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Wines Til Sold Out in Legal Fight

February 2017
 
by Andrew Adams
 
 

 San Rafael, Calif.—One of the leading wine flash resellers, Wines Til Sold Out (WTSO), is facing a class-action lawsuit claiming it defrauded customers by offering wines for discounted prices that were not based on the wines’ true value.

In a complaint filed in the U.S. District Court of New Jersey, attorneys representing customers of the website claim WTSO created wine brands with private-label companies and then offered those wines at discount prices not based on any actual retail value and offered other wines with exaggerated retail prices to make the discounts appear even larger.

The complaint names WTSO and the Ashburn Corp., both based in Pennsauken, N.J. where Roger Wilco Wine & Spirits is also located. Brothers Elliot and Joe Arking own the companies, and Elliot Arking launched the online enterprise in 2006.

An attorney representing the website, however, is confident the case will end favorably for her client and said WTSO stands behind the quality and price of every wine it offers for sale.

Flash resellers typically offer wines for around 40% less than retail for a limited amount of time. Since the websites became popular in the wake of the recession, WTSO has been a leader in the channel, offering dozens of domestic wines per month. Wines Vines Analytics tracks flash offers for domestic wines as part of the regular Wine Industry Metrics reports, and in December, WTSO made 46 offers, the third highest number of all the major resellers.

The class-action complaint was filed by Giskan Solotaroff & Anderson, a New York law firm that specializes in class-action cases, on behalf of Memphis, Tenn., residents Kyle Cannon, Lewis Lyons and Dianne Lyons. The entire complaint can be found on the firm’s website.

Delivered to a customer’s email account or mobile device, a WTSO offer will list the wine as well as an original price, the best price found through a recent web search and WTSO’s offer.

Filed in March 2016, the complaint cites, as an example of what it describes as WTSO’s “scheme,” an offer for Castlebank Vineyards “Vivian’s Vineyard” 2013 Dry Creek Valley Cabernet Sauvignon. The wine is described as having an original price of $35 with a discount or “flash” price of $13.99.

The complaint argues that further research of this brand and nearly 30 others found that the wines were only available from WTSO; it further alleges that many of the brands were produced solely for WTSO through private-label companies.

The attorneys representing the plaintiffs allege that because Castlebank and other private-label wines were not available anywhere else, the original prices and discount prices were a deceptive way to entice consumers to buy wine. The complaint also alleges that WTSO used inflated prices for well-known brands such as Mer Soleil Chardonnay to make their discounted prices appear to be even more of a bargain.

WTSO is facing claims of fraud and could be liable for financial damages based on the initial complaint. Suzanne Schiller, an attorney with Manko, Gold, Katcher & Fox, the firm representing the company, said in a statement to Wines & Vines that while “we will not comment on specific allegations in the pending litigation, we are confident that WTSO will be successful in defending the claims in the complaint.”

Schiller went on to say that WTSO would not have been able to stay in business for more than a decade if it sold wine that did not meet the standards that its members have come to expect. “WTSO stands behind the quality and value of every wine it sells. WTSO’s website describes in detail the origin and content of each wine and there is no claim that this information is or has been false or deceptive.”

The original complaint also had named Jonathan H. Newman, a former chair of the Pennsylvania Liquor Control Board who now also is part owner of a wine and liquor wholesale company in Pennsylvania.

Newman’s attorney, Patrick J. Loftus with the firm Duane Morris, told Wines & Vines that the complaints against Newman were dismissed before the matter reached the courtroom because his client, who was named as an individual in the complaint, is not affiliated with WTSO and had only sold the company wine as a wholesaler. “He’s not an employee, not affiliated, not involved in operations and not involved in how they price their wine.”

The complaint names 29 wine brands sold as part of WTSO’s alleged scheme including established wineries such as Viansa and Eola Hills and brands developed by other wine companies including Moon Meadow and Origami.

According to Wines Vines Analytics, WTSO made 694 offers in the past 12 months ending in December. Of those offers, the brands named in the complaint accounted for a total of 114 or 16% of all the offers.

Private-label brands or those created by wine companies for retailers, restaurants and other clients aren’t new and have become a widespread element of the wine industry. In 2012, the president and CEO of Winery Exchange, a leading provider of private-label wines, estimated they could eventually account for 25% of the entire U.S. wine market.

WTSO then doesn’t appear any different from other retailers in selling private-label wine brands, but what’s landed it in a legal fight are the online discounts.

Other retailers have settled or are fighting class-action lawsuits over similar claims. The state of California successfully sued Overstock.com for its bargain claims (the retailer has since appealed) and, facing a consumer class-action lawsuit, J.C. Penny agreed to a $50 million settlement for touting big discounts on private or exclusive branded goods.

The Connecticut-based Truth in Advertising group has traced a significant upturn in the number of class-action lawsuits filed against online and traditional retailers for discounts advertised on the web in 2016. The group reported on the WTSO lawsuit in April.

 
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