A Better Way On Retailer Wine Shipping In Michigan

Tomorrow,  two attorneys — one representing the state of Michigan and another representing the Michigan Beer and Wine Wholesalers Association — will stand in front of one of the highest courts in the land and argue that discriminatory and protectionist laws that bar Michiganders from receiving wine shipments from out-of-state wine stores ought to be deemed constitutional and allowed to stand. They will argue that it is their concern with the health and safety of Michigan residents that demand those residents not be allowed to receive shipments of California Cabernets, Rhone Valley red wines, Champagne, Vintage Port, Greek wines and rare Oregon Pinots.

This didn’t use to be their argument.

In 2016, the National Association of Wine Retailers along with two attorneys from Indiana warned the Michigan legislature that if they changed their law — which at the time allowed home delivery of wine from out-of-state and in-state retailers using their own vehicles — to allow common carrier shipments of wine to Michiganders from in-state retailers, but at the same time banned the practice by out-of-state retailers, they would be sued and they would lose. We told them that a nearly identical protectionist and discriminatory Michigan law was ruled unconstitutional in 2008.

At the very same venue where Michigan lawmakers were warned they were in the middle of passing a blatantly unconstitutional and anti-consumer law, an attorney for the Michigan Beer and Wine Wholesalers Association scoffed at the idea. He told them, sure, anyone can sue, but Michigan is on firm legal ground because two Federal Courts of Appeal have ruled these kinds of restrictions on out-of-state retailer shipping was unconstitutional. They passed the bill into law. They were sued soon after by the same attorneys who said the state would be sued.

The state of Michigan lost that suit when Judge Arthur Tarnow of the Michigan Federal District Court agreed with the NAWR and the two attorneys that the protectionist and discriminatory law was indeed unconstitutional based on the 2005 Granholm v Heald Supreme Court decision. The State of Michigan and the Michigan Wine & Spirit Wholesalers appealed the case to the 6th Circuit Court of Appeals.

But something interesting happened on the way to that appeal. The Supreme Court of the United States had something to say. In Tennessee Wine v Thomas, the Supreme Court ruled that the anti-protectionist and anti-discrimination principles of the 2005 Granholm v. Heald Supreme Court decision applied to wine retailers just as they apply to wineries. If that 2005 decision meant that states may not pass laws that discriminate against out-of-state wineries by barring them from shipping into a state while the in-state wineries are allowed to ship, and if the Tennessee Wine decision explicitly held that the Granholm decision applied to retailers, it follows that states may not enact laws that bar wine shipments from out-of-state retailers while allowing in-state retailers to ship to the state’s consumers—exactly the conditions that are in place in Michigan due to the recently passed anti-retailer shipping law that is being challenged and that will be heard at oral arguments in the 6th Circuit Court of Appeals Tomorrow.

What in the world are the State of Michigan and the Michigan Beer and Wine Wholesalers thinking?

Officially, what they are thinking, according to their briefs, in this case, is something entirely different than what they thought before the Supreme Court ruled in the Tennessee Wine case. Originally Michigan and its wholesalers argued that the Granholm decision didn’t apply to wine retailers and therefore the anti-consumer and discriminatory Michigan shipping law was constitutional. First, the Michigan Federal District Court shot down that argument, but then the Supreme court did too.

Now, the wholesalers and the state have changed their tune and are arguing in front of the 6th Circuit Court of Appeals that health and safety concerns are justification for the discriminatory and protectionist anti-retailer shipping law. The argument is weak at best and mendacious at worst. Moreover, the U.S. Supreme Court already rejected justification for discriminatory wine shipping laws in their Granholm v Heald Supreme Court decision when they said, “These objectives [health and safety] can also be achieved through the alternative of an evenhanded licensing requirement.”

Tomorrow, the state of Michigan and the Michigan Beer and Wine Wholesalers will argue that a lower court should overturn the judgment of the U.S. Supreme Court.

Tomorrow will be the 6th time the state of Michigan and its wine and beer wholesalers association have stood before a Federal Court and argued that discrimination and protectionism ought to be upheld as a constitutional use of state power. Four of the last five times they’ve lost that argument. They have lost twice where winery shipping is concerned and twice where retailer shipping is concerned. When the ruling on the current case comes down probably in early summer, they will have lost five out of six times.

The state has spent well over $1 Million dollars of Michigan taxpayer money attempting to defend anti-retailer shipping laws in Federal Court. When they lose this case, assuming they don’t appeal to the Supreme Court, they state will probably have to cough up another $1 million to pay the legal fees of the two attorneys who brought this case.

There is a better way. A set of bills has been introduced into the Michigan Senate and House. The companion bills (SB 819 and HB 5799) would legalize wine shipments to Michigan residents from out-of-state retailers under the same conditions that out-of-state wineries may ship. The bills include the issuance of shipping permits, require reporting by retailers to the state on what they shipped, limit how much they can ship to residents, insist on an adult signature at the time of delivery and require Michigan sales taxes to be paid to the state. NAWR estimates that in the first year after these bills become law, the State of Michigan will receive between $1.7 and $2.5 million in tax revenue. Imagine how much tax revenue the state would have received by now if they had allowed retailer shipping since 2005, after they changed their winery shipping law in the wake of the Granholm v Heald Supreme Court decision, rather than, at the time, outlawing retailer shipping.

Senate Bill 819 and House Bill 5799 are awaiting a hearing in the Senate and House Regulatory Reform committees. These committees should make haste in having hearings and approving the bills for vote by the entire Senate and House so they can become law and end this really ugly history of the state of Michigan banning its citizens from accessing the hundreds of thousands of wine not available in the state for the purpose of protecting Michigan wholesalers from having to compete on a fair commercial playing field.

It turns out there is a lot at stake in the direct shipping case being heard tomorrow in the 6ht Circuit Court of Appeals. Other identical lawsuits challenging protectionist and discriminatory retailer wine shipping laws in Indiana, Kentucky, Illinois, Missouri, New Jersey, Rhode Island and North Carolina have also been filed. The decision in this looming case will carry a great deal of weight in those cases.

The National Association of Wine Retailers believes that believe it is both consumer-friendly and commercially-necessary for states to allow shipments of wine from out-of-state retailers is a well-regulated manner. NAWR believes states ought to be allowed to collect taxes and receive reports from out-of-state retailers shipping into a state. NAWR believes that rules ought to be in place to ensure minors do not get handed boxes of wine upon delivery.

NAWR also believes that upholding plainly anti-consumer and discriminatory laws for the sake of benefiting local wholesalers who want protection from competition while everyone else is forced to compete for business is simply bad policy. And NAWR will oppose all such laws in all states.