At a time when New York is desperate to promote private-sector growth, one state agency seems bent on shutting down a thriving local business—which isn’t accused of breaking a single New York state law. The message this sends to other entrepreneurs couldn’t be worse.
The business in question is Empire Wine, a Colonie liquor store that employs 50 people and has developed a national customer base through innovative online sales since 2003.
Last year, the State Liquor Authority set out to revoke Empire’s license. The reason? Empire ships wine to customers in 16 states that prohibit direct out-of-state wine sales to their residents.
These bans are in place for one purpose: to shield favored businesses — in this case, brick and mortar liquor stores—from competition. By boxing out online retailers, stores get to charge more while offering customers fewer choices. New York has a similar restriction that bars retailers from shipping into the Empire State.
The SLA, without any authorization from New York’s Legislature, has taken it upon itself to enforce the laws of these other states— including California, which is both the largest wine producer and the largest consumer market in the country.
Ironically enough, some of the 16 states banning out of state sales aren’t enforcing their own laws. One possible reason for their reluctance may be a 2005 U.S. Supreme Court ruling, in which the court struck down part of New York’s own anti-competition laws. The courts found that the state’s decision to block shipments from out-of-state wineries violated the Commerce Clause.
So, while the vintages of Sonoma and Napa are shipped from California to the doorsteps of New York wine-lovers, the SLA is essentially doing Sacramento’s anti-competitive dirty work, penalizing Empire Wine for selling to Californians. Meanwhile, they’re putting the taxpayers on the hook for what could be a lengthy and expensive legal battle.
The SLA can’t point to a single New York law being violated by Empire Wine; instead, the agency claims that, by shipping wine to these states, Empire is engaging in “improper conduct” — a phrase that is not defined in further detail by New York’s law.
Empire says it has filed Freedom of Information requests with SLA for documents that might reveal more about the agency’s motives for pursuing the company. The SLA, however, has denied most of those requests. Adding to the mystery, the SLA’s top official reportedly has said the agency won’t be applying the same level of scrutiny to the sales patterns of other New York retailers.
While the SLA’s motives remain something of a mystery, the ultimate outcome of its position in this case is clear and predictable. It’s a classic instance of government picking winners and losers: If the SLA is not stopped, Empire’s competitors will win, and the people who benefit from Empire’s success — including its 50 employees — will lose.
New York’s claim of being “open for business” rings hollow when a law-abiding business like Empire Wine faces this kind of treatment.
The implications of this case go well beyond a single business, industry or product: regulatory overreach by overzealous bureaucrats can do as much damage to the state’s business climates as high taxes. Allowing a state agency like SLA to drive a law-abiding employer out of business—on the pretext, incredibly, of enforcing the laws of other states— will have a chilling effect on anyone considering starting or expanding any type of business in New York.