Legislative Action, Market Reaction and Interstate Commerce: Results of Virginia's Natural Experiment with Direct Wine Shipment

38 Pages Posted: 4 Nov 2005

See all articles by Alan E. Wiseman

Alan E. Wiseman

Vanderbilt University - Department of Political Science

Jerry Ellig

George Washington University - Regulatory Studies Center (deceased)

Date Written: December 15, 2005

Abstract

We investigate the impact of the commerce clause of the U.S. Constitution on market competition by focusing on recent changes in state laws governing interstate direct shipment of alcohol. In 2003, Virginia legalized direct wine shipping to consumers from out-of-state sellers. By 2004, the average price difference between online sellers and bricks-and-mortar stores in Northern Virginia was approximately 26-40 percent lower than in 2002. These findings are consistent with the hypothesis that removal of the interstate shipping ban increased competition in the bricks and mortar world, contributing to lower prices. More broadly, they illustrate how the elimination of interstate trade barriers, consistent with the intent of the commerce clause, facilitates efficient markets. Our findings serve as a guidepost to policymakers in various states who need to make their laws conform to the Supreme Court's 2005 ruling striking down discriminatory direct shipment bans.

Keywords: wine, direct shipment, alcohol, electronic commerce, Supreme Court, Commerce Clause, franchising

JEL Classification: L11, L33, L22, L51, L81, L86

Suggested Citation

Wiseman, Alan E. and Ellig, Jerry, Legislative Action, Market Reaction and Interstate Commerce: Results of Virginia's Natural Experiment with Direct Wine Shipment (December 15, 2005). Available at SSRN: https://ssrn.com/abstract=836364 or http://dx.doi.org/10.2139/ssrn.836364

Alan E. Wiseman (Contact Author)

Vanderbilt University - Department of Political Science ( email )

VU Station B #351817
Nashville, TN 37235-1817
United States

Jerry Ellig

George Washington University - Regulatory Studies Center (deceased) ( email )

805 21st St. NW
Washington, DC 20052
United States
703-375-9410 (Phone)

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