Like Other Goods, Wine Should Move Freely In Interstate Commerce But It Doesn't

Posted: Nov 08, 2017

Let’s say that you like wine and sometimes like to shop for it online because you can’t find a particular one you enjoy in your area. You find that a shop in another state has the wine you want, and place an order for a case or two.

Unfortunately, you may run into a problem. Unless you live in one of the 14 states that allow direct out-of-state shipments, you won’t be able to make the purchase. The rest of the states forbid such shipments as a political favor to a potent special interest group – wine and liquor wholesalers. They want to restrict competition that cuts into their business and they’re happy to use their considerable clout with state legislators to protect their profits.

As usual when interest groups team up with politicians, consumers bear the cost.

In his October 23 New York Times column, Eric Asimov wrote, “For consumers who live in states stocked with fine-wine retailers, like New York, the restrictions are an inconvenience. For consumers in states with few retail options, they are disastrous. It’s hard enough outside major metropolitan areas to find wines from small producers. The crackdown makes it that much harder.”

When I saw Asimov’s column, I was puzzled. Hadn’t the Supreme Court settled this issue years ago in favor of commercial freedom? I thought so, but it turns out that it hadn’t.

In 2005, the Supreme Court heard two cases involving state restrictions against the shipment of wine, consolidated under the name Granholm v. Heald.

The cases challenged laws in New York and Michigan that allowed wineries located within the state to sell directly to consumers, but prohibited out-of-state wineries from doing so. In a 5-4 decision with a most unusual split of justices, the majority ruled that such laws violated the Constitution’s Commerce Clause, which doesn’t permit states to enact laws that discriminate against goods or services from other states.

Justice Kennedy wrote the majority opinion, declaring that laws such as those of Michigan and New York “deprive citizens of their right to have access to the markets of other States on equal terms.” Joining in his opinion were Justices Scalia, Souter, Ginsburg, and Breyer. Kennedy also dismissed the arguments that these laws were needed to combat underage drinking, pointing out that there were better means available for states to do that than by interfering with interstate commerce.

By George Leef
November 7, 2017

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