Direct Shipping

On June 26, 2003, the Fifth Circuit Court in Texas decided an important direct shipping case. It ruled that the Texas law that banned direct shipments of wine to consumers from out-of-state vintners violated the Commerce Clause, given that Texas allowed in-state vintners to ship direct to consumers. For the first time, a US Appeals Court explicitly lifted a ban on direct shipments from out-of-state suppliers. (A handful of other direct shipping cases are pending in the federal courts.) A week later, the Federal Trade Commission released a staff report that heartily endorsed direct shipments of wine to consumers. The FTC staff concluded "states could significantly enhance consumer welfare by allowing the direct shipment of wine to consumers." The staff downplayed arguments that direct sales attract underage purchases and make it difficult for states to collect excise taxes. INSIGHTS asked 4 long-time alcohol beverage industry observers to comment on these developments. Their responses follow the links to the US Circuit Court decision and the FTC report.

To view/download the Texas decision, click here.

To view/download the FTC Staff report, click here.

Richard M. Blau, Esq.
HOLLAND & KNIGHT LLP
100 N. Tampa Street, Suite 4100
Tampa, FL 33602-3644
Email: richard.blau@hklaw.com

The recent decision of the US Court of Appeals for the Fifth Circuit in the Dickerson case certainly represents a major public relations victory for those special interests seeking to dismantle the established three-tier system of alcohol regulation in America. The Fifth Circuit enjoys a reputation for sober, conservative jurisprudence. That reputation now has become associated with the notion that direct interstate delivery of alcohol beverages to consumers is permissible, even if never authorized by the legislature (or any other branch) of the affected state's government. Perhaps most importantly, this turn of events throws the "Direct Shipping" cases beyond the arena of the Twenty-first Amendment, to encompass fundamental notions of federalism and states' rights.

Make no mistake: the Dickerson decision is a formidable achievement. The text is eloquent in its language, and attractive in its reasoning. In many ways, this is a well written opinion.

Is the Fifth Circuit's decision open to criticism? Yes; judges are human, too. There are a few questions of judgment worth noting.

A. HAVING SOME CONNECTION TO THE STATE AND ITS THREE-TIER SYSTEM:

For example, the Dickerson decision emphatically rejected the argument purportedly relied upon by the Texas ABC Administrator that, like Indiana in the Bridenbaugh case, Texas insists that every drop of alcohol must pass through its three-tier system. Indeed, the Fifth Circuit judges authoring Dickerson vehemently (and repeatedly) questioned the Texas ABC Administrator's integrity by noting: (1) that Indiana's alcohol laws require wine to pass from licensed wholesalers to licensed retailers to consumers, regardless of the wine's origins, but that (2) several statutory exemptions to the Texas three-tier system permit wine under defined circumstances to sidestep the wholesaler and/or retailer tiers in its trek from the licensed supplier to the consumer.

While it's true that the alcohol regulatory systems of Indiana and Texas differ, the real point is not that every drop of alcohol must pass through all tiers of a state's three-tier licensing system. Rather, the point that should have been stressed by the TABC, and recognized by the Fifth Circuit, is that states have a legitimate and palpable interest -- both under the Twenty-first Amendment and as an exercise of inherent police power -- in assuring that every drop of alcohol passes through at least some tier(s) of the state's three-tier system.

Lest any of us forget, all of these cases fundamentally are about control, i.e. each state's ability to control an extraordinary product. When assessing the legitimacy of state efforts to exercise and maintain that control, it is incumbent on the judiciary to recognize the difference between alcohol that passes through some portion of a state's licensing scheme before it gets to the consumer, versus alcohol that completely bypasses the state's licensing scheme and is shipped directly to the consumer from an unlicensed supplier outside the state. Even if the tiny Arkansas-based vintner Wiederkehr Wine Cellars did obtain a Texas permit to sell its products in Texas (which is unclear from the text of the Dickerson decision, and frankly seems doubtful), many large alcohol suppliers looking hungrily at the Texas market have no physical presence in Texas or any license from the state, and therefore truly have no connection to Texas or its three-tier system. A material deficiency in the Fifth Circuit's decision is the appellate court's failure to expressly require that unlicensed, out-of-state suppliers must become part of the Texas licensing system as a condition precedent to shipping alcohol beverages directly to Texas consumers.

B. IMPOSING THE WRONG REMEDY:

An unsettling consequence of failing to recognize a state's interest in requiring that all alcohol pass through some portion of its three-tier system, is the conclusion that the licensing system is irrelevant to fashioning an appropriate judicial remedy. In Dickerson, the Fifth Circuit ignored the long-standing history and function of the Texas licensing system, choosing instead to focus on a handful of relatively recent exemptions to effectively unwind almost 70 years of legislation.

Early on in its analysis, the Fifth Circuit acknowledges that the Texas Alcoholic Beverage Code was enacted in 1935 pursuant to the state's police power, and that "… with rare exceptions, manufacturers are permitted to sell only to wholesalers; wholesalers only to retailers; and retailers only to consumers." Indeed, the appellate court even went so far as to recognize that "[t]his tripartite functional division of firms that participate in the alcohol industry is designed to aid Texas in the regulation and control of alcohol consumption … " [Dickerson at p. 12 (footnote omitted)]. Later in the decision, the court notes that the troublesome exceptions to the Texas three-tier system are relatively new and few, having been adopted by the Texas Legislature in 1995 and 2001. See e.g. Dickerson footnote 42 at p.15.

Yet, when it comes time to fashion a remedy that balances the state's regulatory interests against the court's determination to root out unconstitutional discrimination violative of the dormant Commerce Clause, the exceptions appear to outrank the rules. The 68+ years old three-tier system gets no credence, whereas the relatively newborn exceptions (all on the books for less than one decade) suddenly become too numerous and venerable to overturn. According to the Fifth Circuit: "If we were to reform the district court's remedies so that all in-state wineries were required to use Texas's three-tier system, the wholesale revision of substantial portions of the TABC would be required ..." See Dickerson at p. 34. The appellate court goes on to note that "many of the discriminatory provisions in the TABC, including sec. 107.07, were enacted in 1995 or earlier …" Id. at p. 35 (although it's worth noting that the decision contains no reference to any statutory three-tier exception adopted prior to 1995).

The Fifth Circuit closed its opinion by observing that: "The remedy requested by the Administrator involves the nullification or enjoined enforcement of many statutes that have been in effect for a substantial time." Dickerson at p. 35. Frankly, the sentence would ring more true if the word "Administrator" had been replaced with "Plaintiffs." The remedy chosen by the Fifth Circuit in resolving the Dickerson decision is open to criticism because it ignores the unique history and nature of the laws governing alcohol in America.

C. IGNORING THE UNIQUE NATURE OF ALCOHOL:

Fundamentally, the Fifth Circuit chose "benefits over burdens" as a standard remedial response in keeping with Commerce Clause case law. That reasoning underlies what is arguably the most glaring error of the Dickerson case, as well as several other conclusions reached by decision makers who are called upon to address alcohol-related issues, even though they lack experience in this esoteric area of law. As Judge Frank Easterbrook of the U.S. Court of Appeals for the Seventh Circuit (himself a former alcohol industry attorney with substantial personal experience litigating Twenty-first Amendment issues) observed in that court's Bridenbaugh decision, alcohol isn't cheese.

Commerce Clause cases embrace benefits over burdens because the fundamental aim of the Commerce Clause is to liberalize markets and reduce interstate obstacles to trade. As the Dickerson decision noted in citing earlier Supreme Court precedent: "The Court has often described the Commerce Clause as conferring a 'right' to engage in interstate trade free from restrictive state regulation." See Dickerson at footnote 85, p. 33.

These are salutary goals when the commodity is cheese, or just about any other consumer good except alcohol. What many jurists, legislators, and executive agency officials either forget, or never appreciated, is that alcohol beverages are unique relative to all other consumer goods marketed in America. Alcohol has historical, social ,economic, political, and even religious ramifications that mandate control at the state level, rather than on an interstate basis. Regrettably, the Dickerson analysis turned a blind eye to this important point, producing an imbalanced result that ultimately might have to be addressed in the US Supreme Court.

This same lack of respect for the uniqueness of alcohol also was demonstrated by the FTC, which released a report last week suggesting that eliminating state regulations restricting e-commerce in wine would produce positive benefits for consumers. However, as noted above, jurists are not the only decision makers who lack knowledge and experience in the rarefied world of alcohol regulation; executive branch agencies can be equally fallible.

There are both methodological and conceptual flaws in the new FTC report. In terms of the methods used to reach the agency's conclusions, the report has an unduly limited database. It's broad conclusions regarding the merchantability of wine are predicated primarily on a single market study limited to one geographic area, i.e. McLean, Virginia. Because Virginia is a control state where (at the time of the FTC study) retail sales of wine were limited to state stores, it was relatively easy for the FTC to conjecture that the market for wine generally holds the potential for greater competition and the concomitant benefits that flow to consumers. Quoted in the agency's press release announcing its report, FTC Chairman Timothy J. Muris concluded: "E-commerce can offer consumers lower prices, greater choices, and increased convenience. In wine and other markets, however, anticompetitive barriers to e-commerce are depriving consumers of those benefits."

As a matter of responsible economic analysis, however, the agency's conclusion amounts to an unsupported extrapolation. Simply stated, the study's database is deficient. Given that Virginia is a control state, it is questionable whether the FTC's collected data accurately or typically reflect market conditions prevailing in most of the country. A broader study of disparate markets, spanning private license as well as control state jurisdictions, would be needed to justify the agency's conclusions.

An even greater flaw arises from the conceptual underpinnings of the FTC study. The new report's emphasis on dismantling regulation, reducing prices, and boosting consumption works well in the context of any consumable other than alcohol. Where the FTC errs is in extending this framework of analysis into the alcohol arena, without adequately addressing the myriad of issues and concerns historically lumped together under the rubric of "temperance." Numerous state legislatures, and their electorates, would vehemently disagree with the notion that increasing sales of lower-priced alcohol beverages constitutes a desirable objective. As noted earlier, alcohol is not cheese. Except that to the FTC, alcohol is cheese, or perhaps more to the point, it is a consumer good. Yes, the FTC report does attempt to address concerns about illegal sales to minors, but not with the level of analysis that would justify reliance upon its conclusions.

In fairness to the agency, it should be noted that the FTC's mandate is to focus on free trade and fair competition in the market place. It never was intended to oversee the distribution of alcohol in America, and is not equipped with the historical knowledge, political grounding, or esoteric legal experience to begin doing so now. Unfortunately, despite these deficiencies, it has issued its report and interjected itself into the growing debate over Direct Shipping.

Andre R. Jaglom
Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
E-mail: jaglom@tanhelp.com

I do not think the industry is well-served by wholesaler advocates who keep their head in the sand, insisting on absolutist 21st Amendment positions and hoping the Commerce Clause issues caused by protectionist in-state exemptions will go away if they are ignored. Spouting polemics won't address the very real flaw with both direct shipment and franchise laws that treat in-state producers differently from out-of-staters.

The recent FTC report focuses on economics rather than constitutional law, but it finds similar problems with barriers to entry for out of state direct shipment. Frankly, I find the FTC's key findings to be unsurprising and less than apocalyptic.First, the FTC concludes that many wines are available online that are not available in stores. Direct shipment of small labels would break a distribution logjam for smaller brands that are unable to get the attention of a licensed wholesaler. While the availability of such smaller labels would bring increased competition to established brands and their wholesalers, it is difficult to argue against the consumer benefit, whether for wine or beer. Laws permitting direct shipment of products from wineries or breweries with annual production below some threshold level would avoid the fatal flaw of current exemptions for in-state producers while retaining the three-tier system for brands that justify it.

Second, the FTC finds a cost savings from direct shipment for higher priced wines. The savings are 8-13% for wines costing more than $20 per bottle and 20-21% for wines over $40 a bottle, if you ship via ground (and expose your expensive wine to temperature extremes for a few days). That's pretty clearly the high end of the market. The report doesn't say, but I would expect the savings to be negligible, if any, for less expensive, everyday wines. I've seen shipping costs of $45 a case, which adds quite a bit -- 37.5% -- to the price of twelve bottles of $10 chardonnay. Shifting to beer, there aren't too many brews selling for over $120 per case, let alone over $240 per case. $5-$10 a bottle for beer is pretty pricey. The higher relative cost of shipping to product price makes the likelihood of significant savings less for beer than for wine.

Third, the FTC focuses on the prohibitions on direct shipment by out-of-state suppliers, in contrast to permitted intrastate direct shipment. Those are the very same laws we see tumbling daily in the courts, because of the Commerce Clause problem of protectionist treatment of in-state producers. Unless some action is taken to fix these laws, we will see more Texas-style cases eliminating the bar on direct shipment for all, and truly threatening the three-tier system.

The FTC also concludes, as I have claimed for a while, that the fear of sales to minors and lost tax revenues are a red herring, and that there are adequate ways, short of barring direct shipments, to address both concerns.

There is a solution to the problems identified by the FTC report and to the fatal defects in franchise laws with in-state exemptions. Beer and wine wholesalers should seek legislation that eliminates the protectionist exemptions for in-state wineries and brewers -- those exemptions are the real threat to maintaining the three-tier system -- and replaces them with exemptions for the small-scale producers that are most likely to have difficulty obtaining adequate distribution. The Commerce Clause problem is then eliminated, while many local producers will remain protected, but in a manner permitted by the constitution, and consumers benefit from a broader range of choices while maintaining the three-tier system for substantial brands. Such a system does not depend on tenuous 21st Amendment arguments to survive a Commerce Clause attack.

There is, of course, an element of the camel's nose under the tent here. If direct shipment of niche brands takes off, there may be political pressure to open the doors to direct shipment of everything. Again, however, I expect that the shipping cost for individual cases of beer and low cost wine will be high enough to eliminate the cost differential, and the convenience factor of going down to your neighborhood store and picking up a few sixpacks along with the gas or groceries will outweigh the burden of having to plan sufficiently in advance to order your beer via UPS ground for delivery next week.

I am far more concerned about the very real threat to the three-tier system posed by the fatally flawed laws that exist now, with their constitutionally defective in-state exemptions, than I am about the consequences of a limited direct shipment right for small producers.

Mark Rodman
Beverage Distribution Consultants
The Penthouse
95 Rockland Street
Swampscott, MA 01907-2523
Beer007@comcast.net

The FTC Report is the most consequential report yet on the sad state of 21^st Amendment affairs.

Indeed, the FTC Report evaporates large parts of what factual foundation remains for perpetuating the 3-tier systems, save for an oft overlooked argument that the 3-tier system is an expression of a state’s competition policy, a position that doesn’t need the support of the 21^st Amendment.

The report is the gravest threat the beer wholesale industry has yet encountered, in that it compiles a large volume of extraordinarily credible and persuasive evidence for regulatory revolutionaries one by one to debunk the keystone regulatory myths and assumptions the industry has relied on for decades.

The report stands as a weapon of mass destruction that present a clear and present danger to the beer industry as we know it today and set a stage to accord privileged-group status on a few powerful members of the trade in an extravaganza of overwhelming financial force.

Continued reliance on these shibboleths clearly endangers the health of a majority of beer, wine and spirits wholesalers everywhere. Indeed, beyond the evidence presented of lesser alternatives to a 3-tier system, noteworthy as a warning is the time and attention the Commission gives to an issue the implicates beer as much as it dethrones state and federal politicians bent on protecting those whose idea of supporting the 21^st Amendment is to give lavishly to PACs.

It vividly demonstrates vaunted NBWA and even our usually effective state associations haven’t slaked beer wholesalers’ thirst for continued state protectionism with a health tonic badly needed to bolster the business health of their constituents. Now wholesalers should at least be glad NBWA finally is forced to become aware of the tremendously troubling evidence out there indicative of the fast paced depletion of historically-unlimited state powers to structure and regulate the alcohol industry.

I. 5th Circuit Affirms District Court Decision; Opens Door to Unregulated, Untaxed, Unlicensed and Unaccountable Direct Shipments of Wine

In a scathing opinion published on June 26th, the 5th Circuit upheld the earlier decision of the trial court in the Dickerson case. Misreading the Bridenbaugh decision and misunderstanding the nature of the remedy employed in Bacchus, the appeals court gave the proponents of direct shipping their first outright victory in the battle thus far.

Analysis:

The 5th Circuit, like the 4th Circuit in the recent Beskind decision, employed a "strict scrutiny" analysis, finding (contrary to the holding of the lower court) that the statutes challenged were facially discriminatory. That test requires that the state be put to a heavy burden "to rescue its statutes" and in such cases it must demonstrate that "it has no other means to advance a legitimate local interest." Alleging that the state had failed to offer any evidence to support their purported interests in accountability, etc., the court struck down the direct shipping prohibitions.

The state had argued that because challenged restrictions were directly related to the importation and distribution of alcohol - the very powers defined by the 21st Amendment - that a lesser standard be applied, a rational basis test which only requires that the state establish that the import restrictions are reasonable (in this case given the ability of the state to hold in-state shippers accountable, especially in light of the restrictions on direct shipment in Texas which require either a face-to-face purchase or shipment to a local retailer). The 5th Circuit rejected this analysis, holding that it was a misreading of the decisions of the Supreme Court in the area of 21st Amendment versus dormant commerce clause jurisprudence, most notably the Bacchus case.

They compared the Dickerson case to the Bacchus decision, although the facts of the two cases are inapposite. In Bacchus, the Court was faced with a state tax break favoring in-state wine interests. That law did not touch on or relate to the powers of the state granted by the 21st Amendment to regulate the importation and shipment of alcohol. As such, the analysis used by the Supreme Court in that case should have had little bearing on an importation case like the one faced by the 5th Circuit. However, the 5th Circuit perceived no such distinction.

The 5th Circuit went to great pains to try to distinguish the Bridenbaugh decision from the case they were faced with. Obviously, the court understood that decision flew in the face of their analysis and could not be ignored. However, they failed to differentiate that case because they completely misread the Bridenbaugh holding and appear to have ignored the facts on the ground in Indiana which led to that decision - a practice for which they repeatedly (and ironically) chastised the state for engaging in in its brief.

The 5th Circuit argued that Bridenbaugh was different because Judge Easterbrook had noted that every drop of wine went through the three-tiered system. He did in fact say that. However, what the 5th Circuit failed to note was that, like in the Texas case, Indiana also permitted direct shipment by in-state suppliers - a fact Easterbrook noted. Taken in that context, what Easterbrook was actually saying was that every drop passed through the "licensed" system - all alcohol, whether imported or in-state, was distributed through licensed Indiana entities and was thus amenable to taxation by the state. That is precisely what Texas required (as an aside, it should be noted that Texas' direct shipping laws required even more accountability than that required in Indiana because of the face-to-face/retail shipment restrictions).

In addition to misreading Bridenbaugh, the 5th Circuit also misread Bacchus insofar as they relied upon the remedy employed in that case to support its decision to open the doors to unlicensed, unlimited, untaxed and unaccountable direct shipments. The state argued that the proper remedy for the court to employ was to remove any alleged discrimination, i.e., remove the in-state direct sales exemption. The 5th Circuit noted that if the state's suggested remedy had been employed in the Bacchus case, the Supreme Court would simply have extended the excise tax to all liquor producers. But that is an incorrect interpretation of Bacchus.

In Bacchus, the Court found that Hawaii favored the in-state wineries - so it removed the law which favored them. The plaintiffs in the Dickerson made the exact same allegation - that in-state wineries were being favored. Therefore, if the 5th Circuit followed the Supreme Court's holding in Bacchus, it should have simply excised the laws favoring the in-state interests. Instead, they did that which the Supreme Court did not do in Bacchus - extend the law to include others within its ambit.

It should be noted that the 5th Circuit attributed its decision to a desire not to legislate - but of course that is exactly what its decision ended up doing. Instead of removing allegedly discriminatory conditions, it will open the door to direct shipments to all Texas residents from out-of-state - an inherently legislative decision.

Moreover, it should be noted that the 5th Circuit's decision unquestionably creates a discriminatory advantage in favor of out-of-state shippers. While in-state shippers are licensed, must pay taxes and can only make direct shipments to Texas residents through face-to-face sales or through sales to local retailers, the ruling provides no such strictures on out-of-state shippers. Therefore, in attempting to redress an alleged discriminatory system, by failing to simply remove the favoritism alleged, the 5th Circuit has engaged in the creation of a system which favors out-of-state shippers. Such is the danger of engaging in judicial activism/legislating.

At this juncture, it is unclear what will happen to the case next. A special legislative session is underway in Texas to deal with redistricting and the topic of direct shipment may come up. Any legislative action would ultimately have an effect on the appeals process.

There is so much to criticize in the FTC Report that it is difficult to know where to begin. Perhaps I should start by noting that the FTC itself makes the recommendations it does and comes to the conclusions it does while at the same time admitting in its press release that:

"The report does not purport to address all aspects of online alcohol sales, or even all aspects of the direct shipping issue. For example, the report explicitly states that the FTC staff takes no position on the constitutional issues involving direct shipping, and the staff could not locate data on the effectiveness of adult signature requirements. Moreover, FTC officials stated they they have not examined the issues of online sales of other types of alcohol, such as beer or liquor, and they have not focused on international direct shipments of wine. The report also does not focus on the merits of the tax debate, other than to note that states attempting to collect taxes generally report few or no problems with collecting them."

This "parenthetical" reminds me of the story of the blind men who were asked to describe an elephant. Suffice to say that a blind man holding the trunk of an elephant and knowingly stating that an elephant is like a snake does not change the true nature of the elephant. And a report which consciously blinds itself to many of the central issues surrounding direct shipping and then purports to come to conclusions and make recommendations concerning the subject should be entitled to about as much weight as the opinion of the blind man who tries to describe the elephant.

Some brief observations:

1. Availability: A study which attempts to speak to the nature of the availability of certain wines nationwide is hardly authoritative when it tries to extrapolate the findings of a study in one small corner of a control state across the entire country. It is safe to say that the ability to obtain wines in Chicago, New York, New Orleans or Albuquerque is probably not comparable to McLean, Virginia. Yet the FTC would conclude based upon a limited study of that one locale that similar findings could be made elsewhere. This is not science - except to the extent that you classify it as junk science.

2. Price: The same critique as above applies here. The price differentials from market to market are not insubstantial. In many markets, the prices for high end wines are much cheaper when purchased through the three-tiered system than if purchased online. It should be noted that testimony at the FTC hearing itself established that wineries which sell online often do not pass the savings on to the consumers - they sell at retail price keeping the additional profits for themselves. If you add in the cost of shipping to that bill, oftentimes consumers will end up spending more for online purchases than at local retail establishments for the same product.

3. Sales to Minors: This is a perfect example of the FTC using evidence that can best be described as equivocal, to support an obviously hollow conclusion. The FTC surveyed a number of states which allow direct sales to determine whether sales to minors was a problem. The FTC concluded based upon the responses that states that permit this practice "report few, if any, problems." But what did the states actually report?

a. None had conducted any stings or enforcement efforts.

b. Several believed that there was a problem with such sales and one believe it had the potential to become a major problem.

c. One reported that there was no system available to assure that minors did not obtain alcohol online since many had credit cards and they were not face-to-face transactions.

d. One reported that compliance checks on the more secure face-to-face transactions revealed a sales to minor percentage of 30%.

e. One reported that 67% of high school seniors said they have purchased alcohol in face-to-face transactions alone.

f. One reported that while its laws required carriers to report alcohol shipments, some do not, and no actions have been taken against them.

The report also glossed over evidence presented concerning the Michigan sting. There, scores of wineries and retailers had sold blackberry wine, "eye of newt" wine, grain alcohol and beer to minors without a problem. Moreover, while the report noted the "stringent" shipping policies of FedEx and UPS, it failed to note that UPS was cited for unlawful deliveries in cases in Michigan and Massachusetts. That evidentiary record is hardly an overwhelming basis for concluding that those states have no problems with sales to minors and that therefore others could do so without significant problems.

4. Demand: One would think that the FTC should be concerned about the needs and desires of the general public - not just a few wealthy, politically connected oenophiles (Nobel economist and grape grower Dan McFadden - a witness called by the FTC to testify at the Workshop to discuss the issue - admitted that it is an "elitist" concern). Yet that is apparently not the case.

In survey after survey, the number one issue of concern among Americans when it comes to alcohol is not their inability to obtain the limited edition of "Chateau Fifi" chardonnay. Rather it is the ability of minors to obtain access to and abuse alcohol. In fact, the only evidence of demand presented to the FTC was a survey which found that 85% of the consuming public was overwhelmingly satisfied with the selection and convenience available to them locally (averaging 350-500 brands available on the average retail shelf) - and which also found that 75% did not believe that online sales could be controlled to prevent underage access. Why the FTC is more concerned about the desires of a few of societies elite rather than with the concerns of the majority is a question that remains unanswered.

The critical question that remains with respect to the FTC Report is why they bothered to call witnesses and gather evidence on the issue of direct shipping at all if they were simply going to ignore all contrary or contradictory evidence in their conclusions and make other conclusions without the benefit of any hard evidence whatsoever.

The only good thing that can be said for the report is that it does, to some extent, catalogue the contrary evidence it later ignores in its dubious conclusions. So when the FTC Report and its conclusions are waved like a bloody flag by proponents of direct shipping in state legislatures and in the courts, there is the hope that policymakers will actually read the report and see if for what it is; "a tale . . . full of sound and fury, signifying nothing."