Delivery by the Case

Delivery by the Case

Copyright 2004, Traffic World, Inc.

What wine goes well with a Supreme Court decision on interstate commerce?

Small wine shippers are hoping for a victory toast when the Supreme Court hears a wine shipping case later this year. In a case that could bring robust new shipping within the country, the court last month agreed to hear arguments bringing together appeals court decisions from Michigan and New York on whether states can restrict interstate wine shipping.

The case hinges on what Bill Nelson, vice president of WineAmerica, calls "a peculiar legal environment" that muddies the shipping of wine across state lines.

The Constitution''s 21st Amendment, which repealed Prohibition, gives states the authority to regulate alcohol. However, the separate Commerce Clause gives Congress the power to regulate interstate commerce.

Wine shipping laws vary greatly from state to state. Twenty six states allow at least limited direct shipping to consumers.

Supporters of state restrictions say the 21st Amendment supercedes the Commerce Clause. But wine shippers argue that Congress should have the power to regulate all commerce and that alcohol should not be singled out for separate treatment.

"The key to our side is that the reason there was a Constitution of the United States, to a large degree, was to get rid of barriers to trade that were inhibiting the United States," Nelson said. "The Constitution was designed to remove those barriers and to establish a national marketplace."

That''s the argument many express companies have used in pressing against state restrictions, and express delivery operators certainly would benefit from greater shipping of cases of wine. But transport carriers have not taken sides in this case.

Nelson and oenologists are pitted against states, which want to retain their rights when it comes to wine shipping, and against the liquor wholesale industry, which argues it can better control wine shipments than wineries could if they were allowed to ship whatever and wherever they wanted.

"We believe the Supreme Court will use this opportunity to let states know that they have the right to protect their communities, safeguard their children and track sales and distribution of alcohol within their boundaries," Wine and Spirits Wholesalers of America President and CEO Juanita Duggan said in a statement. "We agree with the vast majority of states that deregulating alcohol is a bad idea. We look forward to a ruling from the U.S. Supreme Court that once and for all resolves this issue and reaffirms a state''s right under the Constitution and federal law to protect its citizens against alcohol anarchy."

Duggan''s association represents nearly 500 members who control 90 percent of wine and spirits sold at wholesale. The U.S. Census Bureau counts 1,800 licensed U.S. wine and spirits wholesalers, who sell alcohol to vendors rather than to the general public.

States say they want to retain the rights to regulate the shipments of any alcoholic beverages, and they say the case could open the door to a greater erosion of their rights for both small-scale and large-scale alcohol shipping.

"Our position is the states are therefore free to regulate the importation of alcoholic beverages in any manner they see fit," said attorney James Goldberg, who represents the National Alcohol Beverage Control Association. The group, which filed a friend of the court brief in the case, is composed of the 18 states with state-operated liquor stores.

"The case from our perspective is about more than just wine," Goldberg said. "It''s really about the ability of states to control importation and transportation of alcoholic beverages into their states."

Last summer, the Federal Trade Commission issued a report on wine shipping regulations, concluding that the 26 states that allow wine to be shipped directly to consumers have adequate safeguards to keep shipments from minors. The report found that minors are unlikely to buy alcohol online, as those who buy wine directly from wineries often do.

Although the two sides are still working out who will argue the case before the Supreme Court, the Coalition for Free Trade, an advocacy group formed to advocate for greater wine shipping rights, has hired Kenneth Starr, who prosecuted President Clinton. He is expected to be one of the attorneys arguing in court on the side of the wineries.