Days of Wine and Rent-Seeking

Professor Kiesling discusses how new markets created by the Internet ran afoul of existing institutions (wholesale liquor distributors) that had their niche by law.

New York, Michigan and other states prohibited shipments to individual buyers from out of state wineries.

The liquor wholesalers arrangements grew out of the post-Prohibition environment. Laws which were enacted out of a sense of morality (booze is a social ill and must be regulated) were hindering the development of new markets (small wineries who could leverage the internet to sell directly to retailers and wine fans).

The good news is that the courts are reconsidering these laws, that make a distributorship a plum franchise.

16 May 2005: the US Supreme Court struck down the laws banning interstate wine shipments to Michigan and New York.