Wyoming Supreme Court rules winery’s in-home free promotional tastings where nothing is sold but “offers to purchase” are collected are “sales” and are banned under Wyoming law.

You read that right. The Wyoming Supreme Court was recently confronted with a heck of an issue that could only be dreamed up by regulatory counsel looking to try and protect their client from being hit with improper sales: arguing that if you draft a form that says something akin to “this isn’t a sale, it is an offer to purchase and a seller will contact you if they want to accept your offer” then the fact that a person lists the quantities of wine that they want to purchase and tenders their credit card information and calculates tax and shipping on the form should not be viewed as a sale.

The facts from the opinion that apply here are basically those, that a winery (or a wine promoting company that holds an out of state shipper’s license the same as any winery would) – the Traveling Vineyard to be precise – was holding in-home promotions and free tastings and in return, the promoters who represented the company collected “interest forms” and forms similar to the “offer to purchase” after the tastings.

Now, to be fair, this same argument – that because the form says it’s not a sale and that the ultimate seller is just taking the information to decide whether or not it will accept an offer to purchase, has been rejected by courts in both Massachusetts and Illinois.

In defending the rationale that the activity wasn’t gratuitous because there was an expectation that an attendee of a tasting would fill out a form, the Court explained:

Appellants provide wine at the wine tasting events with the expectation that they will receive a completed “Survey & Interest Form” or a guest’s contact information. Traveling Vineyard pays Independent Wine Guides based not only on the number of attendees who purchase products from Traveling Vineyard after the events, but also on the number of guests who attend the tasting events. This demonstrates that Traveling Vineyard recognizes that it benefits from every guest who attends a tasting event. Accordingly, we conclude Appellants’ activities are not “purely gratuitous” because they receive a return benefit from the guests at the wine tasting events. Indeed, Appellants’ business model would not be sustainable if their activities at the wine tasting events were “purely gratuitous.”

The Court went on to note that the fact that the forms for ordering wine reflected that the person filling out the form was making an “offer to purchase” and not placing an order made no difference. Citing the Illinois decision holding that the same activity amounted to a sale, the Court said:

We note that, despite the fact that Traveling Vineyard’s “Survey & Interest Forms” ask for a purchaser’s credit card information, the forms provide that the buyer’s completion of the form constitutes a mere “offer to purchase,” which Appellants may accept or reject. This characterization, however, does not change the nature of Appellants’ activities at the wine tasting events. As the Appellate Court of Illinois observed regarding a similar form:

The form defendants contend is merely a “preference form” is strikingly similar to a sales invoice. The form lists the name and address of [defendants] at the top and provides lines to tally the wine order, figure the subtotal, add shipping and appropriate tax, and figure the total price. The form also lists the type of payment a consumer selects, through either providing a credit card number, attaching a check, or specifying the wine be sent cash on delivery. Although defendants did not ship the product or cash the consumer’s check, they conducted a “sale” within the meaning of the Act. Both the intent behind the Act … and common sense dictate the finding of a sale under the Act. Although defendants later added the terms “all wines are delivered by Shermer Specialties, which will appear on all credit card receipts and statements” in small print at the bottom of the form, this does not change the result: defendants are selling alcohol without a license.

People v. Select Specialties, 317 Ill.App.3d 538, 251 Ill.Dec. 462, 740 N.E.2d 543, 548 (2000)

One important point raised by the Court was that the in-home pouring of alcohol was integral to this decision and the Court refused to address whether the decision might be different if the in-home tastings didn’t include pourings by the “winery’s” representatives:

This is not a case in which we have been asked to determine whether the practice would fit within the definition of “sale” if the pouring did not occur. The pouring and tasting of wine is an integral component of Traveling Vineyard’s business model. While an argument could be made in the hypothetical scenarios that the “value” derived from pouring alcohol is too tenuous or abstract to fit within the statutory definition when that benefit is merely good will, those are not the facts presented in the case before us.

You can read the opinion in Phoenix Vintners (Traveling Vineyard) v. Noble here.

In an interesting dissent, two Justices pointed out that the forms and surveys that the majority relied upon were completely voluntary and that no attendee was required to fill one out or place an offer to purchase:

Appellants’ activity does not fit the definition of “dispensing and pouring for value.” There is no requirement that guests provide any information to the wine company in exchange for the wine. The wine is not dispensed or poured for anything of value from the guests. If the wine company obtains anything from the act of dispensing and pouring the wine, it is a hope that the guest will ask to purchase wine—something that cannot be said to have any specific value.

The wine company does not require that any attendee fill out the interest cards or give anything to the company. In that regard, the wine is provided “purely gratuitously.” The definition of gratuitous fits this situation exactly. The wine is “given freely or without recompense,” or “not involving a return benefit, compensation, or consideration.” Webster’s Third New International Dictionary 992 (3d ed. 2002). The majority argues that if the wine were provided gratuitously, Phoenix’s business model would fail. Although there is no evidence either way, the economic logic behind this business model indicates that it succeeds because the wine is provided gratuitously. If it were not for the free, no obligation, nature of this business model, fewer people may attend or be inclined to participate at the outset. The majority’s argument assumes that if Phoenix successfully generates customer interest by giving away samples of wine, those gratuitous samples somehow become sales, or exchanges for value. I disagree.

The vote therefore was just 3 in favor to 2 opposed, which means Traveling Vineyard missed this one by a single vote. While I wish the majority would have used the “if it walks like a duck, and quacks like duck” logic in determining that an “offer to purchase” is a thinly veiled sale – I’m in the dissenters camp here as their logic regarding the fact that an attendee is under no obligation to fill out a form or place an “offer” shows that the pouring isn’t strictly for “value” and there’s absolutely no exchange taking place – unless you want to rewrite the Uniform Commercial Code to say that an offer is only an offer, if it’s not for wine in somebody’s house.