Perspective: Prohibition redux?

The U.S. Supreme Court will hear arguments next month in a lawsuit that will, if successful, permit American adults to freely buy beer and wine over the Internet.

It's slightly bizarre to think that it takes the nation's highest court to guarantee online shoppers the right to order a case of fine Merlot or Pinot Noir from California. You can thank a crowd of pusillanimous state legislators for that.

Photo
Uncorking a challenge

Winemaker Juanita Swedenburg
is suing to overturn a wine
shipment ban.

Dozens of state legislatures, including those of New York, Pennsylvania, Florida, Maryland, and Michigan, have slapped severe restrictions on out-of-state shipments of alcohol. The culprits behind these rules: Lobbyists for beer and wine distributors, which currently enjoy profitable markups in the 25 percent range that they stand to lose if direct Internet shipping becomes legal and popular.

While this unfortunate situation may pad the bank accounts of distributors represented by the influential Wine and Spirits Wholesalers of America, it amounts to a tax on Internet shoppers.

No local distributor has the warehouse space to stock products from more than a fraction of the thousands of wineries and breweries that are online--which means that aficionados of a rare brew or a less-advertised vintage are likely out of luck today. The Web site of the Kendall-Jackson winery, for instance, flatly refuses to ship to prohibitionist states.

Enter the free-market paladins at the Institute for Justice, a public interest law firm in Washington, D.C., that's suing New York state to strike down its prohibition on out-of-state shipments. New York's law currently says that "no alcoholic beverages shall be shipped into the state unless the same shall be consigned to a person duly licensed hereunder to traffic in alcoholic beverages."

Alcohol shipments uncork a special legal twist that goes back to the early 20th century.

"It limits choice for consumers, it raises the costs of wine, and it inhibits the ability of thousands of small wineries to effectively grow and market their products," says Steve Simpson, an Institute for Justice senior attorney. "There's absolutely no reason to have it."

This isn't the first time that the merry band of litigators at the Institute for Justice has taken to the courts to defend e-commerce.

They successfully sued a federal agency called the Commodity Futures Trading Commission to eliminate rules requiring publishers of Internet investment newsletters to be fingerprinted. The Institute for Justice also overturned a state law that barred out-of-state funeral casket retailers from selling to Tennessee residents (but was unable to dispatch a similar law in Oklahoma). In California, the Institute for Justice is representing ForSaleByOwner.com, which matches home buyers and sellers and is being hassled by the state government.

Repetition of prohibition?
In general, federal courts are willing to eviscerate protectionist state laws on grounds that they unduly interfere with electronic commerce. But alcohol shipments uncork a special legal twist that goes back to the early 20th century: The 21st Amendment, which ended Prohibition, granted states some authority to regulate "intoxicating liquors."

Teenagers are probably more likely to find a way to acquire a six-pack of cheap beer locally than select a $40 bottle of Cabernet Sauvignon from a Sonoma Valley winery via the Net.

Lower court rulings have been mixed. The Institute for Justice won a preliminary victory against New York in a federal district court, but the 2nd Circuit Court of Appeals didn't see things the same way. A separate lawsuit challenging Michigan's prohibitions had better luck and has been consolidated with the Institute for Justice's case for the Dec. 7 oral arguments.

The Institute for Justice is representing Juanita Swedenburg, who owns the family-run Swedenburg Winery in Middlesburg, Va., and David Lucas, who runs the Lucas Winery in Lodi, Calif. Swedenburg's total production is less than 2,000 cases a year--not enough to interest major distributors--and half of the customers who travel to her winery live in other states.

For his part, New York Attorney General Eliot Spitzer is not defending the prohibitions by saying they make much sense. Instead, Spitzer is advancing two arguments: first, that the 21st Amendment authorizes states to do whatever they want, and second, that the law is necessary to protect children. Permitting online orders "eliminates a face-to-face sale and thereby increases the risk that minors will be able to obtain alcohol through Internet sales or otherwise," Spitzer said in a Supreme Court brief.

Map
Interstate restrictions

See which states put curbs
on out-of-state shipments
of wine.

Really? Teenagers are probably more likely to find a way to acquire a six-pack of cheap beer locally than select a $40 bottle of Cabernet Sauvignon from a Sonoma Valley winery. What's more, alcohol shipments require an adult to show ID to sign for the package.

That kind of common sense is echoed by a Federal Trade Commission report, which looked at the states that permit out-of-state shipments and found that they've had no serious problems with minors buying through mail order. California reported that "for at least 20 years there was never a problem that was brought to our attention," according to the FTC report.

Now the question's whether the Supreme Court can see past New York's and Michigan's Internet protectionism and do what's in the best interest of American consumers.

Biography
Declan McCullagh is CNET News.com's chief political correspondent. He spent more than a decade in Washington, D.C., chronicling the busy intersection between technology and politics. Previously, he was the Washington bureau chief for Wired News, and a reporter for Time.com, Time magazine and HotWired. McCullagh has taught journalism at American University and been an adjunct professor at Case Western University.

More Perspectives

Prohibition redux

I think it should be legal to order beer, (a legal substance) online, I am a beer connoisuer, and would like to be able to access any beer I please, and have it shipped to me, as I know others like me would also support. thanks!

Prohibition Redux

Amen to that, Joe.

Prohibition redux

I think it should be legal to order beer, (a legal substance) online, I am a beer connoisuer, and would like to be able to access any beer I please, and have it shipped to me, as I know others like me would also support. thanks!

Prohibition Redux

Amen to that, Joe.

21st Amendment

While your comments make perfect economic sense, Declan, there's a constitutional problem here. The "sales to minors" claim is a red herring, but states rights under the constitution is not. If the commerce clause governed, I think the outcome would be the rational one. But here, the compromise that led to the 21st Amendment gives states almost carte blanche in regulating booze. And it is a fundamental principal of construction that the specific governs the general, so the 21st will probably be interpreted as a carve-out from commerce clause authority of the federal government to step in and regulate or deregulate. Of course the states still have a sticky problem of enforcement.

21st Amendment

The issue is not whether or not the 21st Amendment allows states to regulate alcohol -- clearly, it does. The issue is whether states can discriminate against out of state shippers, which is prohibited by the Commerce Clause. If a state treated all alcohol the same way, then there would not be an issue. It seems likely that the Court will rule that a state may regulate alcohol as it sees fit, but it may not violate other provisions in the Constitution when so doing.

[Ubber geek]

fundamental principal

http://www.analogstereo.com/plymouth_voyager_owners_manual.htm

21st Amendment

While your comments make perfect economic sense, Declan, there's a constitutional problem here. The "sales to minors" claim is a red herring, but states rights under the constitution is not. If the commerce clause governed, I think the outcome would be the rational one. But here, the compromise that led to the 21st Amendment gives states almost carte blanche in regulating booze. And it is a fundamental principal of construction that the specific governs the general, so the 21st will probably be interpreted as a carve-out from commerce clause authority of the federal government to step in and regulate or deregulate. Of course the states still have a sticky problem of enforcement.

21st Amendment

The issue is not whether or not the 21st Amendment allows states to regulate alcohol -- clearly, it does. The issue is whether states can discriminate against out of state shippers, which is prohibited by the Commerce Clause. If a state treated all alcohol the same way, then there would not be an issue. It seems likely that the Court will rule that a state may regulate alcohol as it sees fit, but it may not violate other provisions in the Constitution when so doing.

[Ubber geek]

fundamental principal

http://www.analogstereo.com/plymouth_voyager_owners_manual.htm

[MSGOLD406]

Poor, poor baby....

You can't get your bottle.

Let me ask you questions: Why should you treat wine differently than beer or spirits? Because that is your drink of choice? Because it pumps up the difference (in YOUR arguement) between you and the underage drinker?
There is order in the universe. The 21st ammendment protects that order.
The basic concept of your plight is not choice because the phenomen of your crusade has been a recent one....when in fact more and more choices have become available. Price? No, the shippers take up the difference. It all comes down to a few 'PRIMA DONNAS' that want their special hard-to-get-wine. BULLETIN: If a thousand people want a wine that produces a grand total of 300 bottles, 700 people are NOT getting wine... in or out of the Three Tier System!!! Wake up.

Cheers....
Mickael S. Goldman
Wine Salesman
New Jersey

[drcocktail]

Baby out with the bathwater

Whereas it may appear Declan is speaking of wine, and the popularity of wine makes it a fine central topic point, I am not, solely, nor is the proposed ruling. I am interested in Spirits first and wine second. If I could buy what I want locally it would be a moot point, but I can't. You can bandy about the term "prima donna" all you want, but in fact, that is the face YOU are showing by attempting to denigrate what we must assume is not YOUR first choice for beverage alcohol and the people who want it. Perhaps working as a salesman in the industry you have more choices and acquisition opportunities than the rest of us, or perhaps you are looking out for your own interests and screw what anyone else wants. Again, if I could buy New York or Ohio Catawba wine in California I surely would! Your commentary about 300 bottles for 700 customers is specious as well. Any of the wine and spirits merchants I've spoken to whose states interdict export/import would be GLAD to sell to me -- if they could. It's more like they struggle with sales now, and they'd be lots better off financially if they could sell to me and people like me. If there was a short run, increased production would enhance the local economy (though not, I note, your job) through increased profits and hiring. The internet economy is real. my lack of ability to buy the Cora Amaro, the regional Porter, or yes, the wines I'm after is an abridgement of MY freedom. States can claim power -and often rightly so- but to do so simply to maintain the status quo as you suggest is as wrongheaded as any law (like Prohibition) which has outlived its usefulness and which culture has moved beyond. I don't want you to lose your job, but trying to impede inexorable movement into the future is no way to keep it.

[MSGOLD406]

Poor, poor baby....

You can't get your bottle.

Let me ask you questions: Why should you treat wine differently than beer or spirits? Because that is your drink of choice? Because it pumps up the difference (in YOUR arguement) between you and the underage drinker?
There is order in the universe. The 21st ammendment protects that order.
The basic concept of your plight is not choice because the phenomen of your crusade has been a recent one....when in fact more and more choices have become available. Price? No, the shippers take up the difference. It all comes down to a few 'PRIMA DONNAS' that want their special hard-to-get-wine. BULLETIN: If a thousand people want a wine that produces a grand total of 300 bottles, 700 people are NOT getting wine... in or out of the Three Tier System!!! Wake up.

Cheers....
Mickael S. Goldman
Wine Salesman
New Jersey

[drcocktail]

Baby out with the bathwater

Whereas it may appear Declan is speaking of wine, and the popularity of wine makes it a fine central topic point, I am not, solely, nor is the proposed ruling. I am interested in Spirits first and wine second. If I could buy what I want locally it would be a moot point, but I can't. You can bandy about the term "prima donna" all you want, but in fact, that is the face YOU are showing by attempting to denigrate what we must assume is not YOUR first choice for beverage alcohol and the people who want it. Perhaps working as a salesman in the industry you have more choices and acquisition opportunities than the rest of us, or perhaps you are looking out for your own interests and screw what anyone else wants. Again, if I could buy New York or Ohio Catawba wine in California I surely would! Your commentary about 300 bottles for 700 customers is specious as well. Any of the wine and spirits merchants I've spoken to whose states interdict export/import would be GLAD to sell to me -- if they could. It's more like they struggle with sales now, and they'd be lots better off financially if they could sell to me and people like me. If there was a short run, increased production would enhance the local economy (though not, I note, your job) through increased profits and hiring. The internet economy is real. my lack of ability to buy the Cora Amaro, the regional Porter, or yes, the wines I'm after is an abridgement of MY freedom. States can claim power -and often rightly so- but to do so simply to maintain the status quo as you suggest is as wrongheaded as any law (like Prohibition) which has outlived its usefulness and which culture has moved beyond. I don't want you to lose your job, but trying to impede inexorable movement into the future is no way to keep it.

[R Me]

all about taxes

while the stated reason may be the states legal right to regulate the sale of alcohol, the real reson tht staes bar the outside sale of alcohol is tax dollars. The states that ban outside sales also have the most "state" control over the actual sale of alcohol. Take Michigan for example. I still remember when you had to go to the only store in town to buy alcohol(all but beer), that store was the official state run liquor store. The employess were state employees and the profit went to the state. They fought tooth and nail to keep it that way until legal action forced the state to a more open sales system.

Do you expect states to readily give up the largest tax per item the have now?? Compare/figure the tax on an expensive bottle of wine compared to six-pack.

[R Me]

all about taxes

while the stated reason may be the states legal right to regulate the sale of alcohol, the real reson tht staes bar the outside sale of alcohol is tax dollars. The states that ban outside sales also have the most "state" control over the actual sale of alcohol. Take Michigan for example. I still remember when you had to go to the only store in town to buy alcohol(all but beer), that store was the official state run liquor store. The employess were state employees and the profit went to the state. They fought tooth and nail to keep it that way until legal action forced the state to a more open sales system.

Do you expect states to readily give up the largest tax per item the have now?? Compare/figure the tax on an expensive bottle of wine compared to six-pack.