Michigan hopes justices maintain ban on direct purchases of out-of-state wines.
WASHINGTON -- Michigan told the U.S. Supreme Court on
Tuesday that it could no longer effectively regulate alcohol, including
keeping it away from underage youths, if it can't ban out-of-state
sales of wine directly to consumers.
That argument was made in a case that will decide whether state laws
violate the U.S. Constitution by prohibiting direct wine sales to
consumers by out-of-state vendors but not by in-state wineries.
The Supreme Court's ruling, expected by July, could have a huge
financial impact on Michigan, which collects taxes on wines, as well as
on its liquor wholesalers and growing wine industry, which wants to
increase Internet sales.
Lawyers representing Michigan and New York argued that the 21st
Amendment, which repealed prohibition in 1933, gives them and 22 other
states with similar laws the broad authority to regulate out-of-state
alcohol sales in ways they can't use for other products.
"The court was extremely well-prepared and understood the serious
constitutional questions at stake," said Michigan Solicitor General
Thomas Casey, one of two lawyers arguing for the out-of-state ban. "I
don't know how they'll vote."
Questioning was intense by justices, although it appeared the
justices might be leaning against continuing to allow restrictions
against out-of-state vendors.
The justices must settle the Internet-age tension between the U.S.
Constitution's commerce clause, which requires free trade of goods
between states, and the prohibition-era 21st Amendment, which gives
states special authority to regulate alcohol.
"Justices seemed skeptical of the idea that states need to
discriminate in order to regulate alcohol, Steve Simpson, a senior
attorney with the Institute of Justice, said after the oral argument.
"They seemed, from a constitutional standpoint, to accept the view that
the commerce clause doesn't allow discrimination, even in the context
of alcohol."
For example, Justice Stephen Breyer, among justices appearing to
side against the out-of-state ban, told Casey that the 21st Amendment
didn't intend "to permit discrimination."
But Justice Anthony Kennedy expressed concern that the results of
the "narrow case" could be "sweeping," applying not just to wine, for
instance, but also to regulation of hard liquor.
Wholesalers, who'd lose out if out-of-state wine vendors could sell
directly to consumers in Michigan, back the state's position.
Michigan's wine industry, in contrast, could benefit if the court
struck down the restrictions because it could expand sales in
closed-off markets in the 23 states with laws like Michigan's.
Yet Michigan wineries also worry that, if the court struck down the
bans, Michigan might comply by not allowing any direct shipments to
consumers. That would mean lost revenue for the wine shipped directly
to consumers, largely to Michigan addresses.
Michigan collects nearly $8 million annually in wine taxes. It
collects far more on beer, $42 million annually, and on spirits, where
in addition to the $100 million in taxes it nets $100 million from
acting as the wholesaler, according to the Michigan Liquor Control
Commission.
Bob Begin, the owner of Chateau Chantal near Traverse City, hopes
the court rules against Michigan's ban, opening up 23 states for his
wines.
"The majority of what we ship is within the state. But we'd like to
ship more out of state," Begin said. Michigan has about 40 commercial
wineries producing 200,000 cases of wine annually.
But Michael Lashbrook, president of the Michigan Beer and Wine
Wholesalers Association, warns that if the court strikes down the
out-of-state ban that it could lead to the unregulated sale of hard
liquor.
"Society clearly has determined that alcohol has a potential for abuse and needs to be tightly regulated," Lashbrook said.
"The majority of what we ship is within the state."
Detroit News wire services contributed to this article. You can reach Deb Price at (202) 906-8205 or dprice@detnews.com.
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