News: CJ Exclusives

Distiller’s battle with monopolistic ABC system turns toward online sales

Jonathan Blitz makes and sells whiskey.

He and his team make the whiskey in Durham, at Mystic Farm & Distillery.

They sell the whiskey from the distillery, and in state-controlled Alcoholic Beverage Control stores.

But they can’t sell it online, per Chapter 18B of the N.C. General Statutes.

Blitz, like most N.C. distillers, wants to change that. 

And Blitz, also a lawyer, is determined to do so.

Blitz last month petitioned the ABC Commission for a declaratory ruling that would allow him to sell his products to consumers in states that permit online sales: Florida, Hawaii, Kentucky, New Hampshire, Rhode Island, and Washington, D.C.

The ABC Commission on Wednesday, April 14, declined to issue the ruling and, Blitz said, cut him off when he tried to plead his case. Hiding behind the statute, he says.

“I just think [the board] didn’t want me to make a record.”

Jeff Strickland, ABC spokesman, said Blitz was given an opportunity to address the commission, and that he was heard.

He said in an email: “The Commission declined to issue a declaratory ruling pursuant to 14B NCAC 15A .0602(c)(8), which states that the Commission shall deny a request when ‘the subject matter of the request is involved in pending litigation, legislation, or rulemaking.’”

Blitz can sell his products outside the state on a wholesale level, but he can’t sell to individual buyers, according to state ABC laws that date to the late 1930s.

Blitz says that’s unconstitutional, in violation of the interstate commerce clause — “an impermissible direct burden on commerce,” says the petition, citing the 1824 U.S. Supreme Court ruling in Gibbons v. Ogden.

North Carolina, the petition says, “is violating the right of the receiving state to exclusively control the transportation and importation of intoxicating liquors … in violation of the 21st Amendment. …” 

The petition also cites the Fifth and 14th Amendments, including the distillery’s right to due process and to enjoy the fruits of its labor.

“Why should North Carolina have any say in what I do, vis a vis, with a  consumer in Kentucky?” Blitz told Carolina Journal.

Blitz says he’ll exhaust the administrative process before filing a lawsuit in Durham County to overturn the direct-sales provision, possibly within a month. 

Liquor is pouring into North Carolina despite the law, he says. As much as a quarter-million dollars worth.

“There is so much liquor coming from out of state.”

Blitz prevailed recently in another case against the state, winning a court injunction after alcohol law officers cited him, pulled his permit, and fined him because they found products from other distilleries at Mystic. The officers confiscated 16 bottles, which have since been returned. 

Blitz used the other products as points of comparison to his own, a common practice of distillers throughout the country and throughout North Carolina.

“This entire case is over what I see as one agency’s attempts to just make up and then enforce their own unwritten laws against members of the distilling industry,” Blitz told the North State Journal

The lawsuit could prove moot, however, if the General Assembly passes and the governor signs House Bill 366, Regulatory Reform Act of 2021. A provision deep within the bill would allow N.C. distillers to ship their products to consumers in other states, albeit with rules involving reciprocity laws in certain states. The bill, as of Monday, April 19, was in a House committee.

Distillers and lawmakers have tried this before. In summer 2017, the House stripped a provision in Senate Bill 155 that would have allowed N.C. distilleries to sell directly to consumers, via the internet.

Rep. Pat Hurley, R-Randolph, proposed the amendment to remove that part of the bill. S.B. 155, among other things, at the time cleared the way for N.C. craft distillers to sell five bottles to customers each year, instead of the current one, and, contingent on local approval, allowed restaurants and retail stores to begin selling alcohol Sunday at 10 a.m., as opposed to noon.

Senate Bill 290, passed about two years ago, opened things up for distillers even more, allowing them to sell an unlimited number of bottles directly to customers and freeing them from the onerous process of tracking and policing every bottle sold to customers. The law also allowed distilleries to sell mixed drinks, as well as beer and wine with appropriate permits.

State ABC stores are doing record business, at least part of which can be attributed to pandemic-related lockdowns. Yet distillers, forced to close tasting rooms last year, still must contract with online merchants in other states to sell their products. So the state loses thousands in excise taxes, and consumers are left wanting.

“Alcohol is alcohol,” one distiller told CJ last year. “You’ve got to treat it all the same.”