conflict of interest (i.e. the body that is supposed to be making sure people don’t abuse alcohol is also promoting the sale of alcohol). Fourth, lots of small wineries never get in on the action because wholesalers don't think they'll sell well or suit their portfolio, and as a result are kept from growing and from gaining brand recognition. Finally, this is part of a larger system that masks the real cost and quality of wine, and only exacerbates the unhealthy aspects of the relationship Americans have with alcohol.

Wineries celebrated an important victory in the Granholm decision, when the Supreme Court ruled it was unconstitutional for states to privilege in-state wineries by allowing them to engage in direct-to-consumer shipping while blocking the same from out of state wineries. But this has not necessarily improved the situation as, for example, some states simply moved to eliminate all direct-to-consumer shipping in light of the decision, privileging the second tier wholesalers once again. The battle to have simple, unfettered direct-to-consumer shipping of wine rages on, and if like our forefathers you're prepared to pick up arms to fight for your freedom/would like to not pay taxes on a bunch of stuff, check out freethegrapes.org and the maps and details provided on state shipping laws by The Wine Institute to get informed!

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