Below The Beltway

Last year at about this time, the U.S. Supreme Court released its opinion in Granholm v. Heald, where it struck down laws which prevented wineries from shipping wine to customers who lived in states other than where the winery was located. Or so it seemed at the time. As Stephen Bainbridge writes today at TCS Daily, reality has proven to be far different from what wine lovers nationwide had hoped would materilize.

In Granholm, the Supreme Court by a 5-4 vote struck down New York’s and Michigan’s bans on direct-to-consumer wine sales. Unfortunately, the court did so on the narrowest possible grounds, holding those bans violated the Commerce Clause because they were discriminatory and protectionist:

“States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.”

Accordingly, Granholm did nothing to protect consumers from state laws banning direct-to-consumer sales by both in- and out-of-state wineries.

According to FreeTheGrapes.org, 17 states have such bans in place. In many of the other 33? tates, direct-to-consumer sales are allowed but remain subject to a confusing welter of often inconsistent regulations. In all but 12 states, moreover, interstate shipment of wine by retailers is prohibited. In short, we’re no closer to a true national wine market; instead, both producers and consumers are still mired in the economic Balkans.

In other words, things really aren’t that different than they were a year ago. In the months after the Granholm decision, Kellie and I visited many wineries here in Virginia. When I had the opportunity, I asked the winemaker, or whomever I was able to speak with, about the impact that they thought the decision would have on their business. To a person, it was clear that these relatively small wineries did not think the Supreme Court had done anything that would help them at all. The cost of applying for licensing in each state still existed and, for a small business, was still far too prohibitive to justify branching out in that direction. So, if you live in Georgia and want to buy wine from Virginia, you’re pretty much out of luck.

As Professor Bainbridge writes, though, there is some hope that this continuing insult to the Commerce Clause may come to an end:

Interestingly, however, a new line of attack has been launched against the three tier system. Costco has sued the State of Washington, arguing that Washington’s especially strict version of the three tier system violates the Sherman Antitrust Act. Last month, U.S. District Judge Marsha Pechman agreed with Costco.

While an outcome in favor of Costco wouldn’t completely eliminate the problems that consumers have if they want to direct-order their favorite wines, it would go a long way toward that goal:

[T]he Costco suit gives oenophiles hope for several reasons. First, given the clear evidence that state regulation is anti-competitive, the case for antitrust relief is overwhelming provided the 21st Amendment obstacle can be cleared. Second, Costco has a strong incentive to shake up the three tier system. Savvy wine buyers know that Costco has become a major player, offering very high quality wine – such as first growth Bordeaux and even some California cult wines – at bargain basement prices. At the moment, Costco ships wine only to California, Idaho, Illinois, New Mexico, Oregon and West Virginia addresses. And, it’s not just Costco. Even Amazon is getting into the mix, through a partnership with Wine.com.

A year after Granholm, the fight to free the grapes goes on. Many battles will still have to be fought before we have a true national wine market. Finally, however, consumers have some
deep-pocketed interests on our side.

One can only hope that the wine will flow freely.