A Frontal Assault on Granholm v. Heald

Posted by Tom Wark on May 10, 2010

In 2010, when the efficient and robust interstate movement of goods has become so central to the economy of the United States and to the profitability of nearly every industry, should states be given constitutional protection for laws that intend to restrict interstate commerce?

Put another way and with H.R 5034 in mind, should Congress insert itself into an inter-industry disagreement over the meaning of a changing marketplace for wine by giving proponents of state-based discrimination the tools to eviscerate from 21st Amendment jurisprudence the critical principle of equality of access to markets that has so consistently been defended by the Courts?

This is what's at stake in considering H.R 5034.

Stated in a more base and political way, should congress put the future of the American wine marketplace  in the hands of an enormously powerful special interest who has, for the past 20 years, worked feverishly to restrict consumer access only to those wines sold by the very special interests in question: middlemen wholesalers?

I would argue that no matter how you slice it, any and all support for H.R. 5034 leads to the consequences laid out above. Furthermore, I believe it is clear that any argument in support of H.R. 5034 fail to address the realities of the current regulatory environment for alcohol, which, if anything, has seen an enhancement over the past 20 years as consumer access to wine has increased with the dismantling of discriminatory consumer and market access laws.

HR 5034 is a frontal assault on the principle laid out in Granholm v. Heald that "in all but the narrowest circumstances, state laws
violate the Commerce Clause if they mandate “differential
treatment of in-state and out-of-state economic interests that
benefits the former and burdens the latter.”

HR 5034 turns this principle on its head so that a future rendering of the meaning of the Commerce Clause as it relates to the 21st Amendment would, in an HR 5034-world, read like this:

"Differential treatment of in-state and out-of-state economic interests that benefits the former and burden the latter shall in all cases be allowed as they relate to state-based alcohol laws."

H.R.5034 is, then, a stunning and complete reversal of the principles and teachings of the Granholm v. Heald Supreme Court ruling that emphasized this:

"The 21st Amendment did not give States the authority to pass nonuniform laws in
order to discriminate against out-of-state goods, a privilege they had
not enjoyed at any earlier time."

Under H.R 5034, Congress would remove state alcohol laws from the orbit of the Commerce Clause in a way that the Supreme Court specifically determined it was critical should not occur

Despite the alcohol wholesalers' hysterical claim of a legal morass that has resulted from lawsuits challenging state alcohol laws in 25 states, it is impossible to point to a single result from any of these lawsuits that has made it any more difficult, let alone impossible, for state alcohol regulatory bodies to monitor the distribution and sale of alcohol in their states. In fact, the primary result of these lawsuits has been increased regulation of the direct shipment of wine, increased collection of tax revenue on the sales of wine and a more orderly market for wine in each and every state that has enacted new laws and regulations based on the lawsuits in 25 states.

Neither alcohol wholesalers, alcohol regulators or state attorneys general can point to any any significant problems of minors obtaining alcohol, the maintenance of a disorderly market, or problems with collection of tax revenue that have resulted form the lawsuits in 25 states. 

The claims of states falling headlong into alcohol deregulation and market chaos are nothing but a chimera.

And yet based on this creation of the alcohol wholesalers imagination, Congress is being asked to fundamentally undue a fair and carefully crafted test for determining if a state alcohol law is constitutional and put in its place a new standard for determining if a law, no matter how discriminatory or anti-consumer, can stand up to judicial scrutiny: no standard; all discriminatory state alcohol laws are valid as long as the law simply states, without proof, that it is necessary.

Wholesalers claim that H.R. 5034 protects the principle of non-discrimination that is explained in the Granholm v. Heald Supreme Court ruling and that no direct shipping law is effected by H.R. 5034. But this is a radical attempt at deception. And there is a simple way to demonstrate this:

Ask those that support H.R. 5034 if a state could have any expectation of seeing a discriminatory law that bans shipping by out-of-state wineries upheld if challenged. When they are forced to tell the truth by answering "yes," ask them how. When they respond with, "By simply citing the perceived need for this law to defend the three tier system from attack and to stop minors form obtaining alcohol via direct shipment," ask them if it matters that there may be less discriminatory ways to achieve these goals. If proponents of H.R 5034 responds with anything other than, "It doesn't matter since the law would still be constitutionally valid according the H.R. 5034," they will be lying.

As the American economy shifts in fundamental ways to one that is sustained by fulfilled consumer expectations that they can obtain goods via direct shipment, is now the time for Congress to invite a radical departure from the principles of equal access to goods and markets?

As the American wine market continues to adapt to fundamental conditions specific to the 21st century, is now the time to cement in place control of the market by mandated middlemen invented in the 1930s to respond to problems of the 1910s that no longer exist?