(FORTUNE Magazine) – Remember when wine in a box meant cheap wine with a keglike tap? Now that Americans have become a bit more snobbish about their vino, wine in a box means a case of vintage bottles arriving on your doorstep via FedEx. It's not only wine, either. A profusion of microbreweries offer mail-order suds to beer connoisseurs. Savvy marketers have also stepped in, selling hard-to-find beers and wines through catalogues, toll-free numbers, and the Internet.

Ah, the free market at its finest, you say. True--but in many instances it's also the free market at its most illegal. Much direct delivery is against the law: All 50 states impose some restrictions on the interstate shipment of alcohol; 21 ban it altogether.

The laws date back to the repeal of Prohibition. Each state was given authority to regulate the sale of liquor within its boundaries, which in turn led to the evolution of today's so-called three-tier system--suppliers sell to wholesalers who sell to retailers who sell to consumers. For years producers also quietly mailed small amounts to consumers without attracting much attention from regulators. Now, though, the growth of direct shipping has prompted authorities to take action. In a number of well-publicized stings, states have caught shippers red-handed (or white-, depending on the contents).

Those who oppose direct shipping--notably a group of powerful associations including the Wine and Spirits Wholesalers of America, the National Alcoholic Beverage Control Association (made up of state regulators), and Americans for Responsible Alcohol Access (a public interest group)--argue that the three-tier system provides the only mechanism for enforcing regulations and collecting taxes. On the other side are groups like the Wine Institute and the Coalition for Free Trade in Licensed Beverages, both of which want the states to open up distribution channels.

The proponents of change argue that the exponential growth in suppliers is overwhelming the three-tier system. There are now over 1,800 wineries in the U.S. and some 4,500 labels in California alone, according to Steve Gross of the Wine Institute. While these figures are on the rise, he points out, the number of wholesalers has decreased dramatically as a result of consolidation. "It's impractical to think wholesalers can distribute this many wines--the quantities are too small," he says.

Wine aficionados who prefer to sample a wide variety of labels are flocking to direct marketers like Virtual Vineyards, which sells wine and specialty foods over the Internet. Fill out an order form on the Website, supply your credit card number, and in a few days you have wine and prosciutto in hand. It's the sort of unregulated commerce that sends a collective shiver up the spines of free-trade opponents.

According to a recent poll sponsored by the not-disinterested Americans for Responsible Alcohol Access, 69% of Americans oppose the direct selling of licensed beverages. An even larger majority, 85%, believe direct shipping would give minors easier access to alcohol. However, Virtual Vineyards general manager Peter Granoff says "the Internet is an easy bogeyman," and the fear of sales to minors is largely unfounded. "It's counter to everything we know about adolescent drinking," he says. It is indeed hard to imagine underage frat boys ordering a case of cabernet online instead of asking a senior down the hall to make a quick beer run.

Ultimately, though, after each side rattles its sabers, this becomes an economic argument. Free trade could greatly increase revenues for wineries and direct sellers. Opponents argue it's a potentially dangerous practice, but they too have a vested monetary interest--not only would wholesalers and retailers lose customers, but the sobering $8.7 billion that states collect in alcohol excise taxes would be at risk.

In 1997, legislation to tighten restrictions on direct shipping was introduced in 13 states; Florida, Georgia, and Kentucky have made it a felony for the seller. At the same time, a law passed in Louisiana--the "Louisiana Compromise"--allows limited direct shipping. For 1998, free-trade opponents are backing even more punitive legislation and sting operations while supporters plan to push for Louisiana compromises in other states. As both sides step up lobbying efforts, a Supreme Court showdown seems inevitable.

Still, direct shipping has become so popular that it would be next to impossible to legislate it out of existence. Beer Across America, a beer-of-the-month club, has grown from 400 members in 1992 to 100,000, including the addition of a wine club. The estimated 120 million drinkers in the U.S. represent a tremendous untapped market for Beer Across America, Virtual Vineyards, and their ilk. Just one little thing stands between those millions of drinkers and their home-delivered booze--the law.

--Anne Faircloth