Supreme Court Rules on Interstate Wine Sales

[VivreManger]

The five votes for overturning the ban were Kennedy (author), joined by Scalia, Ginsburg, Breyer, Souter.

For maintaining the ban were Thomas (author) joined by Stevens, Rehnquist, and O'Connor.

Rather interesting bed-fellows. I don't know of any opinion in which Scalia broke from Rehnquist & Thomas to join Ginsburg and Breyer. Perhaps his Italian wine-drinking heritage determined his vote.

Edited May 16, 2005 by VivreManger (log)

[Rebel Rose]

The economic stakes are high in the $21.6 billion wine industry. Owners of small wineries, which have proliferated in recent years, say they can't compete with huge companies unless they can sell directly to customers over the Internet or by allowing visitors to their wineries to ship bottles home.

Hear, hear.

[carswell]

My lack of familiarity with U.S. jurisprudence is showing here, but has the constitutionality of banning the shipping of wine and spirits by producers, regardless of whether they are in or out of state, ever been contested? And aren't there states that ban shipping by producers but allow it by retailers? If so, would that be grounds for a lawsuit by producers?

[Fat Guy]

The reason it may seem odd, I think, is that this is not the type of case that typically receives high-profile coverage. People form their opinions about the Supreme Court based on a few well-publicized cases, mostly civil right cases. But this is an example of an actual business-as-usual case for the Court. In such cases, where there aren't any civil rights issues at stake, most of the justices have a record of voting diversely, based on the arguments and precedents. But even in civil rights cases, there is the occasional Thomas/Scalia split, such as in the Title VII case of National Railroad Passenger Corp. v. Morgan. Here I think what happened was that it was truly an ambiguous situation: it all depends on how you prioritize the commerce clause, the amendment and the precedents. I could easily see any justice voting either way on this one.

[Fat Guy]

My lack of familiarity with U.S. jurisprudence is showing here, but has the constitutionality of banning the shipping of wine and spirits by producers, regardless of whether they are in or out of state, ever been contested? And aren't there states that ban shipping by producers but allow it by retailers? If so, would that be grounds for a lawsuit by producers?

←

Not likely. States are given broad authority to regulate alcohol sales by a constitutional amendment. You can't really contest an amendment. The case that was just decided was special, because you had a constitutional amendment allowing states to regulate alcohol sales, but you also had the interstate commerce clause saying that regulation of commerce can't be discriminatory as between inter- and intra-state commerce. So there was an internal conflict in the Constitution that needed to be resolved one way or the other.

[dls]

Just received an e-mail alert from the Wall Street Journal. Lead text follows:

High Court Bars State Limits

On Direct Shipment of Wines

Associated Press

May 16, 2005 12:47 p.m.

WASHINGTON -- Wine lovers may buy directly from out-of-state vineyards, the Supreme Court ruled Monday, striking down laws banning a practice that has flourished because of the Internet and growing popularity of winery tours.

The 5-4 decision overturns laws in New York and Michigan that make it a crime to buy wine directly from vineyards in another state. In all, 24 states have laws that bar interstate shipments.

The state bans are discriminatory and anticompetitive, the court said. "States have broad power to regulate liquor," Justice Anthony Kennedy wrote for the majority. "This power, however, does not allow states to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers."

[Genny]

Hip! Hip! Hooray!

Along with the silly law in AZ that wines couldn't be shipped to a residence WTF??? (They were afraid kids could get it) I believe this law is no longer in effect but not all wineries are up on the new protocol.

[hwilson41]

This is the best news we're likely to read today . I love it!!

[slarochelle]

I received an email from Amazon last week saying that Wine.com is one of their newest merchants. I checked Wine.com and they didn't ship to my state, Maryland.

I assume Amazon and Wine.com hooking up is related to this news?

[Alex]

The states that had banned out-of-state shipping are: Alabama, Arizona, Arkansas, Connecticut, Delaware, Florida, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Ohio, Oklahoma, Pennsylvania, New Jersey, New York, South Dakota, Tennessee, Utah and Vermont. It's likely that states with a prohibitionist bent and little in the way of viticulture — Mississippi and Oklahoma, for example — will simply ban all shipping. Ditto states whose politicians have ties to wholesalers and their deep pockets. In fact, didn't New Jersey ban in-state shipping last year in anticipation of just such a ruling?

←

"Ditto states whose politicians have ties to wholesalers and their deep pockets."

What a great point. I think you hit the nail squarely on the head for Michigan. Add in Michigan's being the plaintiff in one of the suits, and I think we know what the ultimate result will be. Our in-state wineries have negligible political clout compared to our beverage distributors and their lackey, the Michigan Restaurant Association. The only hope is for consumers to speak up, and loudly, but I doubt that this is a high-priority issue for the vast majority of the electorate. We're in a nasty budget crunch right now, so I fear that Governor Granholm will play the "tax revenue" card, back it up with the "protecting the children" card, and that will be that.

[Rebel Rose]

I fear that Governor Granholm will play the "tax revenue" card, back it up with the "protecting the children" card, and that will be that.

He'll be shooting himself in the foot financially, which is no insurance against stupidity, unfortunately. I pay, and other California wineries pay, sales tax on our customers' orders to states like New Hampshire, Montana, Wyoming, etc. We're too small to interest distributors in those states, so we will not be sending pallets of wine through the three-tier distribution system in those states, but we do collect and pay sales tax on individual orders to the states that require it. If Gov. Granholm says that MI can only collect taxes if wine is subjected to the archaic three-tier system, how is he going to explain that other states are merrily pocketing taxes generated by online interstate sales?

[Greg Wells]

The most troubling paragraph in the decision for wine lovers should be this one that begins on page 9 of the slip opinion:

Laws of the type at issue in the instant cases contradict these principles.  They deprive citizens of their right to have access to the markets of other states on equal terms.  The perceived need for reciprocity sales privileges risks generating the trade rivalries and animosities, the alliances and exclusivity, that the Constitution and, in particular, the Commerce Clause were designed to avoid.  State laws that protect local wineries have led to the enactment of statutes under which some states condition the right of out-of-state wineries to make direct wine sales to in-state consumers on a reciprocal right in the shipping state...The current patchwork of laws  -- with some states banning direct shipments  altogether, others doing so only for out-of-state wineries, and still others requiring reciprocity -- is essentially the product of an ongoing, low-level trade war.  Allowing states to discriminate against out-of-state wine invites a multiplication of preferential trade areas destructive to the very purpose of the Commerce Clause.

The Court doesn't say this because the issue was not before it, but doesn't this suggest that reciprocity laws (i.e., allow shipping from wineries in "open" states but deny shipping to wineries in "closed" states) might themselves be unconstitutional? If so, how will that impact that political process that is going to arise after this decision as states decide what "even-handed" approach they want to take to wine shipments? You can bet that the wholesaler lobby with be fighting for a "ban all shipping" approach in every state that will listen.

The question is: how many of the reciprocal states that now allow shipping have done so because of the leverage that California and other states have wielded through the reciprocity tool? Under the current system, small wineries in Virginia, for example, can plausibly say to the legislature that it should open up Virginia to shipping so that the Virginia wineries can have access to the lucrative markets in the reciprocal states like California. But assuming that reciprocity is Constitutionally infirm, the same small wineries in Virginia are going to be able to ship into California regardless of what Virginia does. And I doubt that most small wineries actually do much in-state shipping to consumers (as opposed to "cellar door" sales which I imagine are significant, but not impacted by the shipping rules). So, if that's the case, where is the powerful constituency that's going to have a strong incentive to fight for direct shipping within the states? Is "consumer freedom of choice" going to be sufficient to ward off the wholesalers? If not, might we end up with fewer states allowing direct shipments than before?

[Carolyn Tillie]

I received an email from Amazon last week saying that Wine.com is one of their newest merchants.  I checked Wine.com and they didn't ship to my state, Maryland.

I assume Amazon and Wine.com hooking up is related to this news?

←

And they may still not be able to ship to Maryland. This ruling is NOT a free-for-all "we can all ship to any state in the Union" decision. Those of us in the industry are now working through to determine exactly what we can and cannot do regarding shipping. Many states still have inter- and intra-state regulations that could be in affect. The real impact may not be known for several days.

[shacke]

http://www.cnn.com/2005/LAW/05/16/scotus.w...s.ap/index.html

Court ruled 5-4 in favor of repealing states' right to ban out of state winery shipments into banned state. Basically, the case pitted a prohibition clause saying states can limit flow of alcohol into their states vs. commerce clause that says states can't discriminate against other states by unfairly restricting one states access to trade over another. Now if a state bans in-state as well as out of state shipments, then we could be hosed.

Overall, it is a good start but I suspect this will launch even more lawsuits. I hope PA opens its doors before I get too old to enjoy my freedom.

Round 1 - us!

[Alex]

I fear that Governor Granholm will play the "tax revenue" card, back it up with the "protecting the children" card, and that will be that.

He'll be shooting himself in the foot financially, which is no insurance against stupidity, unfortunately. I pay, and other California wineries pay, sales tax on our customers' orders to states like New Hampshire, Montana, Wyoming, etc. We're too small to interest distributors in those states, so we will not be sending pallets of wine through the three-tier distribution system in those states, but we do collect and pay sales tax on individual orders to the states that require it. If Gov. Granholm says that MI can only collect taxes if wine is subjected to the archaic three-tier system, how is he going to explain that other states are merrily pocketing taxes generated by online interstate sales?

←

BTW, that's a "she," as in Jennifer Granholm. The state argued both issues (tax and minors) to the Supreme Court. The Court's majority opinion stated, essentially, that the state had absolutely no case for either. Whether the voters have the intelligence, courage, and energy to keep the shipping lines open remains to be seen. As I mentioned earlier, the distributors' lobby is extremely strong.

[shacke]

http://scotus.ap.org/scotus/03-1116p.zo.pdf

The written opinion

[Rebel Rose]

Oops. My apologies to Ms. Governor.

I think the future looks promising with this decision. It appears that the court is saying that all in-state shipments will be considered, including retail wine stores. So a state has two choices: ban all shipments of wine within and into the state, which will anger a lot of businesspeople, or allow all shipments within and into the state.

And you're right, shacke, it's still round one, or actually more like the fourth, but the opposing arguments are getting wimpier with each round.

Fortunately we have a strong ally in the Wine Institute, which is assisting consumers and producers in this battle, and taking the fight into each state. The Institute is headed up by a strong legal team and executive director Bobby Koch (pronounced Cook).

And the statement from the Wine Institute (Free the Grapes!) is now up:

Wine Institute is the public policy advocacy association representing 840 California wineries and affiliated businesses. Since 1985, the organization has worked on legislative and regulatory solutions for direct shipping. Wine Institute submitted a “Friend of the Court” amicus brief to the U.S. Supreme Court on the successful implementation in many states of a model direct shipping bill.

A hearty thank you and a woop-woop to the Wine Institute.

[Varmint]

In North Carolina, all wineries, both in-state and out-of-state, must get a permit to ship their wine directly to consumers. If a winery ships over a thousand cases to North Carolinians, then they must go through a wholesaler IF a wholesaler contacts that winery requesting to sell that wine. Ridiculously, the winery needn't go through the wholesaler that contacted the winery, it just has to go through any wholesaler!

Also, a winery can't sell more than 2 cases (9 liters each) of wine to a North Carolina resident each month.

Thus, this law stays intact, as it treats NC wineries (and we have a booming wine industry) the same as wineries from outside the state.

[Brad Ballinger]

In a dissent, Justice Clarence Thomas argued the ruling needlessly overturns long-established regulations aimed partly at protecting minors.

Quote from the CNN link above. The logic falls apart for me when those same states allow intra-state shipping.

One thing I can't find is when does the ruling take effect? Immediately?

[Pan]

The five votes for overturning the ban were Kennedy (author), joined by Scalia, Ginsburg, Breyer, Souter. 

For maintaining the ban were Thomas (author) joined by Stevens, Rehnquist, and O'Connor.

Rather interesting bed-fellows.  I don't know of any opinion in which Scalia broke from Rehnquist & Thomas to join Ginsburg and Breyer.  Perhaps his Italian wine-drinking heritage determined his vote.

←

Who knows? But I suspect this is probably just a genuine difference in judicial interpretation. In the past, Scalia has broken with Rehnquist and I believe Thomas, too, on some free speech issues. But that's not about food.

[KOK]

I received an email from Amazon last week saying that Wine.com is one of their newest merchants.  I checked Wine.com and they didn't ship to my state, Maryland.

I assume Amazon and Wine.com hooking up is related to this news?

←

It's my understanding that Maryland prohibits shipments that cross county lines, so in effect, they prohibit in state shipments. That is why they will likely still prohibit out of state shipments.

Thanks,

Kevin

[mnebergall]

This decision only applies to shipments of wine into Michigan and New York. I would not read it as having an immediate impact on the laws of any other state. But it eventually will have an impact on those states that have differential treatment of in-state and out-of-state wine shipments when other cases start to bubble up.

[Fat Guy]

I'm not so sure I agree with that. Supreme Court decisions have general and immediate applicability. I believe that if you're a state and you have a law on the books that treats inter- and intra-state direct shipments of wine from vineyards to consumers differently, that law became unconstitutional the second the Supreme Court announced its decision this morning. It may be that some states have quirky laws that don't clearly fall within the terms of the decision, and those would be subject to follow-up litigation, but if there are other states with laws similar to New York and Michigan's laws, those laws (or, rather, parts of laws) are now, I believe, void.

[MarketStEl]

Just a note to the Pennsylvanians reading this:

No, this does not mean that the Liquor Control Board's days are numbered, or that you will immediately be able to order an incredible wine that Jonathan Newman has yet to bulk-purchase for shipment to your door.

Unless, that is, you can already order wine from Blue Mountain Vineyards or Chaddsford Winery or any of the two dozen or so other wineries in the state for shipment from the vintner to your home.

The ruling may have an impact on the provision in state law that permits in-state wineries such as the two mentioned above to sell their own wines in their own retail shops. (Blue Mountain Vineyards does so; Chaddsford once did, but now distributes its wine via the PLCB system.)

[Pan]

Editorial in The New York Times today:

"In Vino, Some Split-Decision Veritas"

Raise a glass, wine lovers, to the Supreme Court for its ruling that ended the unfair barriers erected since Prohibition against the free flow of wine across state lines. About half the states, including New York, have barred out-of-state wineries - but not local producers - from directly shipping wine to customers. This was unfair protectionism, and the court ruled, 5 to 4, that any regulation of winery commerce must be evenhanded and not discriminatory.