Retailer Wine Shipping: On The Litigation Front

justiceIt is ironic that as the Internet wine retail market has heated up over the past decade, the one entity that has been actively discouraged from participating in that heat up is the American wine retailer. As a result of lobbying efforts to protect local retailers and wholesalers, wineries approving of bans on retailer direct shipment, and, importantly, judicial uncertainty, the most qualified sellers of wine in America, wine retailers, are largely banned from participating in the growing wine retail marketplace.

All this makes two separate federal lawsuits working their way through the courts important battles for wine lovers, free marketeers and wine retailers.

With its recent Petition for Writ of Certiorari before the U.S. Supreme Court, the Texas Package Store Association (TPSA) is asking the Court to decide once and for all whether and how the 2005 Granholm v. Heald decision applies to both retailers and wholesalers. The TPSA attempted to convince the Fifth Circuit Court of Appeals that the Granholm decision explicitly protected state laws discriminating against wine wholesalers and retailers from review under the non discrimination principles of the dormant Commerce Clause as laid out in the 2005 SCOTUS opinion. The Fifth Circuit Court held the non-discrimination principle did, though only weekly, apply to wholesalers and retailers when it refused to dismantle a long-standing injunction against Texas from enforcing a multi year residency requirement before a retail license could be granted. This decision conflicts with decisions in both the Eighth and Second Circuits that both proclaim Granholm require that out of state wineries be treated equally with in-state wineries where wine shipping is concerned, but also that retailers and wholesalers had no such claim to fair treatment under the tenants of the Dormant Commerce Clause.

This case is important because if it is granted Certiorari by SCOTUS, the Court, in its review of the case, will have the optio to finally answer the question: Can states discriminate against out-of-state wine retailer shipping for the purposes of protecting in-state economic interests? On the other hand, if cert is granted the Court could decide to take a very narrow look at the case in question and not address retailer shipping. Either way, NAWR will be closely watch this case as will retailers and wholesalers across the country

Only recently filed, Lebamoff v Rauner challenges Illinois blatantly discriminatory treatment of out of state wine retailers. Illinois allows in-state wine stores to ship wine directly to Illinois consumers, but bans out-of-state wine retailers from doing the same. The claim of discrimination and violations of the commerce clause are essentially the same as those that won at the federal district courts in Texas and Michigan, but lost in the Fifth Circuit and Second Circuit Courts of Appeal.

What’s at stake? Certainly millions, if not billions, of dollars. While we have documentation of the size of the WINERY-to-Consumer shipping channel via the ShipCompliant Annual Winery Shipping Report ($2 billion annually), what we don’t have is any documentation showing how much wine is currently being shipped via the RETAILER-to-Consumer shipping channel. However, given the persistence of retailers and the thirst for hard to find wines, imported wines, rare wines, Kosher wines, wine-of-the-month clubs and wine auctions, it is reasonable to assume that the RETAILER-to-Consumer shipping channel is at least half the size of the WINERY-to-Consumer Channel if not larger.

But this begs the question, if American consumers were not dissuaded by arcane, protectionist laws from buying wine via the Internet from retailers and having it shipped to them, how large would the Retailer-to-Consumer shipping channel be, particularly considering that retailers have far more experience selling online and marketing digitally than wineries do?

The National Association of Wine Retailers believes the Lebamoff case filed in Illinois is solid and well founded as a matter of Constitutional law and will support the plaintiffs in any way possible in their attempt to bring justice to the ossified, arcane and discriminatory Illinois alcohol regulatory system.