Proposal to License Fulfillment Houses Threatens Direct Shipping

By Published On: June 23, 2023

The Uniform Law Commission (ULC), a nonprofit organization that recommends model legislation for states, is pursuing harmful policies that threaten the Direct to Consumer (DTC) wine shipping industry, particularly with its recommendations that fulfillment houses be licensed and comply with complex administrative requirements.

Known as the Uniform Alcohol Direct-Shipping Compliance Act, the ULC package is intended as model language for state laws and has turned up so far in Illinois, which was quickly defeated, and more recently in Wisconsin in Assembly Bill 304. It’s a small section (95 125.23) of an otherwise well-crafted bill to help the craft industry.

Many producers are familiar with fulfillment houses; they merely store and label products for common carriers to ship on behalf of their winery clients.  They do NOT produce, own or ship wine.  Fulfillment houses also do NOT have a role in age verification, regulatory compliance, or tax collection.

The ULC model language was championed by wholesalers who list DTC as one of the largest threats to their business model and to the three-tier system which was created after the end of Prohibition.

The licensing of fulfillment houses is particularly misguided and threatens small producers in several ways, including:

  • Adds complexity to already complex regulations, which creates additional costs and administrative burdens for small wineries.
  • Sets a bad legal precedent and is fraught with licensing, enforcement, and constitutional issues related to jurisdiction.
  • Duplicates the voluminous, detailed data that licensed direct shippers already report to state regulators.
  • Discourages the growth of small businesses and encourages large distributors to control growing market share.

Considering landmark proposals implemented by the ULC throughout the years, small producers should be concerned about language showing up in state legislatures across the country.

Of most concern, the UCL proposal is constitutionally questionable. It calls for State A’s ability to revoke a producer’s license in State A when State B makes a claim the producer shipped illegally to State B, thus giving State A the right to enforce State B’s law.

While the public and regulatory benefits may be well intended by those who want to protect communities from illegal sales, the additional requirements will simply raise costs and drive small companies out of business, giving large corporations more advantage than they already have. It is part of the perennial fight to consolidate and control markets.

Instead, we need to modernize and move beyond the politics of prohibition-era institutions that are fighting inevitable change enabled by technology and the internet. Modernization is critical to keeping markets open and fair to help small producers compete against large corporations and give consumers more brands to consider in the marketplace.

About the Author: CWA Staff

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