In a petition for a writ of certiorari to the U.S. Supreme Court, a Florida retailer has asked the high court to overturn a lower court ruling concerning wine shipping. That ruling, from the 8th Circuit court of Appeals, claims the 21st Amendment to the Constitution allows the State of Missouri to discriminate against out-of-state wine retailers by banning them from shipping wine to Missouri residents while at the same time allow Missouri retailers to ship wine to Missourians.
The National Association of Wine Retailers supports this petition to the Supreme Court not only because the 8th Circuit ruling is incorrect, but also because the NAWR believes protectionist laws such as Missouri’s ban on out-of-state retailer shipping harms retailers, denies consumers the ability to take advantage of the most diverse wine market in the history of the country and because history shows that rent-seeking laws based on anti-free trade principles always lead to more of the same.
As the petition to the Supreme Court on behalf of Sarasota Wine Market describes, the 8th Circuit Court of Appeals upheld the discriminatory ban on wine shipments from out-of-state retailers because:
“requiring a retailer to have a physical presence in the state is an inherent prerequisite to effective regulation, so Missouri’s law banning out-of-state wine retailers from its online market was protected by the Twenty-first Amendment and immune from Commerce Clause scrutiny.”
This judgment is contrary to the Supreme Court’s own rulings on the interaction between the Commerce Clause and the 21st Amendment. Again quoting from the most recent petition in the case of Sarasota Wine Market v Schmitt:
“In Granholm v. Heald, 544 U.S. 460 (2005), this Court declared unconstitutional two state laws that prohibited out-of-state wineries from shipping to consumers but allowed in-state wineries to do so. The Court said that the nondiscrimination principle of the Commerce Clause applies to state liquor laws so that if a State chooses to allow the direct shipment of wine, it must do so on evenhanded terms.”
In its most recent case on this question, Tennessee Wine v Thomas (2019), the Supreme Court reiterated that the nondiscrimination principle of the Commerce Clause laid out in the Granholm case also applied to laws regulating wine retailers.
To quote from the Sarasota Wine Market Petition one more time, the 8th Circuit court of appeals ignored these Supreme Court rulings when:
“It held that requiring a retailer to have a physical presence in the state is an inherent prerequisite to effective regulation, so Missouri’s law banning out-of-state wine retailers from its online market was protected by the Twenty-first Amendment and immune from Commerce Clause scrutiny.”
It should worry some readers that in the 8th Circuit Court of Appeals this case was ruled on without an evidentiary hearing of any kind. This is despite the Supreme Court emphatically stating in Tennessee Wine that states must justify its discriminatory law with “concrete evidence” that nondiscriminatory alternatives to the ban are unworkable in attempting to advance state interests in regulating the sale of alcohol. Missouri did not do this. In fact, it did not have a chance to.
These sorts of discriminatory bans on retailer shipping exist in a number of states. In fact, there are currently lawsuits pending in 7 states challenging these protectionist laws.
It is important to note that in the many states where protectionist and discriminatory laws ban out-of-state retailer wine shipments, consumers in those states are harmed the most. While they might have access to winery direct purchases, these consumers only have access to the imported wines that in-state wholesalers bring into the state. In most cases, this amounts to 15-20% of the imported wines available throughout the American marketplace.
Moreover, wine-of-the-month clubs, most rare and collectible wines and the vast majority of kosher wines are only sold by wine retailers. Consumers in protectionist states have almost no access to the vast majority of wines in the American marketplace.
Meanwhile, retailer shipping bans harm the American wine retailer. While big-box stores scoop up more and more alcohol sales that once were the domain of independent wine stores, the only real way for these stores to expand and survive is via online sales and interstate online sales in particular. This is nearly impossible when only 15 states and the District of Columbia allow wine shipments from out-of-state retailers.
Finally, it has long been the case that alcohol laws built on discrimination and rent-seeking that are not challenged and overturned will often lead lawmakers and regulators to indulge further in imposing similar laws while helping to hoist up existing laws that discriminate and protect one special interest to the detriment of others.
The widespread ban on producer self-distribution both in their own states and interstate is a perfect example. It is perfectly obvious that regulatory agencies are able to regulate producer to retailer sales, whether from in-state or from out-of-state producers. Moreover, producers of every alcohol type support self-distribution. Yet the ban on this form of producer sales exists in most states. It leads to less choice for consumers, fewer options for producers, and stagnant inventory choices for retailers and restaurants.
The current case the Supreme Court is being asked to review is an important one. Victory would come in the form of the Court choosing to review the case or directing that the case be sent back to a lower court for an evidentiary hearing.
Ultimate victory, however (and it will come), is when states stop listening to their best-funded special interests and take into account the needs of consumers and the entire alcohol sector. This would lead to the elimination of the kind of protectionist and discriminatory laws that are at issue in Sarasota Wine Market v Schmitt.