Supreme Court urged to decide a long-fermenting trade issue

Lower courts are split on ban of interstate wine shipments to consumers

May 16, 2004|By David G. Savage | David G. Savage,LOS ANGELES TIMES

WASHINGTON - The Supreme Court was asked last week to intervene in a long- fermenting wine war that pits the champions of small vineyards against state regulators and their licensed wholesalers.

The question is whether wine lovers should be able to make purchases through the mail from out-of-state vineyards. The answer requires the court to resolve a clash between two constitutional principles.

The first guarantees a free flow of goods across state lines. The other came in 1933 with the compromise that ended the nation's failed experiment in Prohibition. It gave the states the power to bar "the transportation or importation into any state ... of intoxicating liquors."

That in turn led to a confusing array of state laws that regulate the sale of beer, wine and liquor. Usually, alcohol is sold through a network of state-licensed wholesalers and retailers - and not directly from producers to consumers.

But the growth of the wine industry, especially in California, has set off legal challenges to the post-Prohibition-era laws.

"[Potential customers] will say, `Can you ship us a case?' When I say no because it's illegal, they say: `You've got to be kidding,'" said David Lucas, owner of California's Lucas Winery.

Californians can buy wine from California wineries and have it shipped to them. They can also buy from some states, including Oregon and Washington, which have signed reciprocal deals with California's regulators.

But they may not buy directly from wineries in New York, Michigan and about half the other states. Nor may California wineries ship bottles to consumers in those states.

Lucas joined a lawsuit challenging New York's law that requires alcohol to be sold exclusively through licensed wholesalers.

That's fine for the big players - the top 25 wineries sell more than 80 percent of the wine sold nationwide - but small vintners say they don't sell enough wine to make it worthwhile for wholesalers.

The ban on interstate wine shipments to consumers has attracted more criticism as mail-order sales of other goods over the Internet have boomed. A Federal Trade Commission report last year found that consumers could save as much as 21 percent if they could buy wine over the Internet instead of at retail stores.

The study also dismissed concerns that legalizing such sales would make it easier for minors to obtain alcohol.

"I understand the history of these laws, but I don't understand how they make sense in today's world," Lucas said. "They always talk about the need to protect kids from alcohol, but kids don't get a credit card and order $45 bottles of wine and wait three weeks for them to be delivered."

Said Eleanor Heald, a wine critic from Troy, Mich.: "These are protectionist laws. They protect the monopoly held by wholesalers."

Heald and her husband, Ray, sued to challenge Michigan's law because it prevented them from ordering wine samples from vineyards outside of Michigan. That state, like New York, permits home-state wineries to ship directly to consumers, but prohibits such direct shipments from out-of-state producers.

The lower courts are split on the issue. Last year, the U.S. Court of Appeals in Cincinnati sided with Eleanor Heald and struck down Michigan's law because it discriminated against out-of-state producers. The judges said the Constitution's protection for interstate commerce especially forbids a state from favoring its own products while excluding outside competitors.

But a few months later, the U.S. Court of Appeals in New York rejected Lucas' suit against New York's ban on shipping California wine there, ruling that the 21st Amendment allows a state to close its borders to alcohol imports. Besides, the court said, Lucas could sell his wine there through a licensed New York wholesaler or open his own distribution office in the Empire State.

Lucas dismissed the latter option as unrealistic. His is a small operation, and he cannot afford to open a New York office. "If I could ship 50 cases a year there, I'd be happy. This [direct shipping] is not a threat to them, but it allows me to be competitive," he said.

On Thursday, the Supreme Court met privately to consider appeals in both cases. It might decide as soon as tomorrow whether to take up the appeals.

The Los Angeles Times is a Tribune Publishing newspaper.

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