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GUE S T EDIT ORIAL Viewpoint We welcome commentaries from readers on issues of current interest in the wine industry. Send your topic idea to edit@winesandvines.com, and we'll contact you. California a Model For Other States By Jeff Carroll industry to ask them a simple question: "What are the top issues you would like the ABC to examine?" This meeting began a surprisingly pro- I ductive process that eventually led to the November issuance of an Industry Ad- visory on Third Party Providers (TPPs), which would give TPPs a path to regula- tory certainty in California and a means for licensed sellers (wineries and retailers) to confidently work with advertisers and other TPPs in a compliant environment. The collaborative process was extremely successful and could easily act as a model for other states confronting the issue of how to adapt post-Prohibition regulatory systems to an Internet age. The industry working group that pursued a solution to the issue of TPPs was largely a result of the 2009 California ABC Advi- sory, which expressed significant concerns that sellers may be violating the terms of their licenses when working with TPPs and marketing agents. That same year, Virginia released a circular that had a similar effect, calling into question whether third parties were operating in compliance with that state's laws. Several other states also are actively investigating how contemporary marketing methods gel with current licens- ing and regulatory requirements. I had the pleasure of sitting on the work- ing group that was created to address the issue of TPPs. I learned a great deal and gained a new appreciation for the restric- 162 Wines & Vines JAnUARY 2012 n February 2011, Jacob Appel- smith, the newly appointed direc- tor of the California Department of Alcoholic Beverage Control, called a meeting of key stakeholders from the California alcoholic beverage tions, limitations and rules under which the California ABC and other state alcohol control agencies must work. It's important to remember that state ABCs don't create laws. They are charged with regulating the laws handed to them by state legislatures. Most of these laws were written prior to the advent of the Internet and efficient shipping methods. The key to success with ABC changes was asking stake- holders what they could agree upon. Flash sites and online marketplaces were simply not envisioned by those who wrote alcohol control laws following the repeal of Prohibition in the 1930s. These laws have often been difficult for regulators to navigate when asked to evaluate new alco- hol advertising models. The collaborative process that director Appelsmith initiated in California has dem- onstrated that well-orchestrated industry and regulatory efforts can lead to reason- able solutions to important issues. The key to success in California was asking stake- holders, including the ABC, to define the principles they could all agree upon. The result was the November Indus- try Advisory that provides licensed sellers and TPPs a formula for working together compliantly. Meanwhile, the ABC found a means for regulating TPPs while staying true to the statutes and enforcement struc- tures that guide their work. This formula is based on the following principles, all of which revolve around ensuring full control for the licensed seller, who falls under the jurisdiction of the ABC and is ultimately re- sponsible for complying with the laws. Placement and Pricing: Licensed sellers control product placement, representation and pricing. Transparency: Advertisers represent the licensed seller to the consumer. Acceptance: The licensed seller should always be given an opportunity to reject or accept an order request. Payments: Licensed seller maintains full con- trol of payment settlement and disbursement. Fulfillment: Licensed sellers should di- rect fulfillment and ship products either from their licensed premise or an autho- rized shipping point. While these criteria for sellers and TPP relationships are technologically difficult to implement, they provide a clear path for well-regulated partnerships between licensed sellers and non-licensed agents and TPPs. This development on TPPs in California is significant and will likely cause companies like Amazon.com to take a second look at establishing a wine presence. My hope is that other states, which will inevitably have to address the complexities of a modern mar- ketplace and new marketing channels, will look closely at the California ABC Working Group model as a means of resolving these issues in a way that meets the needs of both industry and ABC. This collaborative mod- el, if entered into with an honest desire for problem solving and the interests of both the state and industry in mind, will allow state ABCs, sellers, marketers and product advertisers to operate with certainty. Jeff Carroll is vice president of compliance and strategy at ShipCompliant. In his role, Carroll identifies needs and designs innovative software to solve industry problems relating to compliance and distribution. He also manages a team of compliance research specialists and is the editor and publisher of Wine Direct Shipping Compliance, a public blog at blog.shipcompliant.com about wine shipping news, issues and analysis. 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