The wholesalers face an uphill battle in Washington, however, as even the Federal Trade Commission concluded recently that online wine sales provide increased consumer choice and in some cases lower prices. "The Internet does not change the baseline principles of freedom and competition," said Todd Zywicki, director of the FTCs Office of Policy Planning.In her testimony, Duggan condemned the FTCs conclusion as preordained. "It is the triumph of rhetoric over reason," Duggan told lawmakers. "It is intellectually dishonest and scientifically specious." Many in Congress are not convinced, however, that the issues raised by the wholesalers are not mainly a diversion from the larger economic battle. "I have to say its about 5 percent for the kids and about 95 percent for the money, honey," Rep. George Radanovich, R-Calif., said. "This is about money, and its about market share, and thats OK." Calling the wholesalers argument "economic protectionism" in the guise of social policy, Rep. John Shimkus, R-Ill., said many small wineries in Illinois do not have the luxury of working within the traditional wholesale structure. For others, however, the issue of online wine sales raises questions, separate and distinct from other online sales, which transcend economics. Controlled substances are "not the same as contact lenses or golf clubs," said Rep. Edolphus Towns, D-N.Y. "Theres really no control here in terms of youngsters being able to order it, being able to receive it, and thats a real problem." The wholesalers concede that there is an economic issue at stake, but they say it is one that motivates startup producers to attack the long-established distribution system. "There is a huge worldwide glut of wine on the market," Duggan told lawmakers, adding that the easiest tactic for new wineries is to attack the system. "There simply is too much wine."
Warning that legacy regulations can inhibit the growth of e-commerce, Zywicki testified that many state bans on interstate wine shipment are in place because the wholesale distribution system was developed before the Internet existed. As e-commerce continues to expand, the potential cost of restrictions will rise, he said.