Supreme Court Uphold State's Broad Authority To Regulate Alcohol
Staff Writer - May 18, 2005
 States Must Treat In-State and Out-of-State Alcohol Producers the Same: Court Holds Three-Tier System: "Unquestionably Legitimate"
On May 16, 2005 the Supreme Court upheld a state's right to regulate the sale and distribution of alcohol within its own borders but said states must also treat in-state and out-of-state alcohol producers the same.
In a 5-4 ruling, the Court struck down laws in Michigan and New York that restricted out-of-state alcohol producers from bypassing the states' regulatory regimes that require face-to-face transactions. In doing so, the Court rejected the states' argument that in-state producers could be more easily regulated and, therefore, could be permitted to ship via mail order or over the Internet.
The ruling forces states to decide whether to allow everyone or no one to sell alcohol through the mail or over the Internet.
Writing for the Court, Justice Kennedy said, the three-tier system is "unquestionably legitimate."
The Court embraced a state's right to protect its residents and watch over the way alcohol is sold and distributed within its borders.
"'The Twenty-first Amendment grants the States virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system.' A State which chooses to ban the sale and consumption of alcohol altogether could bar its importation; and, as our history shows, it would have to do so to make its laws effective," Justice Kennedy added.
"The Court affirmed a state's right to regulate the sale and distribution of alcohol and said in doing so they must treat in-state, out-of-state and presumably out-of-country producers all the same," President and CEO Juanita D. Duggan said. "That means states have a choice between supporting face-to-face transactions by someone licensed to sell alcohol or opening up the floodgates."
"State policies are protected under the Twenty-first Amendment when they treat liquor produced out of state, the same as its domestic equivalent," Justice Kennedy added.
Justice Thomas, writing for the dissent, said the majority made a "mistake" in ignoring the history and purpose of the 21st Amendment.
More than 30 states had sided with New York and Michigan arguing that the existing controls allow local officials to place limits on the number of vendors licensed to sell within a state; enable officials to investigate meaningfully who those vendors will be; empower states to better enforce their laws regarding illegal sales, particularly sales to minors; and provide concrete assurance that those privileged to sell alcohol actually collect the required taxes.
"WSWA supports state efforts to strengthen - not weaken - alcohol laws by making all producers play from the same set of rules that ensure accountable, responsible alcohol sales," Duggan said. "Face-to-face ID checks by those licensed to sell alcohol are the best way to do that."
The decision puts in doubt laws in 24 states that ban out-of-state shipments, although the opinion suggests the laws will be upheld so long as in-state and out-of-state wineries are treated equally.
The Washington-based Institute for Justice says the 24 states that ban direct shipments from out-of-state wineries are:
- Alabama,
- Arizona,
- Arkansas,
- Connecticut,
- Delaware,
- Florida,
- Indiana,
- Kansas,
- Kentucky,
- Maine,
- Maryland,
- Massachusetts,
- Michigan,
- Mississippi,
- Montana,
- Ohio,
- Oklahoma,
- Pennsylvania,
- New Jersey,
- New York,
- South Dakota,
- Tennessee,
- Utah and
- Vermont.
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