Secondary Market

Ohio Cracks Down on Secondary Alcohol Sales

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Secondary market booze sales (i.e., sales of alcohol that was previously purchased, even if still unopened) is mostly illegal in the United States. R Street’s Kevin Kosar has written about why this market should be legalized and brought out of the shadows. While states like Kentucky have recently made modest moves toward liberalizing their secondary alcohol markets, Ohio has escalated a crackdown of such sales according to the Freemont News Messenger:

In December, agents with the Ohio Investigative Unit (OIU) teamed up with Ohio Liquor Control (OHLQ), charging five people throughout Ohio after an investigation into secondary market liquor sales.

Secondary market liquor sales often take place on web sites, such as Craigslist and Facebook groups and Marketplace. An example of secondary sales is when sellers go to other states, purchase bottles of liquor not found or difficult to find in Ohio and turn around to resell them. In Ohio, consumers may only purchase spirituous liquor from authorized sources such as an OHLQ location, which are private businesses that sell the product on behalf of the state of Ohio or permitted retail establishments, such as bars and restaurants…

Read more here.

Fake Whiskey and the Secondary Booze Market

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The Robb Report has a feature article on the uptick in counterfeit booze and how to spot fake spirits. Among other things, the piece discusses the lack of a legalized secondary booze market and the role this plays in driving counterfeit booze sales:

Both Simpson and Graham-Yooll urge that the best way for collectors to protect themselves is by going through reputable auction sites or brokers, who often guarantee their sales and reimburse buyers in the case of fraud. That’s more difficult in the States, however, where there is almost no legitimate market for rare whiskey sales. The so-called three-tier system under U.S. law prohibits private alcohol sales, requiring that a distributor act as a middleman between brands and customers. A few auction houses, such as Skinner in Boston and Hart Davis Hart in Chicago, sell a few hundred bottles of bourbon between them, and some businesses such as Soutirage, a “fine and rare wine retail and lifestyle company,” aid clients in sourcing whiskies at a premium.

Most sales, however, take place in an Internet underground through sites like Craigslist or closed Facebook groups, where members post pictures of bottles and hold auctions in the comments or trade bottles with one another. “The vast majority of sales that happen in the United States are not legal,” says Josh Feldman, a whiskey blogger at the Coopered Tot. “In the absence of legal avenues, there is a vibrant, illegal secondary market. That helps create the environment in which counterfeits can thrive.” …

Read the whole piece here.

Whiskey writer Chuck Cowdery and R Street’s Kevin Kosar have written about the benefits of freeing up secondary booze markets (here and here)..

Tennessee Cracks Down on Online Alcohol Sales

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Regulators in Tennessee are ramping up enforcement efforts against online booze sales on websites like Craigslist, according to The Tomahawk:

Law Enforcement Agents from The Alcoholic Beverage Commission conduct statewide sting operations targeting the online sale of liquor. No two states are alike when it comes to liquor laws, and most are changing from year to year. Anyone intending to sell alcohol through a home delivery service, whether by mail order or online, must hold a valid liquor license.

Seventeen suspects were charged with illegal sales of alcoholic beverages resulting from statewide sting operations targeting online ads on Craigslist and other social media outlets. Agents seized sixty-nine bottles of alcohol that were sold to them during the undercover operations which took place on street corners, parking lots, and places of business...

More here.

As booze expert Chuck Cowdery has explained, such crackdowns are the result of the absence--and illegality--of a secondary alcohol market in the United States:

There is, on the internet, a very active secondary market in rare bourbons and other alcoholic beverages. People offer bottles for sale or indicate bottles they would like to buy. Transactions are arranged by email or other private messaging. This happens on Facebook and Craigslist, and probably many other places. I’m not going to point you to any of them. They aren’t hard to find.

Unfortunately, in the United States the secondary market in alcoholic beverages is illegal. I’ve written about this before, as recently as October.

R Street's Kevin Kosar has also previously called for legalizing the secondary booze market.

Kentucky Moves to (Slightly) Liberalize the Secondary Booze Market

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As DrinksReform.org has covered in the past, the secondary market for alcohol remains heavily restricted in the United States. In fact, R Street has previously advocated for freeing up this market as a way of preventing sellers from turning to the black market. According to renown whiskey writer Chuck Cowdery, Kentucky recently enacted a Vintage Spirits Law that will at least slightly liberalize the secondary market for booze in the Bluegrass State:

"On January 1, Kentucky’s new ‘Vintage Spirits Law’ took effect. The new law (actually, revisions to the commonwealth’s existing alcoholic beverage statute) says, “A person holding a license to sell distilled spirits by the drink or by the package at retail may sell vintage distilled spirits purchased from a nonlicensed person upon written notice to the department in accordance with administrative regulations promulgated by the department.”

It further defines ‘vintage distilled spirit’ as “a package or packages of distilled spirits that are in their original manufacturer's unopened container; are not owned by a distillery; and are not otherwise available for purchase from a licensed wholesaler within the Commonwealth.”

As of the January 1 start date, ‘the department’ (i.e., the Kentucky Alcoholic Beverage Control Department [KABC]) had issued no administrative regulations or guidelines. As of now, what you see above is all the guidance there is. Retail license holders who want to take advantage of it will have to interpret the new law for themselves, with advice of counsel, of course...

Kentucky's new law is revolutionary in terms of bringing at least the ‘vintage’ part of the whiskey secondary market out of shadows. It could be a significant boon to tourism..."

Read the rest of the post here.

It's a Federal Crime to Sell Booze Secondhand

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Spirits writer Chuck Cowdery continues writing about the absence of a legalized secondary booze market in the U.S., including pointing to the particular federal regulation making it illegal:

"There is, on the internet, a very active secondary market in rare bourbons and other alcoholic beverages. People offer bottles for sale or indicate bottles they would like to buy. Transactions are arranged by email or other private messaging. This happens on Facebook and Craigslist, and probably many other places. I’m not going to point you to any of them. They aren’t hard to find.

Unfortunately, in the United States the secondary market in alcoholic beverages is illegal. I’ve written about this before, as recently as October.

It is illegal to sell alcohol if you don’t have a license to sell alcohol. It is against Federal law and it is against state law in every state.

There has been some question, at least in my mind, as to whether, in a given transaction, both buyer and seller are in legal jeopardy. Clearly the seller is in violation, but is the buyer? I couldn’t point to a law that said the buyer was in trouble too. Now I can.

At the Federal level, laws regulating alcoholic beverages can be found in Title 27 of the Code of Federal Regulations. I’ve spent a lot of time in the early parts of Title 27, Chapter I, Subchapter A, especially Part 5, which gets into the labeling and advertising of distilled spirits, but I never made it down to Part 31, which regulates alcohol beverage dealers. There we find a section (27 CFR 31.141) titled “Unlawful purchases of distilled spirits.” It says that it is “unlawful for any dealer to purchase distilled spirits for resale from any person other than” a licensed dealer..."

The whole piece is worth reading. R Street's Kevin Kosar has previously called for legalizing the secondary alcohol market in the U.S. 

Selling Whiskey Online Could Land You In Jail

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Chuck Cowdery has a new post up at his blog about how the secondary alcohol market is mostly illegal in the United States:

Whisky Advocate Magazine devoted most of its Fall 2017 issue to whiskey collecting and whiskey collectors. It is hard to collect seriously if you can only obtain whiskey through retail channels. In virtually all forms of collecting, most acquisitions come from the secondary market, either directly from other collectors, or indirectly through dealers.

But there is a problem. While secondary sale of beverage alcohol is permitted in much of the world, in the United States, with a few small exceptions, it is not. Both state and federal law prohibit the sale of any alcoholic beverage to any person unless you have the appropriate license or licenses. Penalties vary by state. In California it is a misdemeanor, punishable by a $1,000 fine and/or up to six months in county jail.

Read the whole post here.

R Street has previously advocated for freeing up the secondary market, and we also recently covered news from Pennsylvania about a man who was arrested for selling a bottle of booze on Craigslist.