The United States Supreme Court on May 13 rendered a decision that ended a legacy of Prohibition and is likely to expand prospects for the direct shipping of wine from producer to consumer.
The court ruled that wine producers may ship their products directly to consumers in other states. Many states restricted or prohibited such direct-to-consumer sales.
“Enduring Precedent”
“This is a great victory and an enduring precedent with ramifications for interstate commerce,” said attorney Clint Bolick of the Institute for Justice, the lawyer who successfully argued the case.
“There are few countries where this could have happened,” said Bolick, speaking at a May 25 event in San Francisco hosted by the Pacific Research Institute. The owner of a small winery, Bolick said, had “taken on a multibillion dollar oligopoly and won.”
The Granholm v. Heald case pitted small winemakers against a cartel of liquor distributorships and state regulators. New York and Michigan have allowed shipping of wine directly from producer to consumer, but only within their respective state borders. Wineries from other states were prohibited from shipping their products to consumers in the two states. The High Court ruled 5-4 that such practices were discriminatory.
Must Be ‘Evenhanded’
“States have a broad power to regulate liquor,” wrote Justice Anthony Kennedy. “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. If a state chooses to allow direct shipment of wine, it must do so on evenhanded terms.
“Without demonstrating the need for discrimination,” Kennedy continued, “New York and Michigan have enacted regulations that disadvantage out-of-state wine producers. Under our Commerce Clause jurisprudence, these regulations cannot stand.”
Bill Lockyer, attorney general of California, the nation’s leading wine-producing state, called the ruling “a victory for consumers, as well as the great wineries of California.”
The laws that were struck down “were not adequately justified as needed to further any regulatory concerns,” Lockyer said in a statement. “They were economic protectionism, pure and simple. The court rightly found such protectionism has no place in this country’s free market-based system and violates constitutional safeguards for interstate commerce.”
Could Ban Intrastate Sales
Currently there are 13 “reciprocity” states, up from four a decade ago, that allow direct shipping from states that accord the same privilege. Twenty-six states have adopted legislation creating some regulatory structure for direct shipment of wine to consumers. The high court ruling is likely to expand that number.
States could respond to the ruling by banning intrastate direct shipping. Bolick lamented that New Jersey had taken this path, but said he did not expect it to be the rule.
But in a conference call with reporters shortly after the court ruling, Nida Samona, head of the Michigan Liquor Control Commission, said the state likely would further restrict direct-to-consumer wine sales. She said she planned to ask lawmakers to tighten state liquor law rather than allow wineries to expand Internet or mail-order sales.
“There shouldn’t be any shipment of wine or any other alcohol product. It should be purchased directly, face-to-face,” she said in the conference call.
Bolick disagreed.
“There are now wineries in all states and they need to ship,” Bolick said. He added that he hoped to see uniformity in state laws, and he noted model legislation is available from the Wine Institute in San Francisco.
K. Lloyd Billingsley ([email protected]) is editorial director of the Pacific Research Institute in San Francisco and author of PRI’s Wine Wars: Courting Ecommerce and Direct Shipment in a National Wine Market.
For more information …
The U.S. Supreme Court’s decision in Granholm v. Heald is available in three parts through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to http://www.heartland.org, click on the PolicyBot™ button, and search for documents #17281 (majority opinion), #17282 (Stevens dissent), and #17283 (Thomas dissent).
