In 1933 the 21st Amendment overturned the 18th Amendment and Prohibition ended. However, negotiations with individual states to assure the passage of repeal included provisions giving states broad power to regulate alcoholic beverages within their respective states.
States took full advantage of their power to regulate.
In Ohio, and many other states, distilled spirits were managed by state-managed retail outlets (where market forces do not impact price) while wine and beer was sold through traditional commercial venues. In New York, state licensed retailers could sell spirits and wine but could not sell beer. In Connecticut and Florida (and many other states) any state licensed retailers may sell distilled spirits, wine, and beer (thus, prices are subject to market forces). More than 30 states permit the sale of alcoholic beverages in grocery stores…New York does not. There are almost as many variations related to the retail sale of alcoholic beverages as there are states.
And then was the case of Granholm vs. Heald. In 2005 the Supreme Court ruled that if states permitted in-state wineries to ship bottles to a state’s residents then it must permit out-of-state wineries to do the same. The Supreme Court ruled that when a specific state law discriminates against interstate commerce (giving an advantage to in-state interests – the dormant commerce clause) the law is often struck down.
While the case did not specifically grant the same permission to retailers as to wineries, many retailers determined that the right to ship also applied to them. And, for a few years many retailers built robust websites and expanded their customer base to include wine and spirit consumers throughout the nation. However, a variety of impediments eventually reduced the number of ‘friendly states’ into which alcoholic beverages could be shipped to less than 15. For example, shipping companies were reluctant to ship wine designated packages and individual states established laws and regulations to restrict the movement of out-of-state retail alcohol to residents.
Now we have Tennessee Wine & Spirits Retailers Association vs. Blair before the Supreme Court.
Tennessee requires a two-year residency before an individual in the Volunteer State can apply for a liquor license. Moreover, Tennessee imposes a nine-year wait for out-of-state individuals and corporations. Utah transplants to Tennessee, Doug and Mary Ketchum (who were encouraged to move to Memphis for their daughter’s health) decided to purchase a liquor store. Total Wines (the retail giant), at almost the same time, applied for licenses to open two retail locations in the state. The Tennessee Alcoholic Beverage Commission (TABC) was on the verge of approving the applications when state retailers, through The Tennessee Wine and Spirits Retailers Association, threatened to sue the state to block the applications.
The TABC went to federal court to determine if the residency requirement(s) was constitutional. The U.S. Court of Appeals for the 6th Circuit determined that the residency requirement was unconstitutional. The key argument being that the residency requirement was a violation of the ‘dormant commerce clause’ by discriminating against out-of-state residents. The 6th Circuit agreed with the TABC.
The retailer’s association appealed to the Supreme Court, and the court agreed to hear a case that will essentially determine if the 21st amendment provides Tennessee and other states the right to create and enforce any such requirements. The decision may determine, for instance, if a computer or clothing company can sell in Tennessee (or by extension anywhere else) then why should those who sell alcoholic beverages be prohibited for selling their products?
The Tennessee vs. Blair oral arguments were made to the Supreme Court in January. The decision is be rendered between May 13th and the end of this term in June.
We will examine the Supreme Court arguments, the decision, and the implications when the Supreme Court announces its decision and provides the reasoning supporting the decision. The implications are far-reaching…