How Supporters of Unequal Wine Laws Think

A recent court decision is causing something of stir within the insular circles of beverage alcohol law and among Kentuckians, who as a result may one day find they a bottle of Pinot in the same store they purchase their pasta ( I know…crazy, radical, harrowing idea, that!)

In Kentucky, according to an ancient law, wine may be sold at a drug store that also sells food items. But a grocery store, where you can also purchase pharmaceuticals, wine may not be sold. As you might imagine, grocery stores wanting to serve their customers who want to buy Pinot with their pasta and thinking their unequal treatment where selling wine was concerned, suggested a legislative change allowing grocery stores to sell wine.

That didn't work. The powers that be arrayed against them.

So the grocery stores did what any good American grocery store would do. Filed a lawsuit challenging this arbitrary distinction between grocery stores and drug stores.

On Tuesday a Federal District Court Judge in Kentucy ruled that there was no rational basis for the distinction, that the distinction violated the Equal Protection Clause of the Constitution and, thus, the Kentucky prohibition on wine and spirits being sold in grocery stores is unconstitutional.

Something has to be pointed out here. The judge, in determining if the ban on wine sales in grocery stores vas a violation of equal protection, applied what is called "The Rational Basis Test". Using this test, all the state must do to defend its law is show any "rational" basis for the unequal treatment of grocery stores and drug stores in Kentucky law. It is the lowest legal hurdle for a state to jump in order to defend one of it's laws.

It turns out, after working through a number of potential rationales for this law put forth by the state, the judge could find no rational basis for the unequal treatment. None. Zero. It was an arbitrary distinction between drug store and grocery store  that the judge couldn't even find an historical reason for in the record of Kentucky's legislative affairs.

The ruling will either stand and Kentucky must find a way to eliminate the unequal treatment or the ruling will be appealed to a higher court.

As you might imagine there are are those, besides Kentucky drug stores, that don't like this legal decision. There are those that in all cases defend state alcohol laws and the right of state to formulate any alcohol law, no matter how weird and arbitrary, that don't like this decision. I want you to read closing a comment from one such entity:

"This decision, whether it stands or not, underscores oft-voiced need for regulators/legislators/industry members to develop arguments/data that support alc bev laws that on their face seem “arbitrary” to non-insiders."

This comment comes from Beer Marketers Insight, a newsletter serving the beer industry that, as a journalistic outlet, is a staunch defender of a state's right to pass any alcohol law, no matter how arbitrary. The decisiion is, according to Beer Marketers Insight, "a blow to states rights."

"Seem Arbitrary"? Let's review. Drug stores, that also may sell consumable goods may sell wine. Grocery stores, that also may sell drugs, may not sell wine. "Seem Arbitrary"?

This is what consumers are up against. Industry insiders who find protection in arbitrary laws that burden free trade and consumer interests that must be defended at all costs. There are no arguments or data that demonstrate a rational reason for these kind of protectionist and arbitrary laws. Yet such arguments must be "developed". Out of what? The airy foam of beer suds? I might also point out that the folks at Beer Marketer's Insight and their fellow travellers that these protectionists, market diminishing and anti-consumer laws seem arbitrary to industry INSIDERS too.

The Judges ruling can be downloaded here. For a chuckle, read the footnote on page 16.

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9 Responses

  1. Donn - August 16, 2012

    Tom, to quote good old David Byrne of Talking Heads: Stop Making Sense. That seems to be the wholesaler mentality. Restrict trade in order to max prices and margins. Never mind expanding the size of the market. And you gotta love the after-the-fact notion, to develop arguments that justify current law, to find them somewhere in the penumbra and emanations that a formerly god-worshipped Supreme Court justice found for his supporting rational.
    It is so contrary to all evidence in a free world (?) which shows that expanding the access and ease results in a larger market.

  2. Kathy - August 16, 2012

    The entire decision is an interesting read, thx Tom. As this does not change the number of licenses available from the KY ABC (distributed by population), it will be curious how that plays out.
    According to the (just-voted-wet)Somerset (KY) Journal: “[Judge] Heyburn’s ruling comes on the eve of the first meeting of The Governor’s Task Force on the Study of Alcoholic Beverage Control Laws in Kentucky. Gov. Steve Beshear put together the 20-member panel of lawmakers, activists, ABC department administrators and industry hands to study if and how Kentucky’s liquor laws could be overhauled. The panel is set to meet Thursday.”
    That is the more interesting story for the future of direct shipping in the felony state.

  3. Tom Wark - August 16, 2012

    Kathy,
    Good points. I have little faith in the task force. Is there a consumer representative on it? Doubtful. But, this decision willake for interesting discussions among those on the task force.
    Tom…

  4. Keith Pritchard - August 16, 2012

    In Ohio a winery in Kentucky can sell directly to a grocery store or other by obtaining a B2A permit. I have a B2A permit in Ohio and I cannot sell to a grocery store or other because I also must have a “Food Processing Facility” license from our Ohio Department of Agriculture. This entails a whole rigamarole of food safety regulation and inspection not needed by a Kentucky winery to distribute in Ohio. Since I refuse to comply with this nonsense regulation I cannot distribute in Ohio. For more information see: http://www.freethewineries.com or http://www.facebook.com/FreeTheWineries

  5. Alex - August 17, 2012

    Kentucky is a weird state with the alcohol. Were they make Jack Daniels in that county is a dry county. Right were one of the biggest whisky makers are it’s a dry county.

  6. Keith Pritchard - August 17, 2012

    I would think this equal protection issue is violated by this Food Safety law and regualtion in Ohio and our Ohio Department of Agriculture. There is certainly no rational since to it here.

  7. Scott - August 17, 2012

    To be clear, Alex, Jack Daniel’s is made only in Tennessee.

  8. Kathy - August 18, 2012

    Here’s the list of who is on the KY task force.
    Don’t see any public members.
    •Robert D. Vance, chair, Public Protection Cabinet
    •Larry R. Bond, Governor’s Office
    •Sen. Tom Burford (R), Kentucky State Senate
    •Sen. Jimmy Higdon (R), Kentucky State Senate
    •Rep. Dennis Keene (D), Kentucky House of Representatives
    •Rep. Larry Clark (D), Kentucky House of Representatives
    •Tony Dehner, Commissioner Dept. of Alcoholic Beverage Control (ABC)
    •Danny Reed, Distilled Spirits Administrator, ABC
    •Stephanie Stumbo, Malt Beverage Administrator, ABC
    •Frank Harris, Mothers Against Drunk Driving
    •Roger Leasor, Kentucky Liquor Retail Coalition
    •Gay Dwyer, Kentucky Restaurant Association
    •Daniel R. Meyer, Wine and Spirits Wholesalers of Kentucky, Inc.
    •Eric Gregory, Kentucky Distillers’ Association
    •Lowell Land, Kentucky Vineyard Society
    •John Harris, Kentucky Beer Wholesalers’ Association
    •Jennifer Doering, Kentucky Malt Beverage Council
    •Adam Watson, Licensed Microbrewers
    •Sheriff Jerry “Peanuts” Gaines of Warren County, Kentucky Association of Counties
    •Mayor Tom Bozarth of Midway, Kentucky League of Cities
    •James “Jitter” Allen, Licensed Large Brewers
    •Neil Wellinghurst, Kentucky Retail Federation
    Thursday’s meetings consisted of three committees – Licensing, Local Option Election, Public Safety. Public forums in October.
    http://abc.ky.gov/Pages/taskforce.aspx
    KY wet dry counties, cities, golf courses, etc. abc.ky.gov/Licensing%20Resources/Wet%20Dry%20List.pdf

  9. Tom Wark - August 18, 2012

    Kathy, there reason there are no strictly consumers on the task force is because there is no organization or group that represents the interests of alcohol consumers. Furthermore, I’m betting that the view of those organizing the task force is that as long as elected officials are on the task force,the public is represented. This however is a farce as we know. It is much more likely that an elected representative is looking out for a particular interest of the industry.
    Thanks for listing this.


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