Law and Wine (Part 2)

The story so far: In Federal District Court in Seattle, mercantile giant Costco Wholesale Corp. is suing the Washington State Liquor Control Board, charging that the board's requirement that all shipments of wine from out of state go through a licensed distributor is an unfair restraint of trade under the Sherman Antitrust Act. Meanwhile, in Washington, D.C., a couple of boutique winemakers have persuaded the Supreme Court of the United States to listen to their complaint that state laws in New York and Michigan prevent them from selling in those states, in violation of the Commerce Clause of the U.S. Constitution. (See Sips, Dec. 15.) Different as the legal grounds for each argument may be, the two cases attack the same weak point in state laws passed to control alcohol distribution after the fall of Prohibition. Almost half the states in the union opted to forbid out-of-state wineries from selling their products directly to in-state consumers. In these states, wine must first be sold to a wholesaler/ distributor, which then is allowed to sell to stores, restaurants, etc., after adding a hefty markup to the price. The states defend this practice as a way of keeping a sharp eye on who buys wine where. (Typical argument: "If wineries can ship orders directly to consumers, teenagers would use it as a way to get boozed up without their parents or the state knowing.") Winemakers dismiss that argument as a smokescreen. The real reason for preventing direct sales, the winemakers' suit says, is to guarantee the vested interest of wine distributors, who tend to be friendly with state legislators and are free-spending at political contribution time. The Supreme Court long paid little attention to this conflict between states' regulatory rights and the free-trade interests defended by the Commerce Clause. But the interstate shipment of wine is now a big and rapidly growing business, with wineries operating in every state in the continental U.S. Making out-of-state wineries spend money or jump through hoops that in-state wineries don't have to is obviously discriminatory. The question is: Does the state's right to regulate alcohol trump that argument? Judging by the questions asked during the hearing on Tuesday, Dec. 7, the court didn't think much of the state attorney generals' plea to protect our youth from the seduction of $75 boutique cabernets. Justice after justice reduced the defense lawyers to stuttering silence. The plaintiffs' attorneys barely had to speak; words like "protectionism," "discriminatory," and "level playing field" fell freely from the lips of the Band in Black. Few familiar with the court's style would disagree with the judgment of The New York Times' veteran legal reporter Linda Greenhouse: "Consumers who want to order wine directly from out-of-state wineries will soon be able to do so with the court's blessing."

comments powered by Disqus

Friends to Follow