Alcohol shipping showdown
June 1, 2004 - The Supreme Court agreed this week to decide if states can ban direct shipments of wine to consumers from out-of-state wineries. Ultimately, the decision could also affect smaller breweries that hope to sell directly to consumers, bypassing traditional distribution channels.
A number of lawsuits have been brought challenging the bans for unconstitutionally discriminating against interstate commerce. Defenders of the laws argued that states under the 21st Amendment, which repealed Prohibition, have the power to regulate the sale and distribution of alcoholic beverages.
The justices agreed to review cases from Michigan and New York in an attempt to resolve conflicting appeals court rulings.
At issue is the system of alcohol distribution under which out-of-state wine producers may sell only to wholesalers, who distribute to retailers, who in turn sell to consumers. About half of the states have direct shipping prohibitions. Some laws ban direct shipments from out-of-state wineries, but allow direct sales from wineries within the state.
Michigan Attorney General Michael Cox appealed to the Supreme Court. He said Congress delegated to the states the right to regulate the shipment and transportation of alcoholic beverages within its borders. Cox said Michigan's system screens out shipments from outside the state to prevent sales to minors and to ensure that state taxes are collected.
Opponents of the Michigan law described the ban as protectionist, discriminatory and anti-consumer.
The Supreme Court appeal in the New York case was brought by those challenging the law, including two small family-run wineries in Virginia and California and three New York wine drinkers. Their lawyers said there are more than 2,500 wineries in 49 states, and most of the wineries outside the top 25 are family-run enterprises producing fewer than 5,000 cases a year. They said the Internet now makes possible direct sales to consumers.
The lawyers also cited a staff report by the Federal Trade Commission last year that found that the bans reduce consumer choice and increase wine prices.