Supreme Court Rules on Interstate Wine Sales

[Varmint]

Kathi Purvis of the Charlotte Observer describes how North Carolina was ahead of the game in its direct shipping laws: http://www.charlotte.com/mld/observer/business/11664409.htm

[Pan]

Here's part of the Observer article for the record:

Opponents of wine shipping have said minors could get access to beer and wine over the Internet and shipping would hamper states' abilities to collect taxes.

Tanford said, however, that permit systems like North Carolina's, which are in place in 15 states, address both issues. If a company sells to minors or doesn't pay taxes, it can lose its permit.

[dls]

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.

←

I agree. SC decisions apply immediately and the 6 states that have discrimanatory intra-state / inter-state laws must deal with the fact that those laws are now unconstitutional and, essentially, unenforceable. Those states are FL, OH, CT, IN, MA, and VT. What remains to be seen is what will happen with the remaining 15 states that ban any form of shipping. My guess is they will continue as they have in the past.

That said, I don't think you'll find any winery shipping to NY or MI today or for some time for that matter. I would think that they are being advised to hold tight until there is some clarity. Even if they wanted to ignore that advice and ship now, carriers such as FedEx or UPS will not take the shipment until the dust settles.

[pkeibel]

Rather than checking with freethegrapes.com for local laws call the Dept of Liquor Control in your state. Freethegrapes has not updated their site in some time. They still say no shipments to Vermont. I have for the past two years been receiving out-of-state shipments with a legal permit. The process is cumbersome and barbaric but works for scheduled shipments.

[Bux]

Exactly. The ruling, based on a cursory review of the sources, simply says that states must give equal treatment to in-state and out-of-state producers. Still, as a practical matter, I imagine the key states like New York are not about to ban in-state shipping, so it is effectively a big victory for the producers that want to ship to other states.

←

It's not often that I read about anything that makes me look forward to returning home from Europe for gastronomic reasons, but this was good news when read in the International Herald Trib. I assume this means the state must treat all wine commerce equally. I suppose they could ban all direct shipments to consumers from wineries or ban or deliveries from retailers, but shouldn't it treat all national retailers as it treats local retailers in terms of shipping and delivery?

[Capaneus]

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.

←

I agree. SC decisions apply immediately and the 6 states that have discrimanatory intra-state / inter-state laws must deal with the fact that those laws are now unconstitutional and, essentially, unenforceable. Those states are FL, OH, CT, IN, MA, and VT. What remains to be seen is what will happen with the remaining 15 states that ban any form of shipping. My guess is they will continue as they have in the past.

That said, I don't think you'll find any winery shipping to NY or MI today or for some time for that matter. I would think that they are being advised to hold tight until there is some clarity. Even if they wanted to ignore that advice and ship now, carriers such as FedEx or UPS will not take the shipment until the dust settles.

←

SCOTUS decisions apply immediadely in that they *inform* other government agencies. So legislators must change the law to conform, and the courts must use the decision as binding precedent. Essentially, all laws are likely to remain in effect until such time as individual States put alternatives in place. As a practical result, I believe wineries and shippers will continue to opperate under current law until new statutes are in place, even though any penalties levied might be ruled unconstitutional if appealed.

[Capaneus]

Exactly. The ruling, based on a cursory review of the sources, simply says that states must give equal treatment to in-state and out-of-state producers. Still, as a practical matter, I imagine the key states like New York are not about to ban in-state shipping, so it is effectively a big victory for the producers that want to ship to other states.

←

It's not often that I read about anything that makes me look forward to returning home from Europe for gastronomic reasons, but this was good news when read in the International Herald Trib. I assume this means the state must treat all wine commerce equally. I suppose they could ban all direct shipments to consumers from wineries or ban or deliveries from retailers, but shouldn't it treat all national retailers as it treats local retailers in terms of shipping and delivery?

←

Funny. My heart sank when I read the opinion. As I see it, they had really only two ways they could go, since shipping laws are clearly absurd, and they chose the *much* narrower route.

We still have a very long way to go. They could have shortened the path considerably, but they didn't. Just the one small step. Fortunately, our situation in Pennsylvania is much improved over the last few years, so it doesn't sting as badly as it might have.

[jbonne]

my own take, now published, is that the ruling took things about as far as most observers figured they possibly could -- essentially mandating parity in the shipping laws.

to go much further, and start imposing federal requirements on shipping, would require a very, very fine honing (if not outright trashing) of the 21st amendment. but i think the constitutional issues are going to fall to the background, because Costco and the growing unrest by more forward-thinking distributors about consolidation, franchise laws, residency laws, &c., are going to prompt a much closer look at the three tiers through a Sherman Act (antitrust) prism.

[Capaneus]

my own take, now published, is that the ruling took things about as far as most observers figured they possibly could -- essentially mandating parity in the shipping laws.

to go much further, and start imposing federal requirements on shipping, would require a very, very fine honing (if not outright trashing) of the 21st amendment. but i think the constitutional issues are going to fall to the background, because Costco and the growing unrest by more forward-thinking distributors about consolidation, franchise laws, residency laws, &c., are going to prompt a much closer look at the three tiers through a Sherman Act (antitrust) prism.

←

Absolutely. But the distributors (pace Wine Institute) are much better financed. That kind of retail litigation favors them in the long run, regardless of the merits.

I thought Scalia's and Thomas' libertarian lean would bring them over to the side of the angels; didn't count on the split working the way it did *at all*. And neither did anyone I read or spoke to, and with a different majority the opinion might have looked quite different.

Or not, of course.

Edited May 18, 2005 by Capaneus (log)

[Pan]

[...] but i think the constitutional issues are going to fall to the background, because Costco and the growing unrest by more forward-thinking distributors about consolidation, franchise laws, residency laws, &c., are going to prompt a much closer look at the three tiers through a Sherman Act (antitrust) prism.

←

It seems to me that in recent years -- particularly in post-Ford Republican administrations like Reagan's and GW Bush's -- the Sherman Act has been treated as virtually a dead letter, with anti-competitive monopolists and oligopolists favored over small businesses, despite rhetoric to the contrary. Am I operating under a misimpression? Also, I'd love if you'd elaborate on the implications in the food and drink industry. Are you suggesting that there may be a Sherman Act prosecution of Costco in the near future?

[jbonne]

It seems to me that in recent years -- particularly in post-Ford Republican administrations like Reagan's and GW Bush's -- the Sherman Act has been treated as virtually a dead letter, with anti-competitive monopolists and oligopolists favored over small businesses, despite rhetoric to the contrary. Am I operating under a misimpression? Also, I'd love if you'd elaborate on the implications in the food and drink industry. Are you suggesting that there may be a Sherman Act prosecution of Costco in the near future?

←

i think Costco is safe until after Wal-Mart gets a big bullseye painted on it, which it won't. the Sherman Act implications are more likely to be focused on something like liquor distribution, which in most states grants exclusive license to a single wholesaler to handle specific products. Wal-Mart and Costco throw their weight around, but rarely have officially legislated power to serve as exclusive distributor.

i wouldn't say the Sherman Act is a dead letter (Microsoft, anyone?) but it's fair to say it hasn't exactly been a priority of the Bush administration.

[Alex]

FWIW, here's a letter to the editor that I sent today to my local paper (Grand Rapids Press). Let's see if they print it.

Commenting on the May 16 Supreme Court ruling about out-of-state wine shipments, Kim Gary, president of wholesaler Kent Beverage, Inc., said, "You don't know what's being sent in. It could be shipped to someone underage. And the state would be losing taxes." ("State mulls options in wine ruling," Press, May 18)

Those are the identical arguments that Michigan and New York brought before the Court. However, in its majority opinion, the Court called the claim of increased risk to minors "largely unsupported" and that of lost taxes "a diversion." The Court also wrote that the States "...provide little evidence that the purchase of wine over the Internet by minors is a problem" and "provide little concrete evidence for the sweeping assertion that they cannot police direct shipments by out-of-state wineries."

Even with the clarity and directness of this ruling, the state still intents to push for a ban on all wine shipments. So, it also is clear that the revenue the Michigan beverage wholesalers fear losing is their own, and the revenue that really matters to our state government comes from the wholesalers' lobby.