Coming ruling on Direct Shipping of Wine: Implications

Many of us have waited a very long time for the direct shipping issue to come before the Supreme Court. Up to the point in December when the arguments were heard, most of the debate was over the constitutional issues and the effect of baring wineries from shipping direct. Little discussion was given to what would be the outcome of a ruling that found discriminatory anti-shipping laws unconstitutional.

The media, in its fashion, has really not investigated this question. Rather, in their reporting o this issue it has always been assumed that if these anti-shipping laws are struck down, wine will flow freely throughout the U.S.

This is not the case.

Essentially the wineries are arguing that a state can regulate the sale of alcohol nearly anyway it wants to, as long as the playing field is level for both in-state and out of state sellers. Their argument is that the Commerce Clause of the Constitution demands this. If this is correct, what are its implications. 

Best case scenario is that states would no longer bar shipment from out of state wineries. A California winery shipping to a New York resident would be legal, just as it is legal now for a New York winery to ship to a New York resident. Perhaps their would be a permit fee involved, and all wineries would have to pay the state taxes. But the door would be open.

The bad scenario is states would react to the ruling by barring ALL direct shipments to state residents. This would hurt in-state wineries. The important point here though is that a "positive ruling" could lead to negative results for all parties involved….accept the wholesalers, who under this scenario would have complete control of alcohol distribution in a state that chooses to shut down all direct shipping. There is no doubt that even in states where it is now legal to ship direct, the wholesalers will lobby their legislatures to change the rules and make all direct shipping illegal.

But there are other potential consequences. If it is illegal for a state to discriminate and only allow certain wineries to ship direct, how would this affect those states that currently allow direct shipping only with other states that do the same…the so-called "reciprocity" states. Aren’t these states discriminating? In fact, this very point came up during the Supreme Court arguments. It is no stretch at all to interpret a ruling saying that a fair playing field is necessary to also mean that those 26 states that now have reciprocity agreements allowing direct shipping are unconstitutionally discriminating against states that are not part of the reciprocity framework. You can bet that if the wineries win in the Supreme Court there will be immediate lawsuits filed by the wholesalers challenging the constitutionality of reciprocity agreements.

And what about wholesalers? Most states’ laws demand that a wholesaler must be licensed in a state to sell wine to retailers and restaurateurs in that state. Yet, it is conceivable that a Supreme Court ruling outlawing discriminatory anti-shipping laws could be interpreted in a way that suggests the laws governing wholesalers is also unconstitutional. States are in affect saying that a New York Wholesaler can sell wine to a retailer or restaurant in New York, but a Pennsylvania wholesaler cannot do this. There has been a great deal of discussion on this topic. In fact, this implication was, again, brought up during the Supreme Court arguments. This possibility strikes fear into the heart of many wholesalers.

Finally, what of wineries being able to sell direct to retailers and restaurants in another state, bypassing the wholesaler completely. Another possibility that keeps the wholesalers up at night, this too has been discussed as an implication of the Supreme Court’s coming ruling.

The Supreme Court will rule on the wine issue sometime between now and June. Then another round of lawsuits surely begins.

Posted In: Shipping Wine


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