The Supreme Court Case
Regarding Out of State Shipment of Liquor
In the recently-decided Supreme Court cases relating
to the interstate shipment of wine, Granholm v. Heald
and Swedenburg v. Kelly, 544 U.S. __ (2005), the Court
was asked to consider whether Michigan and New York’s
laws that discriminated against out-of-state shipments
of wine to in-state residents was within the boundaries
of the Constitution. The narrow constitutional issue concerned
whether the 21st Amendment’s grant of authority
to the states to regulate alcoholic beverage sales overrode
the Commerce Clause’s protections against discriminatory
treatment of in-state products versus out-of-state products.
The Court answered this question with a definitive “No.”
What does it really mean? These cases uphold
the Constitution’s protections against discriminatory
treatment of consumers and products, even for alcoholic
beverages. In the Court’s words: “State policies
are protected under the Twenty-first Amendment when they
treat liquor produced out of state the same as its domestic
[i.e., in state] equivalent.” Conversely, where a
state seeks to discriminate against out of state products,
that policy can only be upheld if the state regime “advances
a legitimate local purpose that cannot be adequately served
by reasonable nondiscriminatory alternatives.” Thus,
the Court looks to see what the “local purpose”
to be served is, and whether that purpose can be adequately
served by policies that do not discriminate against out
of state goods.
In these cases, the states argued two purposes
for their discriminatory treatment: to keep alcoholic beverage
out of minors’ hands, and to facilitate tax collection.
Both were rejected as justification for the discriminatory
treatment. The argument regarding sales to minors, while
rejected on several grounds, fell hardest on the illogic
of the position of New York and Michigan. The Court appeared
swayed by the fact that the dangers of alcohol getting into
minors’ hands was equal regardless whether the alcohol
was shipped from within or outside of the states’
borders. Having laid the historical foundation that discriminatory
laws were invalid because the Commerce Clause is designed
in part to avoid trade wars among the states, the Court
was unimpressed with the states’ attempt to find a
distinction in the impact on minors based on the shippers’
location. A similar shortcoming was found in the tax issue.
The Court was not convinced that the tax collection system
in place in the states was unable to accommodate both in
state and out of state shippers.
The Court’s conclusion provides a convenient summary
of its holding:
States have broad power to regulate liquor
under §2 of the Twenty-first Amendment. 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.
Prepared by Kenneth J. Nunnenkamp, Esq.
(703) 442-9035
www.ipappeals.com |