After the repeal of Prohibition in 1933, Congress gave States the right to regulate the intrastate flow of alcohol. Most states formed what are known as three-tier systems. Other states – such as Pennsylvania – went into the alcohol business, mandating that all alcohol either be distributed, or sold by official State stores.

Since the end of Prohibition, Maryland has been a three-tier state, meaning that all alcohol flows from a manufacturer, to a wholesaler and then to a retailer. Therefore, all sales in of alcohol in Maryland are hand-to-hand sales, i.e. there is no way for a Maryland citizen to obtain alcohol other than through an in-person, over a retail counter transaction.

While consumers have thousands of wines to choose from (many more than in most states) through Maryland's three-tier system, what happens when they can't find the wine they're searching for?

In a strict three-tier system, the consumer is out-of-luck. In some states, citizens can order wine over the Internet or phone, and have it shipped to them. In Maryland, all shipments of wine direct-to-consumer are illegal – in fact, a felony.

No Shipments of Wine
In 2000, the General Assembly passed a law allowing for Maryland citizens to obtain wines not distributed through the State's three-tier system. Called the "Direct Wine-Seller's Permit," the law creates an avenue for a winery to ship limited quantities of its wine to a Maryland wholesaler, who then delivers it to a retail store for the consumer to pick it up. Sounds great on paper, but it has been proven too complicated for wineries to bother. Plus, with retailers and wholesalers able to charge a mark-up/handling fee, the consumer ends up paying more for their wine than just retail + shipping.

Three Tiers, explained
Tier One: When a winery is interested in having their wines available in Maryland, the winery must find a wholesaler through which to make their wines available at retail. Larger wineries with sufficient quantities and marketing budgets are most desireable to wholesalers. This explains why wholesalers would fight for the rights to distribute Kendall Jackson or [yellow tail]. Small, boutique wineries tend to be lacking both quantity and also marketing and advertising budgets. This is why we don't see many Pennsylvania wines available in Maryland – they just don't fit into distributors' business models. In many cases, it is not economical for small wineries to work with a distributor. To find out why, see tier two. Maryland wineries are licensed by the State and Federal governments, and may only operate in their single manufacturering location.

Tier two. Wholesalers purchase alcohol from manufacuters at roughly 50% below retail price. Then it's sold to retail stores and restaurants at a markup. Many wholesalers have sales and marketing staff who help increase sales to retail stores, while others act primarily as distribution services, able to deliver wines throughout the state, but relying on a winery's marketing prowess to create demand. Many small wineries cannot afford to deal with wholesalers who demand a 50% discount. Wholesalers must also post their prices with the State, ensuring that no retailer is able to receive any discount more than anyone else. This practice is called price filing, and it was developed to ensure that small, independent retail stores were able to compete with larger, volume-focused stores. [NOTE: A Federal Appeals Court ruled on 9/28/07 that the State may not enforce its price filing laws, as they violate the Sherman Act]. Wholesalers are licensed by the State and are able to operate in all jurisdictions statewide.

Tier three. Retail stores and restaurants are the end-point of alcohol in Maryland. It's where Maryland wine lovers spend their time perusing shelves for the perfect bottle. Most stores stock the wines that sell best, while others are known for choosing wines of all stature. Since most stores will stock the most heavily marketed and promoted wines, the small, boutique wines are again likely to be ignored. These stores are licensed by the counties in which they operate, but must pay State sales and excise on every item sold. In Maryland, retail alcohol licensees cannot have stores more than 10,000 square feet, and can only operate in one location (i.e., no chain stores may hold a liquor license).

Of note
Under "farm winery" laws developed in many states in the 1980s, small, farm-based wineries are permitted to distribute their own wines in-state to retail stores and restaurants. They are also permitted to sell wines at their tasting rooms, akin to a farmer selling his lettuce at farm-stands. Farm wineries are given these abilities in exchange for a requirement to grow, and/or use, local fruit. These abilities counteract the biases against small producers that are inherent in both the second and third tiers of the system, by making the wines available at retail at the wineries, and allowing the wineries to deliver them without having to deal directly with a wholesaler.

These abilities were challenged in a lawsuit filed against the State. Without these abilities, wine industries in the US will suffer, if not be drivin to extinction. As long as States mandate a system where the wholesalers (the middlemen) manage which wines get into the market, both consumers and retailers face limits and restrictions on product availablility, price and selection.