Uncorking Free Trade

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun
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NEW YORK SUN CONTRIBUTOR

‘Wine Case Is Corker” was the headline over the story that appeared three years ago at the top of the first number of The New York Sun. The case involved a law in New York that limited the direct sale of out-of-state wine over the phone or Internet, forcing buyers to go to a local store or an in-state licensed wholesaler instead. Fortunately, that law is old news now, thanks to a United States Supreme Court ruling yesterday that will garner cheers from consumers everywhere.


The case, which came to the court as Granholm v. Heald, dealt with two competing provisions in the Constitution. The commerce clause gives Congress the power to regulate trade within America, which is usually interpreted as a prohibition on states setting trade policies themselves. On the other hand, the 21st Amendment, which reversed national prohibition, still allows states to enforce their own regulations on the sale of alcohol.


New York and Michigan, the two states involved in the suit, allowed their domestic wineries to sell directly to consumers but required out-of-state vintners to go through licensed wholesalers who could only distribute the wine to stores. The states argued that the disparate treatment was necessary to enforce state liquor laws.


One argument for the discriminatory laws ran that allowing out-of-state wineries to sell over the Internet would make it easier for minors to buy alcoholic beverages they wouldn’t be able to get in a store. Five justices looked beyond all that. They noted the lack of convincing evidence that allowing Internet wine sales would lead to underage drinking, pointing out that minors already have easier ways of obtaining alcohol, and aren’t likely to be interested in drinking wine to begin with.


But Justice Anthony Kennedy’s majority opinion made an even more important point: “Time and again this Court has held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate ‘differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.’ This rule is essential to the foundation of the Union. The mere fact of nonresidence should not foreclose a producer in one State from access to markets in other States.”


That finding runs counter to a lower court ruling in which the Second Circuit Court of Appeals erred in deciding that, even if laws similar to these wine laws would be unconstitutional if applied to other products, there was a special exception for alcohol, and that the courts should stand up for federalism in this case. It’s a theme that the four dissenting justices picked up yesterday, when they argued that Congress had been willing to make a special exception to the commerce clause for wine and spirits.


It’s encouraging to see that interest in federalism is still alive on the Supreme Court, but that affection for states’ rights was misplaced in this instance. The majority opinion, displaying an equally encouraging interest in The Federalist Papers, noted that the founders never intended for “federalism” to become a tool for states to boost their own fortunes by explicitly discriminating against their neighbors.


That’s what this case was really about. The arguments against out of state wine shipping, such as that it would enable underage buyers, applied equally to the instate shipments New York and Michigan allowed. The fact that wine wholesalers sided with the states in the suits suggests that economic favoritism was the real motivation for these laws. So, while the court left the door open for regulations that would end the discrimination by banning all direct shipping, out of state or in, we suspect that there won’t be a drive to end the practice.


Lofty constitutional principles aside, this ruling comes down to a victory for consumers who want to harness the power of the Internet to obtain products that would otherwise be more expensive, or even impossible, to buy. And we can all toast to that.

The New York Sun
NEW YORK SUN CONTRIBUTOR

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.


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