Supreme Court Could Uncork Out-of-State Wine Sales

by Arkansas Business Staff  on Monday, Nov. 5, 2018 12:00 am   2 min read

Do you remember last week’s story about illegal wine shipments from online retailers into Arkansas provoking the ire of liquor store owners and wholesalers in the state?

Well, we have a bit of an update. The U.S. Supreme Court appears likely to hear early next year a Tennessee case that would decide whether the states have the power to regulate liquor sales by granting permits only to businesses that reside in the state.

Tennessee, along with 21 other states, requires liquor retailers to reside in the state for a certain time before they can get a license to sell alcohol. In Tennessee’s case, retailers must be located in the state for at least two years before applying for a license.

Some industry watchers, however, say the case has much larger ramifications. They say the Supreme Court could also decide whether state bans on out-of-state alcohol sales are constitutional. This would, of course, include online sales.

“It’s rare for the Supreme Court to take new cases about the 21st Amendment, which ended Prohibition,” Scott Bomboy, editor-in-chief of the National Constitution Center in Philadelphia, said in a blog post on the center’s website. “But sometime next year, the Justices will consider the fate of interstate retail wine sales in a new age.”

In late September, the court decided to hear Tennessee Wine & Spirits Retailers Association v. Byrd. The case began in 2016 when Total Wine & More, a big alcohol retail chain based in Bethesda, Maryland, applied for a license to sell its products in Tennessee. The Tennessee Wine & Spirits Retailers Association, representing that state’s retailers, opposed the application, citing the residency requirement.

A federal judge said the requirement was unconstitutional and the 6th U.S. Circuit Court of Appeals in Cincinnati upheld the ruling.

The Appeals Court cited the U.S. Supreme Court’s 2005 decision in Granholm v. Heald, which held as unconstitutional laws in New York and Michigan allowing in-state wineries to ship wine in state while denying out-of-state wineries the same rights. The high court justices, in a 5-4 decision, said the states were violating the U.S. Constitution’s Commerce Clause.

That decision helped wineries, but it left out-of-state retailers out in the cold.

In the Tennessee case, the TWSRA appealed the 6th Circuit ruling, and the Supreme Court agreed to hear the case.

Fruit of the Vine
Tom Wark, executive director of the National Association of Wine Retailers, told your Whispers staff that he expects the Supreme Court to hear oral arguments in January or February, with a decision to come in May or June. His association has advocated direct sale of wine to consumers.

In-state package store owners and wholesalers around the United States, including those in Arkansas, are awaiting the Supreme Court decision with concern. In Arkansas, liquor store owners already face increased competition from grocery stores, which last year were allowed to sell a bigger selection of wine.

If the Supreme Court opens up out-of-state wine shipping, “Arkansas would have to decide if they want to allow both Arkansas and out-of-state retailers to ship wine to Arkansas residents, or allow nobody to,” Wark said. “What they have to do is create a level playing field.”

But the retailing way of the future is online, as Amazon proved and Walmart is betting.

 

 

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