Shipping

Kosar and Dieterle on the Meaning of the Tennessee Wine SCOTUS Case

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As we noted last week, the Supreme Court struck an important blow for freedom in its Tennessee Wine v. Thomas decision, which held that Tennessee’s requirement that liquor store owners be residents of the state was unconstitutional. R Street’s Jarrett Dieterle and Kevin Kosar explain in a piece for USA Today how the implications of this decision could be far reaching, especially when it comes to direct-to-consumer alcohol shipping:

Just after the 100th anniversary of Prohibition’s start — and over 85 years since its repeal — Americans could be forgiven for assuming that government remains blissfully removed from their cocktail glass. Unfortunately across the country, states and local governments still enforce a bevy of outdated and oftentimes downright silly alcohol laws. While these laws have proved notoriously difficult to get rid of, a new Supreme Court decision issued could spell the end for a broad swath of cronyist and antiquated booze rules — and perhaps be the first step toward a more national alcohol marketplace…

The court’s holding might seem limited to the unique circumstances of Tennessee’s law, but it has the potential to be a game changer in the world of booze. The biggest change could involve the shipment and transportation of alcohol.

Unlike just about every other product on the market today — nearly all of which can arrive at your door in two days — direct-to-consumer alcohol shipping is incredibly limited. While a previous Supreme Court case allowed wineries to ship their bottles to consumers in neighboring states, very few states allow out-of-state retail stores — not to mention breweries and distilleries — to engage in interstate shipments.

Under the logic of the court’s holding in Tennessee Wine, however, allowing in-state shipments of alcohol while forbidding out-of-state shipments violates the Constitution. If more of these laws are challenged accordingly, it could mean that a Michigander could soon be able to have her favorite Vermont beer shop send IPAs directly to her door…

Read the whole piece here.

The Supreme Court Just Struck a Blow for Alcohol Freedom

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The Supreme Court finally released its long-awaited decision in Tennessee Wine v. Thomas this week. The case involved a challenge to Tennessee’s “durational residency requirement” law, which said that in order to operate a retail alcohol store in Tennessee, the store owner must have been a resident of the state for 2 years. And in order to renew the license, which was required annually, the owner needed to be a resident of the state for 10 years. The law even required that all officers and directors of companies that ran alcohol retail stores—as well as 100% of all stockholders—to be state residents.

The Court, in a 7-2 decision, struck down the Tennessee law for violating the U.S. Constitution’s so-called Dormant Commerce Clause. To put it simply, this doctrine holds that states cannot discriminate against out-of-state economic interests while favoring in-state economic interests. The Tennessee residency requirement obviously favored in-staters over out-of-staters, but the law’s defenders argued that the 21st Amendment to the U.S. Constitution (which repealed Prohibition but granted broad powers to state governments to regulate alcohol) immunized laws like Tennessee’s from constitutional scrutiny. While the Court emphatically rejected that argument, its holding also could have broader implications:

Before Americans can enjoy a nationally cohesive alcohol shipping marketplace, however, much work remains. Many states still discriminate against out-of-state retailers interested in shipping alcohol—laws which will almost certainly be challenged in light of the Court’s decision. And nearly every state still labors under a three-tier system of alcohol distribution, which mandates a role for wholesalers when it comes to most alcohol sales. Furthermore, the U.S. Post Office forbids the shipment of alcohol entirely (although some private carriers permit it).

Therefore, governments around the country will have to take proactive steps to liberalize their alcohol shipping laws and streamline them in a way that makes interstate alcohol shipping more achievable. But for now, the Supreme Court’s decision in Tennessee Wine can be seen as an early step toward a more robust interstate shipping market for booze.

DrinksReform.org will have more coverage of the Tennessee Wine case and its aftermath in the weeks ahead!

Congress Tries (Again) to Allow the Post Office to Ship Alcohol

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Shipping alcohol is notoriously complicated in modern day America. This is especially odd given that, uh, everything else in the universe seems to be a mere 2-day-shipment away. While private carriers and individuals states have complicated rules around alcohol shipping, the United States Postal Service forbids it from being shipped at all. A determined member of Congress is trying once again to fix this anachronistic ban:

The USPS Shipping Equity Act (H.R. 2517) was introduced by Congresswoman Jackie Speier (D-CA). She said the bill would end the Prohibition-era restriction that prohibits the Postal Service from shipping alcohol.

“In 2016, California was America’s top destination for the direct shipment of wine, yet consumers and manufacturers are prohibited from using the U.S. Postal Service to ship or deliver these everyday products,” Speier said…

This is not the first time Speier has made this effort. In fact, it’s not the third.

Her bill was last introduced in 2017 but failed to advance. It was also introduced in the two sessions of Congress prior to 2017. She obviously really wants to see the Postal Service start shipping alcohol, but there historically has been little interest in Congress to pass such a law. Maybe the fourth time is the charm?…

Read more at FedSmith.com.

Mississippi Considers New Wine Shipping Bills

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Mississippi is currently in the vast minority of states that does not allow outside wine shipments to in-state residents. According to WLOX, the state legislature is at least considering changing that:

Two bills are under consideration in state legislative committees that would allow direct sales and shipment of wine to Mississippi residents.

Members of both the House and Senate have authored bills, and local liquor stores are lobbying against them.

Similar measures failed last year…

Mississippi is among a handful of states that doesn’t allow wine to be shipped. All wine and liquor goes through the Revenue Department’s Alcoholic Beverage Control (ABC) Division.

Read more here.

Will Direct-to-Consumer Shipping Expand for Distilled Spirits?

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As R Street’s Jarrett Dieterle has previously discussed, it’s very difficult for the alcohol industry—especially distilled spirits and beer—to participate in the direct-to-consumer (DtC) shipping boom. Most states restrict the ability of brewers and distillers to ship their products directly to customers, although Kentucky recently passed a DtC law that could spread to other states. An article for RaboResearch lays out the current state of play:

In a world where consumers can get anything they want, however they want, the spirits industry is at a real disadvantage. Direct-to-consumer (DtC) shipments and e-commerce have driven growth in the wine category, but spirits face restrictive rules around shipping and retail that limit distillers’ ability to operate online. As we approach the holiday season – the most important time of year for wine and spirits sales – we want to highlight the structural challenges facing spirits in a world increasingly defined by e-commerce.

In 2018, wine shipped DtC will represent 7 percent of the total US wine market – more than USD 3 bn. About 95 percent of US consumers can go online to buy and ship wine DtC across state lines. The laws for shipping spirits DtC are, however, much more restrictive: Only five states allow DtC spirits shipments, with 5 percent of the US population having access to the channel. In fact, shipping laws are so complex and the market so small that common carriers won’t even ship spirits in states that do permit distilleries to ship DtC.

If the spirits industry had the same access to consumers as wine, they could build a market worth billions of dollars. Recognizing the opportunity, distillers are pushing state legislatures to change their shipping laws, and believe it or not, they are making progress. Kentucky, perhaps aspiring to its state slogan 'unbridled spirit', passed a law to legalize DtC spirit shipping in 2018. Other states will likely follow. As Eric Gregory, president of the Kentucky Distiller’s Association, told Insider Louisville “... once other states realize Kentucky has broken the ice... we’re going to see a lot of movement with other states coming on board.”…

Read the rest here.

The Battle Over Interstate Wine Shipping Continues to Spread

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Amidst recent crackdowns on interstate wine shipments from retailers—not to mention the Supreme Court’s recent decision to hear the case of Tennessee Wine v. Byrd, which could have profound implications for wine shipping—Florida has become the latest legal battleground on the issue. As reported by Wine-Searcher:

Midwestern attorney Robert Epstein is on a mission to open up as many states as possible to interstate shipping.

"We have pending cases in Missouri, Illinois and Michigan, which is now on appeal," one of the Indianapolis-based founders of Epstein, Cohen, Seif & Flora shares. He has next set his sights on Florida, where he has requested a declaratory statement from the state's Division of Alcoholic Beverages and Tobacco (ABT), requesting that the state permit out-of-state retailers to ship wine into Florida…

Epstein's plan – if successful – is likely to broaden the availability in both Florida, and other markets, to older, unusual wines and those found through the auction market. Lesser-expensive, commercial wines are not likely to be a big factor in future Florida purchases, unlike the less-expensive, over-the-state line purchases that have influenced the Chicago and Maine markets, where taxes are much lower in both neighboring Indiana and New Hampshire

Read more here.

Also of note in the interstate wine shipping wars, the 7th Circuit Court of Appeals recently held in favor of a wine store owner challenging Illinois’ ban on wine shipments from out-of-state retailers.



Florida Wine Importer Sues California Over Wine Laws

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California requires all out-of-state wine importers/wholesalers to first sell their wine to an in-state importer/wholesaler before the wine can be sold to California retail outlets. According to Wine & Spirits Daily, a Florida importer is challenging the law in court on the grounds that it discriminates against out-of-state importers:

In California, importers and wholesalers based outside the state must first sell their products to an importer or wholesaler based in California, while in-state importers/wholesalers can sell directly to retailers.

Florida-based Orion Wine Imports argues that requirement adds distribution costs to out-of-state wholesalers that in-state ones don't face, which violates the Commerce Clause and the Privileges and Immunities Clause…

Read more here.

This case could be impacted by the current lawsuit in front of the Supreme Court, Tennessee Wine v. Byrd.

How the Tennessee Wine v. Byrd SCOTUS Case Could Impact Wine Shipments

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As previously highlighted, the Supreme Court is considering a challenge to Tennessee’s residency requirement, which mandates that state liquor retailers must be residents of the state for 2-9 years before opening a store. As Liza Zimmerman recounts for Forbes, the case could have profound implications on interstate wine shipments:

For the first time in more than a decade, the U.S. government has shown a willingness to reevaluate how wine and spirits are sold, both within and between various states in the country.

In fact, the case of Tennessee Wine and Spirits Retailers Association v. Clayton Byrd (Tenn. v. Byrd) represents only the second such move by the high court since the repeal of Prohibition in 1933.

When Prohibition was repealed, the U.S. government decided that the safest way to regulate alcohol sales was by giving each state the right to decide how wine and spirits were sold within its borders. That resulted in a fractured legal arrangement in which almost every state handled the sale and shipment of drinks differently…

The biggest issue about the case is how the court may reevaluate the legal intricacies of interstate shipping. Retailers, with brick-and-mortar locations in distant states, had long been allowed to ship into other states. This was a right that most store owners thought had been set in stone by the 2005 Supreme Court case of Granholm v Heald.

However, as retailers in certain states and wholesalers began to worry losing a share of their revenue to out-of-state players, they put more pressure on shipping services such as UPS and FedEx to follow the letter of the law to the finest degree. As of a year ago, the bulk of major interstate shippers have been shipping into only 14 states and the District of Columbia….

Read the whole article here.

Michigan's Out-of-State Wine Rules Struck Down Again

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In the landmark 2005 case of Granhom v. Heald, the U.S. Supreme Court ruled that Michigan’s law forbidding out-of-state wineries from shipping directly to Michigan consumers was unconstitutional. In the aftermath of the case, Michigan and other states interpreted the decision narrowly, declaring that while it applied to wineries, it did not apply to wine retailers. In a new lawsuit, a federal judge rejected this line of reasoning, as recapped by Wine Spectator:

After two years of legal volleys, lawyers challenging restrictions on wine direct shipping notched an important victory on Sept. 28. A federal judge in Michigan has ruled that the state's prohibition on direct-to-consumer wine shipping from out-of-state retailers is unconstitutional. If the ruling stands, Michigan residents will be able to purchase wine from stores anywhere in the country and have it shipped to their homes.

Robert Epstein, lawyer for Cap n' Cork, an Indiana chain of wine stores and plaintiffs in the case, hopes it is a bellwether for the shipping options of wine lovers across the country. "What has been accomplished is a first step in opening up shipping by retailers around the country to out-of-state clients," Epstein told Wine Spectator.

Lebamoff Enterprises, Inc. et al v. Snyder et al is one of three similar cases undertaken by the Indianapolis-based law firm Epstein, Cohen, Seif & Porter. The other two were filed in Illinois and Missouri. In each, the plaintiffs argue that state bans on out-of-state retailer direct shipping violate the U.S. Constitution's dormant Commerce Clause and Privileges and Immunities Clause…

Read more here.

Amazon Starts Delivering Booze in Texas

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As mentioned previously on DrinksReform, Amazon is disrupting the booze industry. This time, they are making a splash in Texas. They are now allowed to deliver beer and wine:

Amazon previously had not applied for a permit to sell alcohol in Texas, said Texas Alcoholic Beverage Commission spokesman Chris Porter. But recently it obtained "wine only package store" permits  and "beer off premise" licenses for five of its warehouses in Texas. 

The permits allow Amazon Logistics, which holds a TABC "carrier's permit" to deliver beer, ale, and wine to consumers within the counties where their warehouses are located — in this case, Bexar, Dallas, Harris, Tarrant and Travis. The drivers are trained to check for IDs and to collect an adult's signature before delivering the alcohol, Porter said.

Other online delivery services that operate in Texas had to partner with a retailer in order to deliver beer and wine. Amazon is now a retailer in Texas, from the standpoint of beer and wine sales, Porter said...

Read the whole piece here.