Legal Analysis of Wholesalers Shameful Bill To Stop Wine Shipping

National beer wholesalers of america The alcohol wholesalers recent success in getting H.R. 5034 introduced in the House of Representatives is a straightforward effort to turn back the clock on a well-regulated, problem-free direct shipment of wine and to completely exclude all wine shipments across state lines by wineries and wine retailers. In fact, the entire, shameful bill is directed against the 2005 Granholm v. Heald Supreme Court decision that helped open the door to consumer access to wine and that allowed smaller, artisan wineries to flourish.

In the Granholm decision, the Supreme Court made clear that a state law that discriminated against out-of-state wine shippers was a violation of the Commerce Clause and the U.S. Constitution if there existed less discriminatory means of achieving the state's goals of temperance, an orderly market in alcohol and and tax collection:

"the [Supreme] Court has held that state regulation of
alcohol is limited by the nondiscrimination principle of the
Commerce Clause. When a state statute directly regulates or discriminates
against interstate commerce, or when its effect is to favor
in-state economic interests over out-of-state interests, we
have generally struck down the statute without further
inquiry….Our determination that the Michigan
and New York direct-shipment laws are not authorized by the
Twenty-first Amendment does not end the inquiry. We still must
consider whether either State regime “advances a
legitimate local purpose that cannot be adequately served by
reasonable nondiscriminatory alternatives.”

To put it more simply, if a state wants to pass discriminatory legislation against out-of-state wine shippers, it must demonstrate that there are no non-discriminatory ways to achieve its goals of temperance, an orderly market and tax collection. The court, in fact, found that there were many other non-discriminatory means of achieving these goals.

H.R. 5034 would tell the court, via amendment of the Web-Kenyon Act, that it is the policy of the U.S. Congress that states may enact discriminatory wine shipping laws and, if challenged in court, do not have to show that there are no other non-discriminatory means available to achieve their goals of temperance, an orderly market and tax collection. H.R. 5034 says:

"Notwithstanding that the State or territorial law may burden interstate
commerce or may be inconsistent with an Act of the Congress, the State
law shall be upheld unless the party challenging the State or
territorial law establishes by clear and convincing evidence that the
law has no effect on the promotion of temperance, the establishment or
maintenance of orderly alcoholic beverage markets, the collection of
alcoholic beverage taxes, the structure of the state alcoholic beverage
distribution system, or the restriction of access to alcoholic
beverages by those under the legal drinking age."

Put more simply, if a state passes a ban on out of state wine shipping, while allowing its own in-state wineries to ship wine, all the state must do if the law is challenged in court is show that the law would have some effect on promoting temperance, collecting taxes, creating an orderly market, preventing minor access or upholding the states alcohol regulatory structure. How would they demonstrate this? The law would merely have to say this is the intention of the law. That's all…That's it.

H.R. 5034's BIG LIE
Some have claimed that certain language in H.R. 5034 would prevent the passage of discriminatory laws that keep out of state shippers from sending wine to consumers. They point to this language in the proposed bill:

"(b) Construction of Congressional Silence- Silence on the part of
Congress shall not be construed to impose any barrier under clause 3 of
section 8 of article I of the Constitution (commonly referred to as the
`Commerce Clause') to the regulation by a State or territory of
alcoholic beverages. However, State or territorial regulations may not
facially discriminate, without justification, against out-of-state
producers of alcoholic beverages in favor of in-state producers."

But even this language is pointed directly at the Granholm v. Heald decision with the goal of completely overturning that decision. In this Supreme Court decision, the court looked closely at the reasons the states gave for wanting discriminatory laws against out of state shippers and found all the justifications wanting:

"In summary, the States provide little
concrete evidence for the sweeping assertion that they cannot
police direct shipments by out-of-state wineries. Our Commerce
Clause cases demand more than mere speculation
to support
discrimination against out-of-state goods. The burden is
on the State to show that ‘the discrimination is
demonstrably justified."

What's important to note about the above language in H.R 5034 is that it does not say the state may not "facially discriminate against out-of-state producers". It says the state "may not facially discriminate, WITHOUT JUSTIFICATION…" And as we saw above, this new law would provide a state with the ability to simply announce that the discriminatory law is meant to protect minors or assure tax collection…NOT THAT the discrimination is the only way of protecting minors or assuring tax collection. This is important. It gives states free reign to do what they like and renders the bill's "may not facially discriminate" language meaningless.

To put it more simply, under H.R. 5034, the states need only offer "mere speculation" in order to support and make constitutional discriminatory laws that will most definitely be introduced into state legislatures if the bill passes through Congress.

The National Beer Wholesalers Association, who wrote this bill, and the Wine & Spirit Wholesalers of America, who also support the bill, have produced an extraordinarily cynical and deceptive bill in H.R. 5034. They have done so by carefully deconstructing the key holdings and principles of the 2005 Granholm v. Heald Supreme Court Decision.

In the National Beer Wholesalers Association's press release congratulating themselves, they come right out and attempt to pass off deception as a truth:

"The CARE Act aims to clarify congressional intent that states have
primary authority to regulate alcohol; prevent the additional erosion
of state-based alcohol regulation through the expansion of the Granholm v. Heald decision, but not allow facial discrimination against out-of-state alcohol producers."

This is shameful. But what's worse is that the beer wholesalers know it's shameful yet they do it nonetheless.

10 Responses

  1. David Honig - April 19, 2010

    No disrespect, but that’s not a legal analysis. It’s just a description. A legal analysis starts with your description, then asks the effect of the bill, should it become a statute.
    I will try to find a few minutes to really break it down over the next few days, but the bottom line is that Congress does not get to tell the Supreme Court how it is to go about determining whether a state law is constitutional. The tell is in the first few words:
    “Notwithstanding that the State or territorial law may burden interstate commerce…”
    Ummm, NO. Unless the Supreme Court turns the clock WAAAAY back, and un-incorporates the Commerce Clause, that is a non-starter.
    I am not saying your description does not capture the intent of the wholesalers, just that this is far short of a legal analysis, and fails to discuss the effect of such a bill, which is likely, at best, little more than a “friend of the court brief.”

  2. John Kelly - April 19, 2010

    David – very true. BUT – if Congress passes HR 5034 and the President signs it into law (unlikely on both counts, but one never knows these days) then it could be years before the Supreme Court overturns this patently unconstitutional proposed legislation.
    And just to be totally on point – if Congress modifies the Constitution with a 2/3rds vote, anything they determine is Constitutional by definition. Not much the Supremes can say about it. That is what is so astonishing about the proposed legislation – it seems to me that, as proposed, it rises to the level of a Constitutional ammendment.

  3. Tom Wark - April 19, 2010

    I look forward to your analysis of this bill. But keep in mind when you do that analysis that discrimination against out of state interests where alcohol laws is not unconstitutional on its face if the state can offer a justification for that discrimination that is in accord with the length to which the 21st amendment and federal legislation allows states to regulate. This law rebalances the relationship between the Commerce Clause and the 21st amendment and Web Kenyon.

  4. David Honig - April 20, 2010

    The Constitution cannot be amended by a vote on a statute in Congress. Even if both the House and the Senate pass a bill by unanimous votes, that does not amend the Constitution.
    Tom, I agree that is what the legislation attempts to do. Whether it does so or not is the question.

  5. JohnLopresti - April 20, 2010

    Somewhat off-topic, I wonder about competitiveness in price of wines shipped from states with “right-to-work” laws.

  6. James McCann - April 20, 2010

    A bill to stop wine shipping? Proposed by the BEER Wholesalers? While it will certainly have an effect on the wine business, I believe that it’s pupose is to combat direct shipping by breweries to large licensees such as chain grocery stores, convenience stores, etc…
    Keep in mind that these will ultimately remain local fights, as this law will not force anyone to change existing shipping laws. Rather, it will make it more difficult to challenge existing laws.

  7. Allen Dale Oson - April 20, 2010

    Tom was right the other day when he suggested that a real problem in our efforts to stop this bill is that the general public will have little or no interest in it. Agreed, it seems as if it has little chance to succeed, but there is a distinct possibility that it could slip through, regardless of all our speculation, prognsications, and analysing simply because not enough press or public is paying attention. We must attract enough attention to make all legislators aware that wine consumers will not lay back and let happen what will happen. This Saturday, we Hoosiers (VinSense,Inc.) will see some 5,000 consumers at the annual Indiana Wine Fair in Story, and I have already alerted my Member of Congress to try to put a stop to this shameless initiative. We also expect to see a handful of Congressional wannabes at the Fair. We shall not remain silent.

  8. electric winch - April 21, 2010

    OK,That is right

  9. Angela Logomasini - April 21, 2010

    I am confused by some of these comments. Are some of you suggesting that Congress can’t give states the right to regulate commerce?
    Unfortunately,this bill would not be unconstitutional. The Constitution grants Congress the power to regulate interstate commerce and that includes the right to “consent” to certain state-imposed trade barriers. So if Congress grants states the right to limit wine commerce, it can’t be overturned.
    This is how the commerce clause has been interpreted and, such powers are clear in Article I Section 10 reads:
    “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing …”
    In other words, if Congress consents, states can restrict interstate trade.

  10. Bubba - February 10, 2012

    Hey Tom. Bubba here. What is your point? The funny thing about legislation in the US is that by the time you hear about it, the decisions have already been made. I love C-SPAN. It’s like Golf — very soothing. Hey I tasted the most amazing Condrieu the other day — it tasted like worked leather.
    Tom you are a very talented critic. You are not an attorney or a legislator or any credible force in reforming 3-tier. Please talk about what you know – wine.

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