'Storm' of negative pr as wine.com sneaks on rivals
January 15, 2008
By Tim Teichgraeber
Wine.com has brought 'a bleep-storm of negative PR' on itself after reporting fellow retailers for breaking state shipping laws.
In a move that has sparked significant controversy in the American wine media and industry, the San Francisco-based online wine retailer initiated a 'sting' program against competing US wine retailers.
In the US, complex state laws regulate the shipment of alcohol from one state to another, and some states prohibit interstate shipment by out-of-state retailers or ban wine shipments altogether.
Wine.com has set up a network of warehouses and retail operations in various states so that it legally can deliver wine to consumers in all 50 states. Many other retailers regularly violate the loosely enforced regulations by shipping wine in discreetly marked boxes.
Wine.com placed orders with at least 29 retailers that violated state shipping regulations and then, through its law firm, since last July has been reporting the illegal shipments to state regulators in Washington, New York and other states.
The retailers targeted included California's Beverages and More!, Sam's in Chicago and Wine Library in New Jersey.
The move has caused what one blogger called, 'A bleep-storm of negative PR' for Wine.com from bloggers and commentators on popular wine-themed blogs like Alder Yarrow's Vinography.
Yarrow himself compared the sting tactic to 'taking down the license plate numbers of cars that are going more than 65 miles per hour on the freeway and reporting them to the highway patrol.'
Wine.com CEO Rich Bergsund defended the practice to the Wine Market Report newsletter and also on Vinography, saying that he thinks it's time for state regulators to either enforce their laws uniformly or open up to interstate shipping.
The move has also generated a row between Tom Wark, executive director of the Specialty Wine Retailers' Association (SWRA), and Craig Wolf, CEO of Wine and Spirits Wholesalers of America (WSWA).
According to UK journal Off Licence News, Wark criticised Wine.com for its 'stings on fellow retailers'. This drew the fire of Wolf, who said the SWRA should be more concerned with its members breaking the law than a retailer reporting those violations.
Wark retorted that Wine.com had 'failed to involve themselves in any of the significant legislative battles that directly effect their customers and wine lovers in general.'
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Wine.com's entrapment tactic offends many in the wine community - not merely the wine trade - because it violates an old, though admittedly weakened, American precept: fair play. Yes, that precept is violated more in the breach than in practice, but its undoubted value is transmitted in lessons that parents teach children.
Everyone grows up loathing the schoolyard snitch, the kid who says 'I'll tell the teacher on you' or, worse, if the sadistic intent is to ignite paralyzing fear, 'I'll tell your mother on you.'
Sting operations are the functions of law-enforcement institutions, not private businesses.
Wine.com's sting was clearly what the British call so elegantly and understatedly 'bad form.' The company behaved, as Oscar Wilde might have said, like 'a perfect cad.' (In the next line, we'd be reminded that nobody is perfect.)
Wine.com's behavior is tone-deaf to Americans' reflexive contempt for 'stoolies' - stool pigeons. Who doesn't remember what Marlon Brando's character in 'On the Waterfront' (1954), a washed-up boxer turned longshoreman, lived through after testifying against a corrupt mob boss?
Perhaps the film's director, Elia Kazan, was indirectly expressing regret for his down-and-dirty testimony against old friends in 1952 when the House Un-American Activities Committee was conducting a witch hunt against former Communists in Hollywood.
When I was a schoolyard kid my dad drove over a skunk. It took days of using a garden hose to wash away the stink from the car's underside. By that measure, Wine.com's chief executive officer, Rich Berglund, better connect his to a fire hydrant.
Howard G Goldberg, New York, USA
No one likes a snitch, even when they're right.
Rachael Smith
Benjamin Franklin's statement, "We must all hang together, gentlemen...else, we shall most assuredly hang separately" was made at the signing of the Declaration of Independence and meant that if they did not band together in the fight against the British, they would all be hanged separately.
Andrew Glazier, Back Roads Wine
If they have a legal right and the others are breaking the law why can't they protect their own interest and report the law breakers? Are we suppose to get on people who are doing the right thing and ignore the law breakers?
Juan Ortega
wine.com is now off my list of whom to do business with. Thanks for the info.
Anon
This has some parallel to the steroids controversy in Major League Baseball and the Tour de France. If you are a player going by the rules and not using steroids would you be inclined to let the others get away with using and watch your career head south because of the unlevel playing field? Or might you want to report users?
Sometimes playing by the rules means you go out of business while those who bend them are hailed as succeses.
Ted Neumann
Wine.com just went off my list permanently as a spot to buy wine. Their job is to sell wine, not be the wine police. Talk about a bunch of juveniles.
Peter Kitchak
With respect to this issue, the American wine consumer is equivalent to a horse that has escaped the corral and is half way across the country. That horse is NEVER going back in the corral, and any regulator at state or federal level who imagines otherwise is a fool. Consumers will continue to find ways to get wine shipped to them, and there will always be businesses that will accommodate them. Why? Because informed consumers see the restrictions for what they are - blatant protectionism - and have no moral qualms about an end run
around them.
Peter Granoff
First, thank you for being a forum for commentary on important issues in the wine industry.
To the point, wine.com is has shown itself to be a contemptuous entity deserving of a boycott on the grandest scale. I am a US resident and lived 20+ years in Pennsylvania, which has the some of the strongest anti-free-trade regulations in the nation with regard to purchasing wine. I just visited the wine.com site and I was met with a “barrier” screen asking to which state I wanted my shipped. When I clicked on Pennsylvania (PA), it told me I could only ship non-alcoholic items.
Here is where wine.com showed itself to be a company below contempt; despite having been “pre-screened” from shipping alcoholic beverages, I was easily able to shift my location to Virginia (VA), where I actually reside presently. So it is obvious that wine.com is quite fine with me breaking laws by having wines shipped to a market other than that in which I reside…to a brother or friend perhaps…as long as it gives them a competitive advantage. I normally don't wish anyone ill-will, but I would be the first to lift a glass if wine.com were to dry up and disappear from the marketplace. Words cannot describe my disgust for their methods; should they go out of business, they have a great future in politics.
Tom Ward, Leesburg, VA, USA
This wasn't an honest effort to keep retailers honest, it was a dishonest effort to scare customers away from their competition. Glad it's backfired too.
Dan Friedman, NYC, USA
It is impossible to fully comply with all laws. In the case of wine.com's sting operations, it is time for others to sting wine.com and find areas in which wine.com has broken the law. One good snitch deserves another. Let justice be done.
Ron Saikowski, Texas, USA
I can understand why wine.com would be upset about other companies cheating and slipping by the system because wine.com is actually taking the measures to follow the laws and regulations very carefully. If they actually cared about their customers and about wine lovers, they would have warned the involved companies before tattling on them.
Shannah LaRoche
Wine.com is still living in the past. They have built a huge and expensive infrastructure based on the way their business needed to be set up back in the late 1990's. They are continuing to operate as such rather than changing with times, stream lining operations and modernizing. This sting is purely self serving and smells of desperation in order to substantiate the millions of dollars of investor capital that they have burned over the years.
There is no question that the laws in many of the states that the retailers in question are shipping into are grey. In many cases the laws are structured so that wineries can sell their goods at retail directly to the consumer bypassing the middleman of the antiquated three tier system. The reason why none of the states have taken issue is because testing this in court would most likely result in a waste of time and tax payers money.
As soon as a winery fulfills a “retail” order then they are indeed a “retailer”. What court is going to attempt to create and enforce different classes of “retailers”? The importance of these laws is to insure that wine delivered directly to a consumer is received by an adult, not to protect the antiquated business practices of Wine.com.
Michael H. Kogan
Wine.com sounds like a retailer that is quick to point fingers. Why report fellow retailers if nothing bad is really coming from the illegal transactions through states?
Anon
'Fair Play' is indeed important, particularly when Wine.com had gone to the expense of setting up correctly and playing by the rules - don't we all like a fair referee in a Football game? perhaps Wine.com could have first approached the companies with a proposal for a distribution and business arrangement to help their competitors to 'play fair' in other states. It's not about stealing market share, it's about making the pie bigger.
Ceejay Haymen, Dubai, UAE
Undoubtedly Wine.com is not the first to snitch on the competition, it's thier public righteousness which rubs. Let us not forget however that Wine.com has gone to great expense and effort to stay within the law only to see thier counterparts easily ignore the law without impunity.
In this case, I weigh in with Wine.com. I disapprove of Snitches more when they falsely pretend never to have snitched.
Jennifer Ryan, Giacobazzi Grandi Vini, Italy
Apparently being the world's #1 online wine retailer is not enough. Now Wine.com has earned the reputation of being the "neighborhood bully" by smashing down their mid-level competitors. Anybody else sense wine.com's eagerness to take over (monopoly) the online wine market? Bad way to try and get more publicity.
Ryan Scott, San Luis Obispo, CA, USA
I find it disgusting business for www.wine.com to act as they have done. While I have yet to do business with them, these are the sort of actions that ensure that I will NEVER do business with them. www.winelibrary.com can not ship to my state...and I respect that. However when the ban is eventually lifted they will be one of the first places to get my business.
Kirk R. Grant, Wine Director, Havana Restaurant, USA
Down here on planet earth, corporations are constantly suing one another for unfair competition, however it is perceived to be manifested. Why should the wine world be any different. It's jungle out there in the "free market". No company can afford to do business with one hand tied behind its back, while everyone else is swinging with both dukes. The wine.com CEO did the right (if ineffective) thing. It's his fiduciary obligation, mixing metaphors, to try to level the playing field.
But Peter Granoff is also right. As with Prohibition, consumers find a way to satisfy their tastes and pocket books, and this "snitch" episode will have no effect on shipping vino under the radar.
Tom Merle
Thanks for putting a balanced view on this. As a further balance I want to point out that Beverages and More! / BevMo! was not part of this sting. As a founder member of the SWRA we seek to change the archaic and complex shipping rules to enable consumers all over the United States access to the substantial range of wines we sell in our stores. We do so through the SWRA as we attempt through legislation (we were party to the recent significant win for retailers in Texas), lobbying and education.
“(We need to correct a mistake in an earlier article from Wine Market Report, who stated erroneously that BevMo! ships illegally. That is not our belief – in fact they appear to be one of the few companies who, like Wine.com, are working within the law)”.
Just wanted to put the record straight
David Richards, BevMo!, USA
It is one thing if state shipping laws need to be more readily enforced, but wine.com is not the police here, so they shouldn't take it upon themselves to set up their competitors and rat them out. They may feel like they are doing some good in keeping the playing field legal and fair, but they are actually buiding themselves a bad reputation in a competative industry that does not forget.
Tessa Britton-Martinelli San Luis Obispo, CA, USA
This reminds me a bit of a tabloid newspaper hiring someone to lure a politician into a compromising situation and then reporting on it. This was not in the public's interest but rather the wolf eyeballing the hen house and trying to figure out how to keep out the other wolves and the chickens to himself. I will definitely remove Wine.com from my list of merchants and encourage others to do the same.
Christina Kelly, Wine Columnist
I would have to agree with a comment already posted. This sneaking around is not getting the wine.com people anywhere. It is definitely not enhancing wine sales. If anything it is scaring customers aways from purchasing out of state wines.
Erica Brannon, Cal Poly San Luis Obispo, CA, USA
It is my hope that the only group to suffer from this scandal is wine.com, and that this negative PR will strongly and adversely affect their sales. Cheers to whomever topples them as the largest online wine retailer.
I'm sure some legal action will be taken against the guilty parties that wine.com snitched on, but I don't understand why these interstate shipping laws were created in the first place. I am especially surprised that it took a competitor to these other wine merchants to expose the illegal shipments; why do we have these regulatory agencies if these acts were news to them? If they can't enforce their own laws and regulations, they should be disbanded and their easily side-steppable laws should be left behind.
Andy Gardikas, San Luis Obispo, CA, USA
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Wine.com's entrapment tactic offends many in the wine community - not merely the wine trade - because it violates an old, though admittedly weakened, American precept: fair play. Yes, that precept is violated more in the breach than in practice, but its undoubted value is transmitted in lessons that parents teach children.
