Claims of Counterfeits in DtC Shipping are Overblown

Among those who, for whatever reasons, oppose direct-to-consumer (DtC) shipping of alcohol, one argument that keeps coming up is that consumers should not be able to have alcohol shipped to their homes because of the risk of counterfeits. That is, there is apparently a belief that if an alcohol product is sold without the involvement of a distributor (even if the distributor never actually handles the product) then it is inherently suspect and is likely fake or even dangerous. And therefore, all DtC shipping must be prohibited and ruthlessly policed.

If this argument is subject to even the slightest scrutiny, however, it quickly falls flat. And indeed, the DtC shipping market, if expanded, could prove a ready fix for many counterfeiting concerns.

What is the risk of counterfeits?

Now, no one here is arguing that counterfeiting in the beverage alcohol industry is not an issue. Just as with other luxury goods, there are numerous alcoholic brands that command customer interest and thus also high prices. An unscrupulous person who gets their hands on an empty bottle of Pappy Van Winkle might readily fill it with any old brown liquid in the hope of earning a quick few hundred dollars.

When it comes to beverage alcohol, the risk from such fakes is compounded by the real potential for actual harm to the consumer if the product is substandard. If that fake bottle of Pappy Van Winkle is filled with a lower-grade whisky, the consumer will only lose out on their money; if that bottle is filled instead with a bootleg whisky or worse, the consequences could be devastating. (The regular reports of mass alcohol poisonings in countries with such restrictive alcohol laws that consumers are forced to go to the black market should make us grateful for our open and well-managed alcohol industry.)

And certainly, there are plenty of cases of alcohol counterfeiting in the U.S. that should be investigated and prosecuted to ensure that consumers can remain assured of the safety and fidelity of the products they purchase. It is just unclear why the DtC shipping market should be specially targeted because of this (industry-wide) issue.

DtC shipping and counterfeits

When opponents of DtC shipping bring up their concerns around counterfeiting, the examples that are brought up usually involve either eBay or Craigslist. And frankly, in that context, there is a point. While these sites may be great for cleaning out your garage or selling decades-old memorabilia, they are largely unsuitable for the sale of alcohol. For one, it can be very difficult to know who you are buying from, and that’s giving the seller the benefit of the doubt that they are licensed to sell the alcohol listed on their page (a dubious assumption).

But focusing on cases that involve such obvious improper behavior that the shipping aspect is really the least of the problems is at best a distraction and more likely is an attempt to defame the entire DtC shipping market. Instead, a robust—and robustly regulated—DtC shipping market provides ample chances to combat counterfeiting.

Indeed, often enough counterfeiting is impossible in a DtC shipment. Most DtC shipments these days are sourced directly from alcohol producers, primarily wineries. As such, recipients of DtC shipments are largely purchasing directly from the source, the brand owner themselves. Almost by definition, brand owners cannot counterfeit their own brands—they may sell a product that the consumer finds doesn’t meet their expectations, but it cannot be a fake.

This then becomes an argument for why DtC shipping permissions should be expanded not contracted. Currently, 47 states plus D.C. permit DtC shipping of wine, whereas only about eight states allow some form of DtC spirits shipping. So, for roughly 95% of American wine connoisseurs, when they read about a new, limited-distribution 99-point Napa cab, they can connect with the producer and buy an otherwise unavailable product.

However, if that same consumer wants to get a similarly highly rated and inaccessible whisky (and over 80% of them do), they are largely out of luck. Rather than accepting the vagaries of the alcohol market for what they are, they might be convinced then to seek out the “back alley” seller on eBay and take the risk. If they could reach out to the distiller directly, though, they could ensure the authenticity and safety of the product.

When it comes to product safety, there is no evidence that the DtC market is, or would be, any riskier than the existing three-tier market. When a producer DtC ships a package of alcohol, it should be of no-less quality than anything else that producer would sell at their tasting rooms or have distributed to retail stores. Production facilities are subject to state and federal scrutiny on their cleanliness and quality control. If a producer is found to be selling substandard alcohol, they would be vigorously prosecuted regardless of how the product was sold.

Even when it comes to DtC shipping by retailers, a more limited but developing market, consumers should feel confident in the safety of the products sold. This is because almost all alcohol sold by retailers across the country has been distributed by a local wholesaler, which is supposed to be guaranteeing the safety of the products they handle. (It is somewhat ironic, then, that many wholesalers argue against DtC shipping by retailers on the grounds that you can’t trust what is being sold.)

Any retailer that is willing to sell counterfeit products will do so whether they can DtC ship or not, and there are already ample state laws available for local regulators to go after such actors when they are found out.

Expand legal DtC shipping

By and large the arguments against DtC shipping are mostly hot air. Repeated claims of sales to minors, lost tax revenue or the hollowing out of the three-tier market fail to be supported by more than anecdotal evidence. But the scary language around the risk of counterfeits is particularly disingenuous.
Certainly no one is going to argue for the legitimacy of Ray’s Discount Liquors on eBay. But there is a proven model for how DtC shipping can work safely and effectively, in a way that provides benefits to all parties (including increased three-tier sales). Indeed, if a whisky lover could buy directly from Buffalo Trace and not have to seek out shadier sources for their Pappy Van Winkles, that could end up shutting down a lot of the businesses that DtC shipping opponents claim to be so worried about.