The Attorney General’s Enforcement of Michigan Direct Shipping Liquor Laws
Mark Vanneste
Howard & Howard Attorneys PLLC
A few months ago, I wrote about the requirements to ship wine directly to the consumer in Michigan and complying with the Michigan Liquor Control Commission (“MLCC”) requirements to do so. Both in-state and out-of-state wineries or wine manufacturers are generally eligible to apply for a Direct Shipper license. The application is not necessarily onerous, and the fee is only $100 initially and for annual renewals, plus $70 for an “inspection fee” when applying.
However, under Michigan liquor laws, out-of-state retailers that do not manufacture wine are prohibited from shipping wine directly to Michigan consumers, as are out-of-state wineries without a license. This law withstood a challenge on constitutional grounds not long ago. So, what does the state of Michigan do to enforce the prohibition of shipping intoxicating liquor directly to Michigan consumers from certain out-of-state sellers?
Over the last couple of years, the Michigan Department of Attorney General has filed a number of civil lawsuits against out-of-state retailers shipping wine directly to Michigan consumers. The Attorney General’s office has also filed civil lawsuits against out-of-state wineries or wine manufacturers for shipping wine directly to Michigan consumers without the proper Direct Shipper licensing.
Typically, these lawsuits are filed after the MLCC sets up an operation intended to catch violators. The operation normally follows the same format.
First, and MLCC investigator will place an order on an out-of-state retailer’s website or order wine from an unlicensed, out-of-state winery. The MLCC investigator pays for the wine and shipping and then waits to see if the out-of-state seller processes the order and ships the wine. If the out-of-state seller follows through and ships the wine to the MLCC investigator, the Michigan Attorney General’s office will normally send a cease-and-desist letter to the seller.
Then, sometime later – several months or even a year – the MLCC investigator will attempt to purchase wine again from the same out-of-state seller. Alternatively, the MLCC investigator may review common carrier reports from companies like FedEx or UPS to determine if additional orders have been shipped into Michigan by the same out-of-state seller after the cease-and-desist letter was sent.
If the out-of-state seller ships wine to the MLCC investigator a second time (or if the shipments show up on a common carrier report), the Attorney General typically files a civil action in federal court against the out-of-state seller. The civil action customarily includes a claim relying on the Twenty-First Amendment to the United States Constitution in conjunction with the Michigan statutes prohibiting the allegedly illegal shipment of wine, or alcoholic liquor. The complaint will also normally include a claim under the Michigan Consumer Protection Act alleging that the shipment of wine into Michigan constituted unlawful trade or commerce under that law.
The Attorney General usually requests a penalty of $25,000 for each violation or shipment, an order permanently enjoining the seller from violating Michigan law in the future, reimbursement of investigative expenses, and reimbursement of costs and attorney fees.
In other words, an unsuspecting out-of-state retailer or out-of-state unlicensed winery, shipping wine directly to an MLCC investigator acting as an ordinary Michigan consumer, can find themselves facing a very costly lawsuit. Other actions have been taken by the Attorney General’s office as a result of shipping wine directly to consumers other than MLCC investigators. However, lately, it appears that most of the civil actions filed by the Attorney General have resulted from an MLCC investigator conducting the operation outlined above.
All hope is not lost for an out-of-state retailer or out-of-state unlicensed winery. Direct shipping laws vary greatly from state to state. Perhaps the out-of-state seller just made a mistake. Typically, there is an opportunity to settle these lawsuits with the Attorney General. Those settlements usually require that the seller admit responsibility, agree to make changes to their business practices to avoid shipping wine into Michigan again, and also paying a fine to the State of Michigan.
If you have questions regarding the enforcement of Michigan’s direct-to-consumer shipping laws or find your business involved in a civil action brought by the Attorney General, feel free to contact me at [email protected].
Have a wine law question? Reach out to Mark Vanneste of Howard & Howard at:
