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Supreme Court overturns state laws restricting out-of-state wine shipments
Tuesday, May 17, 2005

WASHINGTON -- States like Pennsylvania that allow in-state wineries to ship their products directly to consumers must accord the same privilege to out-of-state wineries, the U.S. Supreme Court ruled yesterday.

 
 
 
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The 5-4 ruling, which will benefit small wineries and the burgeoning Internet wine business, struck down laws in New York and Michigan that provided what Justice Anthony M. Kennedy's majority opinion called "a competitive advantage over wineries located beyond the state's borders."

Such discrimination, Kennedy said, violated the Commerce Clause of the Constitution, which gives Congress, not the states, the authority to regulate interstate commerce.

"Time and again, this court has held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter," Kennedy wrote.

Twenty-six states allow some direct shipping of wine, but many -- including Pennsylvania -- treat in-state and out-of-state wineries differently.

In Pennsylvania, wine from out-of-state vineyards must be shipped to state liquor stores where customers can pick it up. In-state wine can be shipped directly.

"It's my personal opinion that nothing changes in Pennsylvania today or tomorrow" because of the Supreme Court ruling, said state Liquor Control Board Chairman Jonathan Newman.

Yesterday's decision does not require states to allow their citizens to order alcoholic beverages directly from either in-state or out-of-state producers. States retain the right to ban all consumption of alcohol under the 21st Amendment, which ended Prohibition in 1933, and Kennedy's opinion suggested they also could require that wine and other alcoholic beverages be sold through wholesalers.

But a state no longer may allow in-state wineries to ship directly to consumers without treating out-of-state wineries the same way.

The Michigan statute struck down yesterday exempted in-state wineries from a rule that wine must be sold through wholesalers. The New York law allowed out-of-state wineries to ship directly to consumers only if they set up a factory, office or storeroom in New York State.

In ruling that both laws violated the Commerce Clause, the majority rejected the argument that the 21st Amendment carved out an exception from the Commerce Clause for alcoholic beverages. But Kennedy said the exception wasn't a blank check for states to pass whatever laws regarding alcohol they pleased. Previous decisions, he wrote, "confirm that the 21st Amendment does not supersede other provisions of the Constitution and, in particular, does not displace the rule that states may not give a discriminatory preference to their own producers."

Kennedy was joined in the majority by Justice Antonin Scalia, one of the court's most conservative members, and three liberal justices: David H. Souter, Ruth Bader Ginsburg and Stephen Breyer.

Dissenting was an equally unusual alignment of Chief Justice William H. Rehnquist and Justice Clarence Thomas, both conservatives, the more moderate Sandra Day O'Connor and the liberal John Paul Stevens.

In his dissent, Stevens conceded that the New York and Michigan laws would be unconstitutional "if they regulated sales of an ordinary article of commerce rather than wine. But ever since the adoption of the 18th Amendment [establishing Prohibition] and the 21st Amendment [ending Prohibition], our Constitution has placed commerce in alcoholic beverages in a separate category."

In a lengthier dissent that traced the history of alcohol regulation, Thomas, joined by Rehnquist, Stevens and O'Connor, wrote that even before Prohibition, Congress had given the states considerable leeway in controlling the sale of alcohol. But Thomas said the "broader language" of the 21st Amendment made it even clearer that states could pass "discriminatory" liquor laws.

The closeness of yesterday's decision was a surprise after oral arguments last December at which most justices seemed to feel that their hands were tied by Bacchus Imports Ltd. v. Dias, a 1984 decision that struck down a Hawaii law that gave in-state wineries an exemption from a 20 percent excise tax on wholesale liquor sales.

In Bacchus, the court held that the "central purpose" of the 21st Amendment "was not to empower states to favor local liquor industries by erecting barriers to competition."

In his dissent yesterday, Thomas said, "Bacchus should be overruled."

First published on May 17, 2005 at 12:00 am
Michael McGough can be reached at 1-202-662-7025 or mmcgough@nationalpress.com.
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