Supreme Court Ruling Sets Precedent for Wine Retailers
In a 7-2 ruling, the Supreme Court struck down a Tennessee law that requires a person to be a resident of the state for two years before acquiring a retail license to sell alcohol. The law was challenged by Total Wine, a mega-chain with over 200 stores, and a couple who had recently moved to Memphis.
While the 21st Amendment allows states broad control over their alcohol regulations, the court determined that the Amendment does not give permission to “impose all manners of protectionist restrictions on commerce in alcoholic beverages,” Justice Alito wrote in the opinion.
Part of the foundation for the ruling was that the law violated the dormant Commerce Clause. The legal doctrine, which has been inferred from Article I of the Constitution, prohibits states from discriminating against interstate commerce. While Tennessee argued that the law was in compliance with the dormant Commerce Clause in that it discriminates against interstate commerce in order to “advance a legitimate local purpose,” the court disagreed.
The majority wrote that protectionism is not a legitimate “local purpose” for the residency requirement and that the law “has at best a highly attenuated relationship to public health or safety.”
While the court opinion only addresses the Tennessee law, it sets a precedent for nationwide wine retailers. Based off of the broad judicial decision, wine retailers could interpret the ruling to mean that prohibiting wine retailers from shipping across state lines is unconstitutional.
Prior to the court’s ruling, it was illegal for a state to permit in-state winery shipping and not permit out-of-state winery shipping. The same rules did not apply for wine retailers who could be discriminated against based off of their nonresident status. The different interpretations stemmed from a 2005 Supreme Court decision that was narrow in scope in that it only applied to wineries.
This disparity in the interpretation of the law has left an uneven playing field where wineries have been given more shipping rights than wine retailers. According to Wine Spectator, wineries can directly ship across state lines to 40 states, but wine retailers can only ship to 14 states.
“The bulk of American wine and spirits wholesalers have historically been opposed to retailers having the right to ship wine from state to state,” mainly due to safety and underage drinking concerns, according to Forbes. The validity of those concerns is debated and some believe that the only reason that wine retailers are discriminated against is to protect the privileges of wineries.
It remains to be seen whether a new case will climb to the Supreme Court directly challenging the regulations on wine retailers’ interstate shipping, but if those laws are challenged, it is hard to envision a scenario where the court rules against the retailers.
For now, wineries should enjoy their special shipping privileges. They may not last much longer.