By Jim Clarke
Citing the Commerce Clause, the Supreme
Court today ruled 5-4 that laws permitting in-state shipping of
wine while forbidding such shipments from out-of-state are protectionist,
discriminatory, and unconstitutional. They ruled specifically on
two cases in New York and Michigan, but 24 other states have similar
laws that could be affected. The decision comes as a defeat for
wine wholesalers, who are concerned about being passed by as wineries
take advantage of their new ability to reach consumers directly
via the Internet. Many wineries, especially smaller ones, hope to
benefit from the decision, claiming their smaller output was being
slighted by a three-tier producer-wholesaler-retailer system which
encourages distributors to concentrate on larger producers.
The laws could have stood despite
their discriminatory nature if the States had demonstrated that
the laws had a legitimate purpose that could not have been achieved
using non-discriminatory means. They advanced two arguments: the
laws kept wine out of the hands of minors and facilitated tax collection.
Regarding the former, the Court found that allowing direct shipment
of wine was not a greater problem in states that already allowed
such shipping. In the Court’s opinion, Justice Kennedy wrote,
“Even were we to credit the States’ largely unsupported
claim that direct shipping of wine increases the risk of underage
drinking, this would not justify regulations limiting only out-of-state
direct shipments. As the wineries point out, minors are just as
likely to order wine from in-state producers as from out-of-state
They also felt tax collection could
be achieved by non-discriminatory means; in fact, Michigan’s
tax structure for alcohol already taxes out-of-state wineries directly.
The Supreme Court has not, however,
proposed a remedy in the case, so the legislatures of New York,
Michigan, and eventually other states will have to decide how to
respond. While it is generally expected that many states will open
up to direct shipping, there is nothing preventing them from forbidding
wine shipments of any sort, as long as they don’t discriminate
against out-of-state producers. Wholesalers are expected to put
a lot of money into the fight to protect their control of the industry.
Bottle for my Mother for more background on this case.