The Case For Screwing Wine Lovers
Fourteen years ago one thing was clear to everyone concerned after the Supreme Court rendered its decision in Granholm v Heald: States that allowed their own wineries to ship wine direct to consumers but prohibited out-of-state wineries from doing the same had to erase that discriminatory treatment. There was little talk or concern then as to whether or not states needed to address discrimination in retailer DTC shipments.
In June 2019 when the Supreme Court issued its decision in Tennessee Wine v Thomas, we got a clear statement concerning how the older Granholm decision impacts retailers:
“Granholm never said that its reading of history or its Commerce Clause analysis was limited to discrimination against products or producers. On the contrary, the Court stated that the Clause prohibits state discrimination against all ‘out-of-state economic interests’ and noted that the direct-shipment laws in question ‘contradict[ed]” dormant Commerce Clause principles because they “deprive[d] citizens of their right to have access to the markets of other States on equal terms.’ “
Put simply, the same non-discrimination principles that forced states 14 years ago to reaccess and change their discriminatory winery DTC shipping laws must also now force states to reckon with their discriminatory retailer DTC shipping laws.
How this happens over the next several years will largely depend on who lawmakers in various states believe are their most important constituents. Should the changes in retailer DTC shipping laws address the concerns of wholesalers and retailers who fear competition from out-of-state sources? Or should lawmakers look to the interests of consumers? Depending on who’s interests are taken most seriously will determine how the discriminatory retailer DTC laws are changed to come into compliance with the Tennessee Wine decision and the U.S. Constitution.
States that currently discriminate against out-of-state wine retailers via protectionist anti-retailer shipping laws have two choices; the same two choices that similarly situated states had when they addressed their winery shipping laws after the Granholm decision. 1) eliminate the discriminatory treatment of out-of-state retailers by barring their own in-state retailers from shipping to local residents. 2) Allow out-of-state retailers to ship to residents in the state just as in-state retailers may currently do. In the vernacular, states may “level up” or “level down”.
Whether a state decides to level up or level down in their effort to bring their laws into compliance with the Granholm and Tennessee Wine Supreme Court decisions will depend entirely on whose interests lawmakers believe are most important. Are millions of consumers’ interests more important or are the interests of a tiny number of wholesalers and retailers who believe consumers should be restricted in the wines they may access in order to be protected from competition more important?
Here is a serious rhetorical question. In a state where consumers are able open their door, greet a FedEx driver, sign for and receive a box of wine shipped from an out-of-state winery, an in-state winery and an in-state retailer, what concern for safety or health of the community justifies barring that consumer at the door from signing for a package of wine from an out-of-state retailer?
Even before Tennessee Wine confirmed that the principle of non-discrimination in commerce applies to retailers as well as wineries, no group or lawmaker or regulator or member of the industry was able to create any justification for discriminating against out-of-state wine retailers other than on protectionist grounds. They simply thought it important to restrict consumer choice in order to protect local wholesalers and retailers from competition.
There are considerable problems with a state choosing to protect local retailers and wholesaler interests by leveling down their retailer shipping laws in response to the Granholm/Tennessee Wine principles.
First and most important, by prohibiting consumers from receiving wine shipments from both in-state and out-of-state retailers, the choice of wines available to consumers is severely restricted. Even those consumers living in a metropolitan area with numerous wine sellers would have access to a very tiny minority of wines that are available nationally. On average, a state’s entire contingent of wholesalers generally makes available no more than 25% – 30% of the wines that are available nationally. Finally, the political/economic ethics of so severely restricting a consumer’s choice for the sake of protecting a very small group from having to compete is highly questionable.
Second, by leveling down and barring wine shipments from both in-state and out-of-state wine retailers, a state is forgoing millions of dollars in tax revenue that would otherwise be remitted by out-of-state retailers on their shipments into the state. Again, from a moral and ethical perspective, it is hard to justify denying considerable tax revenue that could be used for education, infrastructure and other uses simply to protect a very small group of local retailers and wholesalers from competition.
Third, why should all of a state’s retailers be barred from engaging in the most significant retail innovation in decades: the internet marketplace. Not all retailers are so concerned with being protected from competition that they are willing to give up their right to ship wine to in-state residents. In states like California, New York, Missouri, Illinois and others there are a significant number of wine retailers that do a robust business selling wine online and delivering it in-state. Their business models should not be restricted and destroyed so that other retailers who may not want to go that route can protect themselves from real competition.
Finally, a robust interstate retailer shipping channel is good for both producers and wholesalers. In a world where retailers can meet consumer demand, more wine is depleted from retailer inventories, more wine is depleted from wholesaler inventories and more wine is needed from producers to re-stock those inventories. It is a fallacy that retailer shipping harms local retailers for the simple reason that consumers are efficient. If they can buy locally the wines they want they will do so rather than pay the often expensive shipping costs and have to wait for delivery. Only when they cannot obtain what they want locally will they turn to-out-of-state sources. Retailer-to-consumer interstate wine shipments are good for producers and wholesalers.
In the coming months and years there will be states whose lawmakers successfully fix their now unconstitutional laws by successfully stifling the the desires and interests of consumers, reducing state tax revenues, restricting their own retailers marketing and sales options and altering supply and demand all in order to save a small number of special interests from having to compete on a level playing field.
The degree to which this unfortunate outcome is allowed to occur will depend entirely on the degree of sunshine that can be shone on the process; the degree to which the local media is willing to report on the how campaign contribution recipients ignore their real constituents, and the degree to which consumers and wine drinkers get involved in the process.
From a rhetorical and practical perspective, those who believe that free trade in wine ought to be the reigning paradigm can take heart that there is not a single practical reason why wine consumers ought to be barred from receiving wine shipments from out-of-state retailers. This may seem beside the point where the coming politcal battles are concerned, but in fact, having the legal, rhetorical, ethical and moral high ground in any effort is very important.