Court Hears Case on Wine Sales on the Internet
By THE ASSOCIATED PRESS
Published: December 7, 2004
Filed at 11:56 a.m. ET
WASHINGTON (AP) -- State laws barring people from buying wine directly from out-of-state suppliers should be struck down as unconstitutional, the Supreme Court was told Tuesday, as it heard arguments in a case that could lead to sweeping changes on how alcoholic beverages are regulated and sold.
Justices heard arguments in three appeals involving laws in Michigan and New York that allow direct instate, but not out-of-state, shipments. The dispute pits regulators and wholesalers against out-of-state wineries that want to sell alcohol to consumers, mostly over the Internet or by phone.
``A state power over alcohol has ebbed and flowed over the years, but one principle has remained constant: States may regulate alcohol by only one set of rules,'' said Clint Bolick, who represents a family-run winery in Virginia that says the laws are discriminatory.
Michigan solicitor general Thomas L. Casey, who says states must control the distribution of alcohol as they see fit to protect minors, disagreed: ``There are substantial differences between policing instate wineries and those out of state.''
Several justices appeared troubled by the notion of unequal treatment, although they also seemed uncertain about whether overturning state laws that have been in place since Prohibition was the solution.
The case involves a clash between two parts of the Constitution, with lower courts divided over which section should hold sway.
On one side is the 21st Amendment, which ended Prohibition in 1933 and explicitly granted states authority to regulate alcohol sales. Twenty-four states have laws that generally require outside wineries to sell their products through licensed wholesalers in the state. Michigan and New York allow instate Internet or telephone sales of alcoholic beverages. Some other states allow such sales, others do not.
The Constitution also implicitly prohibits states from passing laws that discriminate against out-of-state businesses. That provision has been embraced by wine makers who hope to reach faraway Internet customers looking for favorite U.S. vintages unavailable in their home states.
While the 2nd U.S. Circuit Court of Appeals sided with New York in upholding the state restrictions, the 6th Circuit, based in Cincinnati, Ohio, struck down Michigan's laws as unconstitutionally protectionist.
``Michigan wineries enjoy both greater access to consumers who wish to have wine delivered to their homes and greater profit,'' the 6th Circuit stated, in ruling for wine consumers Ray and Eleanor Heald of Troy, Mich. ``Out-of-state wineries, on the other hand ... may be shut out of the Michigan market altogether if unable to obtain a wholesaler.''
The stakes are high in the $21.6 billion wine industry. States collect millions of dollars in alcohol taxes and claim the established system helps stem fraud and underage drinking. They argue they have less enforcement power over out-of-state sellers who aren't licensed.
``Allowing Internet sales of a highly dangerous and highly regulated product, such as alcohol or tobacco, is a genuine concern for state regulators,'' attorneys general from Ohio and 32 other states argue in a friend-of-the-court brief backing Michigan.
Owners of family owned wineries such as Juanita Swedenburg in Virginia disagree. They say there are other, less-restrictive ways to control underage drinking, such as requiring shipping companies to verify recipients are 21 or older, that don't burden wineries with hefty middlemen's fees.
Since 1980, the number of wineries has quadrupled nationally to more than 3,700 this year, and their survival depends on state laws that give them a fair shake, the National Association of American Wineries argues in a friend-of-the-court filing.
Tuesday's case only involves wine sales, but industry groups representing distributors for beer and other alcohol also have asked the high court to rule for continued state regulation, believing that the justices' decision eventually could apply to them.
The Washington-based Institute for Justice says the 24 states that ban direct interstate shipments are Alabama, Arizona, Arkansas, Connecticut, Delaware, Florida, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Ohio, Oklahoma, Pennsylvania, New Jersey, New York, South Dakota, Tennessee, Utah and Vermont.
The cases are Granholm v. Heald, 03-1116; Michigan Beer & Wine Wholesalers Association v. Heald, 03-1120; and Swedenburg v. Kelly, 03-1274.