Monday, May 16, 2005

Shaking Up the Wine Tier System

The Supreme Court just eliminated a ban on the purchase of wine directly from out-of-state producers. The following article courtesy of the NY Times,

May 16, 2005
Supreme Court Strikes Down Bans on Wine Shipments
WASHINGTON, May 15 - The Supreme Court ruled today, in a case of interest to millions of wine-drinkers and those who make their livings in the multibillion-dollar industry, that people can buy wine directly from out-of-state vineyards.

In a 5-to-4 decision that struck down laws in New York and Michigan, and by extension calls into question the laws in 22 other states, the court held that laws that discriminate against out-of-state vineyards violate the Constitution's Commerce Clause, which empowers Congress to regulate interstate commerce.

"Laws such as those at issue contradict the principles underlying this rule by depriving citizens of their right to have access to other states' markets on equal terms," the majority held, in an opinion by Justice Anthony M. Kennedy.

Today's ruling is of intense interest not only to the states - 26 of which already allow direct shipment from out-of-state wineries - but also to the wholesale liquor industry, which fears eventually being left out of what is now a state-run three-tier system: liquor producer to licensed wholesaler to licensed retailer.

The worry for liquor wholesalers has been that if the justices ruled that consumers could buy wine directly from out-of-state producers, so might liquor retailers be able to do so, at least in theory.

Today's decision, in the cases of Granholm v. Heald, No. 03-1116, from Michigan, and Swedenberg v. Kelly, No. 03-1274 from New York, had to do with interpretation of the Constitution, the intent of the 1933 Amendment that ended Prohibition and changing personal tastes in the age of the Internet.

When the case was argued before the justices on Dec. 7, lawyers for New York and Michigan asserted that the Prohibition-ending 21st Amendment to the Constitution gave states such wide authority over the importation of alcohol that it trumped the principle embodied in the Commerce Clause: that the states may not, without Congressional authorization, discriminate against one another.

New York's and Michigan's lawyers insisted then that the goals of preventing minors' access to alcohol and assuring that the states could collect taxes from out-of-state shippers justified their states' statutes. Solicitor General Caitlin J. Halligan of New York told the justices that the case "goes to the very core of the 21st Amendment."

Justice Kennedy responded - tellingly, it would appear from today's ruling, that "it also goes to the very core of the Commerce Clause."

Justice Kennedy, who was joined by Justices Antonin Scalia, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer, said New York and Michigan "provide little evidence for their claim that purchasing wine over the Internet by minors is a problem."

"The 26 states now permitting direct shipments report no such problem, and the states can minimize any risk with less restrictive steps, such as requiring an adult signature on delivery," the majority said. Moreover, the majority said, the states could devise tax-collection procedures without resorting to discrimination in interstate commerce.

Chief Justice William H. Rehnquist and Justices John Paul Stevens, Sandra Day O'Connor and Clarence Thomas dissented.

Justice Stevens conceded that the New York and Michigan laws would be "patently invalid" if they regulated sales of "an ordinary article of commerce," not wine. "But ever since the adoption of the 18th Amendment and the 21st Amendment, our Constitution has placed commerce in alcoholic beverages in a special category," Justice Stevens wrote. (The 18th Amendment ushered in the era of Prohibition and, some social historians have said, the bootleggers and speak-easies that accompanied it.)

"Today, many Americans, particularly those members of the younger generations who make policy decisions, regard alcohol as an ordinary article of commerce, subject to the same market and legal controls as other consumer products," Justice Stevens wrote. "That was definitely not the view of the generations that made policy in 1919 when the 18th Amendment was ratified or in 1933 when it was repealed by the 21st Amendment."


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