Senate Committee Holds Hearing on Internet Alcohol Sales

(March 9, 1999) The Senate Judiciary Committee held a hearing on Tuesday morning, March 9, on Internet and interstate alcohol sales. Sen. Hatch stated that he would introduce legislation to assist states in enforcing laws that prohibit the sale of alcohol to minors.

Sen. Orrin Hatch (R-UT), Chairman of the Senate Judiciary Committee, presided at the hearing. Sen. Hatch said in his opening statement that "States need to protect their citizens from consumer fraud and have a claim to the tax revenue generated by the sale of such goods. And of the utmost importance, States need to ensure that minors are not provided with unfettered access to alcohol. Unfortunately, indiscriminate direct sales of alcohol have opened a sophisticated generation of minors to the perils of alcohol abuse."

Sen. Dianne Feinstein (D-CA), and two Representatives from California, argued that small wineries, which are concentrated in California, need to be able to sell over the Internet to market their product. Sen. Feinstein stated that small wineries "are concerned that your legislation would have a very chilling effect."

Rep. George Radanovich (R-CA) and Rep. Mike Thompson (D-CA) both represent wine producing districts. Rep. Radanovich said that "traditional distribution mechanisms are not available for most" small wineries. Direct mail and the Internet are important for these wineries to compete with the larger companies.

In contrast, Rep. Juanita McDonald (D-CA), who represents Los Angeles, called Internet alcohol sales "cyber-booze for minors." She complained that children "are surfing the Internet and getting direct access to alcohol." She added that as schools acquire more computers with Internet access, the problem will become worse.

Rep. Robert Ehrlich (R-MD) also spoke about a related issue: that Internet and direct mail sales alcohol are frustrating state and local efforts to collect sales taxes.

The Committee heard from a eighteen year old high school student who sits on the board of MADD. Brendan Brogan testified about a nearly fatal experience he had had with binge drinking, and the harmful effects of drinking by minors generally. He said that Internet alcohol sales could "turn Federal Express and UPS into bartenders."

The Committee also heard from Stephen Diamond, a law professor from the University of Miami, whose specializes in regulation of the liquor industry. He stated, "I do think that federal intervention of some kind is desirable to preserve the realm of relative state autonomy in alcoholic beverage regulation and that such an intervention conforms with the spirit of the Twenty-first Amendment, and that the Twenty-first Amendment is not and should not be read as a dead letter."

Wayne Klein, Assistant Attorney General for the State of Utah, testified regarding his experiences with trying to prosecute out of state companies selling alcohol to minors in Utah. "There are high stakes in this battle," said Klein. "The existence of the alcohol direct selling industry is a frontal challenge to the entire concept of states exercising their police powers. It is a defiance of states’ rights and their ability to control alcohol sales within their states."

"States need to be allowed to prevent out-of-state alcohol vendors from continuing to ship liquor in to the states in violation of state laws," said Klein. "An unfortunately high number of alcohol producers and shippers are defying state laws and challenging their authority to control the sale of liquor within their borders."

Klein also addressed some of the legal problems he faces: "Heretofore unchallenged notions that the Tenth Amendment and the Twenty-First Amendments vested the states with authority to control the sale and transportation of liquor within the states’ borders are now under broad and determined attacks. What is unfortunate is that these violators are masquerading as legitimate businesses. ... Congress has reaffirmed this special reservation of powers to the states. The Webb-Kenyon Act expressly prohibits the 'shipment or transportation' of alcohol 'in violation of any law of [a] State, Territory, or District ...'"

Sen. Hatch described the bill that he will file as follows:

"Later today, I will introduce a bill entitled the “Twenty-First Amendment Enforcement Act.” Federal law already prohibits the interstate shipment of alcohol in violation of state law. Unfortunately, that general prohibition lacks any enforcement mechanism. The bill I am introducing simply provides that mechanism by permitting the Attorney General of a State, who believes that his or her State laws regulating the importation and transportation of alcohol are being violated, to file an action in federal court for an injunction to stop those illegal shipments."

At the end of the hearing Sen. Feinstein suggested that "the key may well rest in tightening the verification in some way of the age of the purchaser on the Internet. I don't know how that can be done."

Sen. Orrin Hatch (R-UT)

In his closing remarks Sen. Hatch promised to work with Sen. Feinstein and the wine industry. "We want to solve a problem without hurting your industry." He concluded: "As you know, the Internet has opened up all kinds of difficulties for us, and we have got to approach the difficulties in an intelligent way."

Early in the hearing Sen. Hatch praised the quality of California wines. Although, as a Mormon, he conceded, "I wouldn't know." He suggested that another Committee member, Sen. DeWine, might be an authority on the subject.

The hearing lasted one and one half hours. Sen. Hatch and Sen. Feinstein were present for the entirety. Sen. Mike DeWine (R-OH), Sen. Charles Grassley (R-IA), Sen. Jon Kyl (R-AZ), and Sen. Arlen Specter (R-PA) were also present for much of the hearing. Sen. Patrick Leahy (D-VT), the Ranking Minority Member, did not attend because the Appropriations Committee, of which he is also a member, held a simultaneous hearing on the FY 2000 budget for the Department of Justice.