Iowa Squeezes Internet ‘Bootleggers’

Iowa Squeezes Internet ‘Bootleggers’

Buying a bottle of whiskey and selling it on eBay or Craigslist is tantamount to bootlegging in Iowa. The state initiated a crackdown after discovering several bottles of small-batch, micro-distillery spirits were being auctioned via the Internet.

According to the Des Moines Register, at least six people had listed bottles of Templeton Rye on Internet auction sites. The Iowa-based distillery’s product retails for $36, and the alleged online bootleggers were asking as much as $100. Only state-licensed establishments are allowed to sell liquor, and only at specified sites.

“I don’t understand what the ABD is trying to accomplish,” said Kevin Boersma, Templeton distillery manager, referring to the state’s Alcoholic Beverages Division. “It’s rather funny to me that Templeton’s beginnings as a bootlegger during Prohibition has come back to the ABD accusing people of bootlegging for selling one or two bottles of whiskey on the Internet.”

Boersma said he’s only aware of one instance of online sales. “Someone tried to sell a bottle of our Batch 6, Bottle 12 on the Internet for $80,” he said. “When the ABD threatened that person with fines, the post came off the Web site immediately.”

‘A Major Headache’
Iowa’s bootlegging law is a misdemeanor punishable by up to a year in jail and a $2,000 fine, said ABD spokesperson Tonya Dusold. “We received a complaint that there were about a dozen people selling alcohol on the Internet,” she said. “We prefer to educate rather than prosecute to bring these people—most of them simply didn’t know it was illegal—into compliance.”

Dusold said that soon after Iowa radio, television, and newspapers began running stories noting selling liquor on the Internet technically is considered bootlegging in the state, every offender removed the goods from online auction sites. “So far, we haven’t prosecuted a single person,” she said. “But we’ll continue to respond to complaints,” she said. “If we do encounter a repeat offender, we may prosecute them,” she added.

“The state of Iowa is technically within their bounds to crack down on these auction sales,” said Aaron Berdofe, a Minneapolis, Minnesota-based wine consultant. He argues current Iowa regulations on alcohol sales are too stringent and have forced liquor manufacturers to resort to novelty bottling of the beverages, including hand-labeled bottles and numbered batches, to attract collectors. “The licensing to set up the correct way to do this is a major headache and isn’t worth the trouble, which is why they are trying this creative route of selling collectible containers.”

Berdofe added: “Templeton is currently increasing their production year to year, but not at a pace that will meet national demand from its devoted fans anytime soon. Thus, more inventive ways will pop up.”

‘No Tax Leaves’
Berdofe said eBay “appears to be turning a blind eye to this trend. Try entering the word ‘rye’ on Internet auction search engines,” he said. “You’ll find it leads to numerous options to purchase even non-collectible, unopened bottles of whiskey despite eBay’s policy strictly forbidding the sale of alcohol with the exception of limited wine sales.”

Boersma says he suspects the ABD is more interested in money than criminal justice. “We sell our whiskeys to the ABD, who turn around and sell it to distributors,” he said. “If someone buys it from a state-approved store and resells it at a profit on the Internet, the ABD can’t tax the markup,” he added.

The Internet auction site is certainly within its rights to accept or reject these sales based on its own internal policies, and the government intervention is likely driven by the weak economy, said Scott Testa, assistant professor of business at Cabrini College in Philadelphia.

“With the tough economic environment, state and local governments are looking to protect their incomes,” Testa said. “In a good economy, the state and local governments will tend to look the other way on these kinds of things, but given the situation today, they want to make sure that no tax money leaves.”

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois.