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Monday, October 15, 2007

Ohio State U Uncorks Economic Research: Wine Prices Dip When 'Net Sales Allowed

COLUMBUS (TDB) -- Economic research about online wine sales shows Ohio consumers with a taste for the grape are going to be squeezed out of some cash by a new state law. The measure took effect this month and bans large wineries from shipping directly to customers who shop on the Internet or order by mail. The data published by Ohio State University and George Mason University in Virginia says online competition lowered wine prices by up to 40 percent in a local market.

Ohio's wine industry is the beneficiary of legislative and lobbying sleight of hand that prohibits wineries bottling more than 150,000 gallons a year from shipping directly to Ohio purchasers. OSU and George Mason researchers teamed up to study what happened to prices in northern Virginia in 2004 after federal court rulings knocked down a state-imposed trade barrier against online competition. Alan Wiseman, an OSU political science prof, said prices fell 40% when local stores in Virginia confronted interstate shippers.

"Consumers are better off when local stores have to compete with online sellers. Virginia merchants reduced their prices to meet online competition, and I think the same thing would happen in other parts of the country if the laws allowed. The results suggest that brick-and-mortar stores were quite calculating in how much more they could charge customers. They knew that their prices couldn't be too far above out-of-state merchants, but that they could still charge a premium because of shipping costs."

The researchers studied the 50 most popular wines in American restaurants, which were named by Wine and Spirits magazine. They compared online versus store shelf prices.

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