The Curmudgeon and the Three Tier System

Few wine writers live up to their moniker better than Jeff Siegel, who has long called himself “The Wine Curmudgeon”. In addition to sussing out the best and worst value wines, Jeff also regularly comments on the business of wine. In his latest article, 2019 Wine Trends, Siegel paints a disturbing picture of wine in the U.S. However, he also speaks to the upcoming Supreme Court case, Blair v Tennessee and warns that we shouldn’t expect the high court to deliver any changes to the archaic three-tier system:

“More three-tier reform failure. Yes, I am well aware that every smart liquor attorney and wine analyst expects the Supreme Court to kick the three-tier system in the groin in the upcoming Tennessee retailers case. And I want them to be correct. But it ain’t going to happen. This Supreme Court, which sees the 1950s as the Golden Age of American life, isn’t going to change three-tier in any way, shape, or form.”

I want to remind those interested in this case that the outcome really isn’t expected to defy or change the “three-tier system”.

This term, “three-tier system”, seems to have become a synonym for “state alcohol laws”. This kind of overarching definition of “three-tier system” confuses the issues and makes it difficult to discuss all kinds of things related to wine and the wine industry. So, let’s be very, very clear as to what the three-tier system is.

“Three Tier System” describes a common element or state alcohol regulatory systems in which alcohol producers, alcohol distributors and alcohol retailers (restaurants and stores) are separately licensed. Additionally, this system also requires that no single entity may hold more than one such license at a time. Generally, alcohol producers may not also be retailers. Retailers may not generally be wholesalers. Wholesalers may not also be producers. Put another way, a state’s three-tier system governs how alcohol makes its way to consumers in the state.

There is any number of problems with this kind of a regulatory system, not the least of which is that it concentrates too much market power in the hands of distributors. However, the three-tier system only represents a part of a state’s alcohol regulatory system. For example, the specific law in Tennessee that is directly at issue in the coming Supreme Court case requires that an applicant for a Tennessee retail license must be a resident of the state of Tennessee for two years before receiving said licenses. This law has very little to do with Tennessee’s three-tier system of licensing producers, distributors and retailers separately and preventing any one entity from holding licenses in two or more tiers. No matter what the Court rules, it’s unimaginable that the legality of the three-tier system will be brought into question.

So, while Jeff is right that the Blair v Tennessee case isn’t going to “change the three-tier system in any way, shape or form,” it was also never a case that was ever expected to change the three-tier system.

What is being brought into question in the Blair case is the degree to which a state may discriminate against interstate commerce based on the grant of power to the states from the 21st Amendment. It’s a question of balancing interests between the Federal governments exclusive right to regulate interstate commerce and the states’ rights to regulate alcohol within their borders.

I have a bit of the curmudgeon in me, just like Jeff. But recently Jeff has ramped up his curmudgeonyness where the state of the American wine industry and wine consumer are concerned. We would all do well to read what he has to say, even if you don’t possess my, let alone his, level of curmudgeon. It’s always a good idea to see what the astute naysayers are saying. And besides being a curmudgeon, Jeff is astute.


One Response

  1. VVP - January 11, 2019

    The Twenty-First Amendment does not immunize states from violating constitutional provisions simply because they have the power to regulate liquor within their borders, said Institute for Justice. And they ate totally right.

    “The transportation or importation into any State… of the United States for delivery or use…” phrase in its Section 2 is clearly nothing else, but subject to federal power to regulate such transportations and importations.If you read the added section 2004 at the end of the Amendment you should get the point.

    Three-tier system and interstate shipping are not the questions in the Blair case, so any attempts to bring them to attention will be ignored, as the case itself, where one defendant is resident, but the other is not, already has enough complicity.

    Wine retailers, being it Californian wine only wholesaler/retailer or being it a winery do hold more than one such license at a time. So they are clearly not in compliance with the three-tier requirements. There is no discrimination against them in any State where three-tier is mandatory.

    The answer on interstate shipping, to a question who is actually bottlenecks it, you will find in your own recent post. Your lovely common carrier FedEx refuses to provide service to you and refuses to transport and deliver your own wine from you to you. Enjoy!

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