Proposed federal legislation may have a detrimental impact on the ability of Oregon wineries to ship their wine into other states for sale. Moreover, if made into law, the proposed legislation opens the door for states to pass laws discriminating against out-of-state wineries.
House Resolution 5034 (H.R. 5034) submits federal legislation entitled the “Comprehensive Alcohol Regulator Effectiveness Act of 2010” or CARE for short, that is intended to insure “that each State or territory shall continue to have the primary authority to regulate alcoholic beverages.” While HR 5034 provides that “State or territorial regulations may not facially discriminate, without justification, against out-of-state producers of alcoholic beverages in favor of in-state producers,” it also provides several ways for a state to pass laws discriminating against out-of-state wineries.
In doing so, H.R. 5034 provides that (i) any State or territory law regarding the regulation of alcoholic beverages “shall be accorded a strong presumption of validity,” (ii) any challenge to the legality of the law “shall in all phases of any such legal action bear the burden or proving its invalidity by clear and convincing evidence,” and (iii) the law should be upheld unless it is proven that “the law has no effect on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.”
The concern with H.R. 5034 is that, if it is passed, it will give states the ability to pass anti-competitive and discriminatory laws dealing with wine, beer and spirits. How is this possible? To answer that, we need to explore federal constitutional law.
A state’s right to regulate wine and alcohol is granted by the 21st Amendment, but is also subject to Congressional and judicial oversight and the Commerce Clause of the U.S. Constitution. The 21st Amendment to the US Constitution, in addition to repealing Prohibition, provides that the “transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited”
The Commerce Clause, found at Article I, Section 8, Clause 3 of the Constitution, provides that Congress has the power to “regulate Commerce with foreign nations, and among the several States, and with the Indian tribes.” Generally speaking, the Commerce Clause limits any state legislation that would discriminate against interstate commerce. Stated another way, the Commerce Clause generally prevents a state from enacting a law that would prefer or give an advantage to an in-state producer of goods over an out-of-state producer of goods.
Conflict between the 21st Amendment and the Commerce Clause was thought to be resolved in a 2005 U.S. Supreme Court decision titled Granholm v. Heald. At issue in Granholm v. Heald were Michigan and New York laws that prevented wineries located outside of Michigan or New York from shipping directly to in-state consumers. The laws were challenged as violating the Commerce Clause and the states defended claiming that the laws were valid under the 21st Amendment. The Supreme Court held that both laws discriminated against interstate commerce in violation of the Commerce Clause.
The concern is that H.R. 5034 will invalidate the Supreme Court’s ruling in Granholm v. Heald, and that state laws discriminating against an out-of-state wine seller will be upheld if the state can merely establish that the law has some effect on “on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.” In our opinion, that language is broad enough to allow states to pass laws that could discriminate against out-of state wine sellers.
H.R. 5034 was written by the National Beer Wholesalers Association with support from the Wine & Spirit Wholesaler’s Association. These two associations are very powerful lobbying organizations. More information on opposition to H.R. 5034 can be found at www.stophr5034.com.
H.R. 5034 is obviously controversial. H.R. 5034 was introduced to the House of Representatives by Rep. Bill Delahunt of Massachusetts on April 15, 2010. In his support of H.R. 5034, Rep. Delahunt notes that twenty-six states have been sued by private interest groups seeking to “deregulate the sale of alcohol.” However, recognizing the possible discriminatory impacts of H.R. 5034 as initially written, Rep. Delahunt submitted an amended H.R. 5034 to the Chairman of the House Committee on the Judiciary on September 13, 2010. The amended H.R. 5034 removes all of the language providing that a state law regulating alcohol sales will be upheld if the state can merely establish that the law has some effect on “on the promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.”
H.R. 5034, if enacted as initially proposed, will certainly grant states the ability to regulate, or discriminate against out of state alcohol producers. Wineries that ship out of state, or intend to ship out of state, should become more aware of this pending legislation and should contact the legislators to oppose H.R. 5034. As of the date of publication of this article, hearings were still being held on H.R. 5034 and there had been no votes on the bill. You can find your federal legislators (Senators and Representatives) by entering your zip code at the following website: http://www.usa.gov/Contact/Elected.shtml
