Wine lovers may buy directly from out-of-state vineyards, the Supreme Court ruled today, striking down laws banning a practice that has flourished because of the Internet and growing popularity of winery tours.
WASHINGTON — Wine lovers may buy directly from out-of-state vineyards, the Supreme Court ruled today, striking down laws banning a practice that has flourished because of the Internet and growing popularity of winery tours.
The 5-4 decision overturns laws in New York and Michigan, which supporters said were aimed at protecting local wineries and limiting underage drinkers from purchasing wine without showing proof of age. In all, 24 states have laws barring interstate shipments.
The court said the state bans are discriminatory and anticompetitive.
“States have broad power to regulate liquor,” Justice Anthony Kennedy wrote for the majority. “This power, however, does not allow states to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers.”
“If a state chooses to allow direct shipments of wine, it must do so on evenhanded terms,” he wrote in an opinion joined by Justices Antonin Scalia, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer.
The ruling means that legislatures in the 24 states barring out-of-state shipments will have to review their laws to make sure in-state and out-of-state wineries are treated equally. As a result, states could choose to allow wineries to sell to consumers directly, but could also bar all wineries from doing so.
The wine industry is booming, with an estimated $21.6 billion in sales and tourists flocking to wineries for tastings and tours. The recent hit movie “Sideways” took a lighthearted look at California’s love affair with the grape.
While Washington state’s 350 winemakers are toasting victory, it could be years before they taste the true results of today’s Supreme Court’s decision.
St. MIchelle Wine Estates in Woodinville, the state’s biggest producer, said it won’t see any benefit from the decision because it is large enough to sell wines through distributors in all 50 states.
Wineries too small to attract distributors are the big winners, since the ruling opens the door for them to ship cases to individuals in other states. However, they can’t start shipping until legislatures in those 24 states act to allow interstate sales, a process that could take many months.
“Nothing is going to change overnight,” said Steve Burns, interim director of the Washington Wine Commission. “But clearly the momentum is in the favor of wineries serving their customers.”
While wineries have proliferated, there also has been consolidation. Smaller wineries say they can’t compete with huge companies unless they can sell directly to customers over the Internet or by allowing visitors to their wineries to ship bottles home.
The Supreme Court case centered on the 21st Amendment, which ended Prohibition in 1933 and granted states authority to regulate alcohol sales. Nearly half the states subsequently passed laws requiring outside wineries to sell their products through licensed wholesalers within the state, allowing state governments to collect millions in alcohol taxes.
But the Constitution also prohibits states from passing laws that discriminate against out-of-state businesses. That led to a challenge to the Michigan and New York laws.
In a dissent, Justice Clarence Thomas argued the ruling needlessly overturns long-established regulations aimed partly at protecting minors. State regulators under the 21st Amendment have clear authority to regulate alcohol as they see fit, he wrote.
“The court does this nation no service by ignoring the textual commands of the Constitution and acts of Congress,” Thomas wrote. He was joined by Chief Justice William H. Rehnquist and Justices Sandra Day O’Connor and John Paul Stevens.
While the ruling only involves wine sales, industry groups expect that it will soon apply to beer and other alcoholic beverages currently regulated through state-licensed wholesalers and retailers.
Wine lovers immediately cheered the ruling.
“This is the best day for wine lovers since the invention of the corkscrew,” said Clint Bolick, counsel for the Institute for Justice, which represented local wineries in the dispute. “It demonstrates that in the era of the Internet, the court will vindicate the principles of free trade that made this country great.”
Juanita Swedenburg, the Middleburg, Va., vintner who sued to overturn New York’s laws said called the ruling “a boon for America’s wine-loving consumers who like to have various wines from throughout the nation.”
But Nida Samona, chairwoman of the Michigan Liquor Control Commission, said the decision was a setback for Michigan’s efforts to battle underage drinking. She said her commission will urge lawmakers to bar direct shipments for both local and out-of-state wineries.
“That protects the class we are fighting for _ to make sure minors cannot purchase and consumer alcohol before they are of age,” she said.
In the ruling, Kennedy wrote that states do not have the authority to regulate liquor simply to protect their economic interests. He argued there is little evidence that unauthorized wine sales to minors over the Internet is a problem that justifies discriminating against out-of-state businesses.
Minors typically consume beer and wine coolers, rather than wine, and could just as easily order wine illegally from in-state wineries that sell over the Internet, Kennedy wrote. States also could take measures to deter minors by requiring adults to sign for wine packages.
“Without concrete evidence that direct shipping of wine is likely to increase alcohol consumption by minors, we are left with the states’ unsupported assertions,” Kennedy wrote.
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.
The cases are Granholm v. Heald, 03-1116; Michigan Beer & Wine Wholesalers Association v. Heald, 03-1120; and Swedenburg v. Kelly, 03-1274.
Seattle Times business reporter Alwyn Scott contributed to this report.