Uncorking a Conflict? Liquor Commission Denies Permits as it Plans Launch of Wine Shipping Business

May 14, 2018

The New Hampshire Liquor Commission, which operates the state’s liquor stores, says it plans on getting into the business of shipping wine directly to consumers.

But at the same time, in its role as a regulator, the commission has been taking steps to limit out-of-state wine retailers from selling to New Hampshire customers, making the business of ordering a favorite Bordeaux a lot more complicated.  

The Liquor Commission is no slouch when it comes to inventory. The state-run stores stock somewhere in the neighborhood of 7,000 different wines. But that doesn’t mean wine lovers can always find what they want.

"The bottom line is that New Hampshire consumers rely on out of state retailers for the wines they can’t find in state," says Tom Wark, executive director of the National Association of Wine Retailers, a trade group based in California.

Right now, New Hampshire residents can purchase and have wine shipped right to their doors, as long as the wine retailer has a New Hampshire issued permit. There are more than a 1,000 businesses with those permits, and most are vineyards.

In the past few months, however, the Liquor Commission has begun rejecting permits for a much smaller category: retailers who don’t make wine, just sell it.

"I mean literally the best wine stores in America located in New York City and around New York and some of the best wine auction houses anywhere in the world will now be off limits," Wark says.

The backstory to those rejections is that earlier this year, the Liquor Commission asked the legislature to ban all of the 80 retail-only wine sellers from importing into the state. That includes some wine clubs.

'I got to tell you, in our minds, they start to look like gangsters.'

The Commission contends that these retailers are in some cases selling the exact same products you can get in New Hampshire liquor stores. And since the liquor stores are state-owned, that cuts into state revenues.

The Legislature disagreed. Some lawmakers questioned why the state would want to limit consumer choice, and quickly tabled that bill.

And when that happened, Tom Wark says the Commission began simply denying the permits.

"I got to tell you, in our minds, they start to look like gangsters," Wark says. "We’ve got an agency that is abusing its authority, and doing things on its own, when it was told specifically by the legislature we don’t want this to happen."

The thing is, the Liquor Commission, under current state law, has the right to take action when outside entities are chipping into their market share. What isn’t clear is how much market share the state is actually losing to these 80 or so out-of- state retailers.

Liquor Commission chairman Joseph Mollica was asked that question while testifying in Concord on Monday.

"To what extent, we don’t know," he said. "But we surmised that there was some revenue being diverted from the state to these direct shippers."

The state says about $4.5 million worth of wine gets imported by the retailers each year, though no one knows if that’s rare vintages the commission doesn’t carry, or whether it's Yellow Tail, something readily available.

What is known is the commission collects an 8% tax on those out of state sales, which adds up to a couple hundred thousand dollars in easy money for the state.

But rather than just sit back and collect, the Liquor Commission says it is now going to get into the business of shipping wine itself.

Chairman Mollica says the direct-to-consumer service could be up and running by October. 

"I certainly think that the Liquor Commission being involved in direct-ship in the future will bring additional funds into the state. And quite frankly, far outweigh the 8% that’s being shipped from brick and mortar retailers across the state."

The prospect of increased revenues is of course welcome news to lawmakers, who count on the commission’s profits to fund the state budget.

But put yourselves in the shoes of those out-of-state retailers.

The Liquor Commission is denying them the ability to sell products. Meanwhile, they're about to launch a competing service.

Tom Wark with the Wine Retailers Association says that's a problem.

"The fact of the matter is this: It is a profound conflict of interest for an agency that sells all the wine in the state to be regulating its competitors. When that happens, this is the sort of abuse of power that you see."

To him, these are gangster tactics. To the state, this is how you protect taxpayers and the bottom line. And to wine lovers, it’s bound to uncork a bit of confusion about where they’ll be able to order their favorite bottles.