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Supreme Court on Wine Sales

May 16, 2005 at 12:00 AM EST
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RAY SUAREZ: In today’s 5-4 decision, the Supreme Court struck down two state laws that ban wine sales from out-of-state wineries. The Justices ruled that New York and Michigan violated the commerce clause by prohibiting outside wineries from directly shipping to consumers, but allowing in-state wine makers to do so. More than 20 other states have similar laws that now will be called into question. Here to walk us through today’s ruling is NewsHour regular Jan Crawford Greenburg, Supreme Court reporter for the Chicago Tribune.

And Jan, who were the plaintiffs in this case, and what was the conflict that got it up to the high court?

JAN CRAWFORD GREENBURG: Well, many small family-owned wineries, consumers, wine lovers wanted to be able to have access, wanted to be able to — the wineries wanted to be able to sell their products directly to the consumers. The smaller wineries thought that was an important market for them because sometimes, you know, they don’t make enough, produce enough wine to have the big wholesalers get them in the big liquor stores.

So, they wanted to have access to these states in these markets that allow the in-state shipment and delivery of wine, in-state wineries that could also sell wine directly to consumers. So they sued. They sued in Michigan, and they sued in New York, and they argued those laws discriminated against them; the laws allowed the in-state wineries to sell directly to consumers. They should also allow the out-of-state wineries to reach those consumers as well. And they said it was important to their livelihood and to opening up these new markets.

RAY SUAREZ: So how did the majority explain their decision to strike down those laws?

JAN CRAWFORD GREENBURG: Well, as you said, the ruling was 5-4, and it agreed, this decision below, and as you said there was a case out of Michigan and a case out of New York, and the appeals court in those cases split. And today the court agreed with the Ohio court interpreting the Michigan law, and said that the Constitution’s commerce clause prohibits these kind of discriminatory laws.

Now the commerce clause is designed to give Congress the power to regulate interstate commerce and suggest that states cannot pass laws that would discriminate against out-of-state businesses. In its ruling today, the Supreme Court said that these laws do just that; they discriminate against the out-of-state wineries by allowing the in-state wineries to sell their products in ways the out-of-state wineries cannot. And as a result, those laws, the court said, are unconstitutional.

RAY SUAREZ: So in the collision between the long-standing state authority to regulate how alcoholic beverages are sold and the collision between that and the commerce clause of the Constitution, the Constitution won basically?

JAN CRAWFORD GREENBURG: Well, that’s right. And this case was interesting because it did involve two competing constitutional concerns. The opponents, the people who did not want to expand and have these broader direct sales of wine, the wholesalers, the distributors, some anti-alcohol groups, they argue that another constitutional concern came into play here, the Constitution’s 21st Amendment, which ended prohibition and gave states broad authority to regulate the transportation, importation of alcohol across state lines.

One of the appeals courts had agreed with that line of thinking. But today the Supreme Court said yes, the 21st Amendment gives states broad authority to regulate alcohol, but it does not give the states the authority to pass these non-uniform laws that would discriminate against out-of-state businesses. In effect, the commerce clause of the Constitution trumps the 21st Amendment.

RAY SUAREZ: Now there are frequently 5-4 rulings from this court. But was it an unusual five and an unusual four?

JAN CRAWFORD GREENBURG: It was. And if this case has split these lower courts; it also divided these Justices. And sure we talk about when we see these five to four rulings, we think the five more conservative joining against the four more liberal. But today Justice Anthony Kennedy wrote the opinion for the majority. He was joined by another conservative, Justice Antonin Scalia, and three liberals: Justices Ginsburg, Souter and Breyer.

In dissent Justice Thomas wrote the dissent, joined by Chief Justice Rehnquist, Justice O’Connor and perhaps one of the most liberal Justices on the court, John Paul Stevens, who also wrote a separate dissent. And the dissenters said that the words of the 21st Amendment were so clear, that the states should have the authority to make these decisions and regulate this type of sale.

RAY SUAREZ: Now, alcoholic beverage sales have been a big money spinner for states. They tax it in a special way, and mail order and Internet sales and all that has been a sort of tax-free, open market. Aren’t these inevitably going to come into conflict? Is there some tax issues at the heart of this?

JAN CRAWFORD GREENBURG: The states that had opposed these broader sales of wine had said that was one of their big problems, that it was harder to collect taxes and that they needed to be able to have the sales from the wine shop or the sales of the in-state wine so they could ensure that they were going to have this kind of — easily get the tax collection.

They also had argued that selling the wine online or on the Internet or by out-of-state distributors directly to consumers would make it easier for minors to have access to wine and promote underage drinking. The court today in the opinion by Justice Kennedy rejected both of those arguments. Justice Kennedy said that states that allow these kind of direct sales have not had any problem with tax collection. There are permanents and ways that they can go about reporting collecting taxes.

And he also said that minors have not really been the ones who are ordering these boutique wines, boutique wines through the Internet; that they want more instant gratification, and in states that allow some form of direct shipment, that has not been a problem. Twenty-seven states allow form of direct shipment of wine; thirteen of those states allow it only if the state where the wine’s coming from also allows the shipment, reciprocal privileges.

RAY SUAREZ: But does today’s ruling necessarily mean that those old laws will be struck down? Can’t some states say, well, that’s it, nobody can mail order wine?

JAN CRAWFORD GREENBURG: That’s exactly right. And what I was going to say 15 states now don’t allow any wine shipment in state or out-of-state. So this doesn’t affect them. The court’s decision today only said if you are going to allow wine shipments, you got to allow the in-state wineries and the out-of-state wineries to sell their wine to your residence. You can’t discriminate. You can allow ban it all or you can allow it all, but you can’t pick and choose between in state or out-of-state.

Today, the big open question after this ruling is what those, there are eight states that have this distinction, in-state and out-of-state, what those states are going to do. The chair of the Michigan Liquor Control Commission told reporters this afternoon she was going to recommend to the Michigan legislature that it just ban all direct shipments of wine instead of expanding it and allowing the out-of-state shipments. So the efforts now in those states will turn to the legislatures or even in New York, to the court and, of course, opponents, the distributors, and wholesalers will now make the argument, just ban it all, even the in-state.

RAY SUAREZ: Jan Crawford Greenburg, thanks for coming by.