William Tomaszewski, General Counsel for Wine.com, talked about the constantly changing legal environment he navigates as legal counsel for an alcohol retailer.
“I love Prohibition,” stated Tomaszewski at the outset of his keynote presentation at the 2017 Chief Legal Counsel Leadership Forum held on October 25 in San Francisco. “The only reason I have a job is because of Prohibition. It was enacted in 1920 as the 18th Amendment to the Constitution and repealed in 1933 by the 21st Amendment. This is the only constitutional amendment that was ever repealed.” Tomaszewski noted that he comprises the entire legal team at Wine.com.
He explained that a three-tier system was instituted following the repeal of Prohibition to prevent breweries, distilleries, and wineries from owning bars, which had been the norm prior to the 18th Amendment. It was believed that breweries, distilleries, and wineries were exerting too much pressure on retailers to buy a particular producer’s products.
The three-tier system assures that producers of alcohol can’t own either wholesale operations or retail operations. Similarly, wholesalers can’t own producers or retailers, nor can retailers own wholesalers or producers. This separation into three different groups ensures that the economic and political interests of producers, distributors, and retailers are fundamentally different and, as a result, are often in conflict, noted Tomaszewski.
Tier I comprises:
Tier II comprises:
• Liquor wholesalers
• Beer distributors
• Wine wholesalers
“Wholesalers are a state-mandated monopoly,” explained Tomaszewski. “The wholesaler buys the product from the producer, and I, as a retailer, must buy wine from the wholesaler. I can’t go directly to the producer, except for in California, which is an exception.”
Tier III comprises:
• Convenience stores
• Package stores
• Grocery stores
• Bars and restaurants
• Private clubs
• Passenger trains
“Wine.com is the largest online wine retailer in the world,” stated Tomaszewski. “Just yesterday, Wine.com slayed Amazon. As of December 31, Amazon is out of the wine business, because it couldn’t compete with Wine.com. In the direct-shipping industry, the regulations are a hindrance, but they’re also a barrier to entry,” he noted.
Tomaszewski continued, “When the 18th Amendment was repealed, the federal government left it up to the states to regulate alcohol as they saw fit. So, with 50 different states plus the federal government, there are 51 different rules. In Hawaii, each island has a different rule, and a few other states have different rules as well, so there are 58 different rules all together. The regulators in each of these jurisdictions are able to interpret the rules with some flexibility, so that’s fun for me. Most of my job is 60% alcohol regulatory work.”
“When the 18th Amendment was repealed, the federal government left it up to the states to regulate alcohol as they saw fit. So, with 50 different states plus the federal government, there are 51 different rules.”
Wine.com operates in a complex, regulated category that involves navigating state wine-shipping laws, many of which prohibit shipping wine across state lines. Consumers, retailers, and wineries have lobbied and litigated to update antiquated laws to allow for free trade/e-commerce between states. Regional wholesalers and brick-and-mortar retailers have traditionally lobbied for the status quo in order to protect their local revenue base. Each individual state sets its policies, with minimal federal jurisdiction, so progress or setbacks happen one state at a time. “I have something like 40 different licenses I need to keep track of,” stated Tomaszewski.
Many states have updated their wine-shipping laws via the legislative process. Others are effectively modernizing via policies of non-enforcement. “Wine.com’s regulatory approach includes a mix of compliance with the letter of the law (letter compliant) and compliance with the non-enforcement policies of each state (policy compliant),” explained Tomaszewski.
“Utah has the strictest alcohol laws in the country. Most of the bars are private clubs, and you have to be a member. They used to have something called the ‘Zion Curtain.’ If you went into a bar in Utah and asked for a mixed drink, the bartender would make the drink behind a curtain, because it was illegal to watch him make it,” he said. “The most bizarre law I found on the books is in Kentucky. In Kentucky, it’s a felony for a retailer to sell alcohol to someone who’s known to not support his family.”
“If you went into a bar in Utah and asked for a mixed drink, the bartender would make the drink behind a curtain, because it was illegal to watch him make it. In Kentucky, it’s a felony for a retailer to sell alcohol to someone who’s known to not support his family.”
The state laws regarding alcohol are constantly changing, and this challenge is why Tomaszewski loves to go to work every day. “Good relationships are vitally important in this industry. Nothing is black and white. Everything is shades of gray. Nothing is impossible.”
“Good relationships are vitally important in this industry. Nothing is black and white. Everything is shades of gray. Nothing is impossible.”
ABOUT WILLIAM TOMASZEWSKI:
Bill Tomaszewski has been the General Counsel for Wine.com, Inc. since 2004. His main focus is working with state agencies on alcohol regulatory matters. Prior to his employment with Wine.com, he served for 20 years with the Jersey City Police Department in various roles. He’s a graduate of Rutgers-Newark School of Law. Bill is board president of Planet Bee Foundation, an environmental education nonprofit educating youth nationwide. He’s also on the board of Pacific Rowing Club, a San Francisco nonprofit rowing club for youth.