The notorious ‘three-tier system’ regulating alcohol sales in the U.S. may be on the way out. On Wednesday (6.26), the Supreme Court handed down a decision that paves the way for interstate shipping of alcohol with much wider ramifications. On a macro level, the 7-2 SCOTUS ruling determined that the states’ ability to regulate alcohol has boundaries.
“If a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to “‘advance a legitimate local purpose,’” Justice Samuel Alito wrote in the majority opinion.
‘Tennessee Wine and Spirits Retailers Association v. Blair, No. 18-96’ challenged a TN state law that requires an individual (and/or corporations and their “officers, directors and stockholders”) to live in-state for at least two years before they can receive a one-year sales license from the TN Alcoholic Beverage Commission. In a confusing twist, to renew the license, the applicant must have logged ten years living in state.
The case was bought by Kimbrough Fine Wine & Spirits, a small mom n’ pop operation, along with Total Wine & Spirits, a large national retailer. Their attorney Carter Phillips argued, “The sole purpose of this statute was, as my friend here who represents the retailers association proves beyond any question, what this is designed to do is be exclusively protectionist.”
Alito agreed that the residency requirement “expressly discriminates against nonresidents and has at best a highly attenuated relationship to public health or safety.”
The ruling opens the door for a host of other challenges to state regulation of the alcohol industry. However, in the immediate future, the 16 states that allow for in-state shipping of wine will need to rewrite their now-unconstitutional laws.The new legislation will wither eliminate shipping altogether or allow for out-of-state shipping.
Of course, the large retail interests that fought the change are not planning to completely capitulate.
“The majority opinion clearly recognized that liquor is a unique commodity in our nation’s history and affirmed the right of states under the 21st Amendment to enact liquor-related regulations for the health and safety of residents, even if those regulations might be impermissible in other industries under the dormant Commerce Clause,” the TWSRA declared in a statement. “The guideposts provided by the decision will be helpful to state legislatures throughout the country as they continue to refine their regulation of liquor.”
Justices Thomas and Gorsuch provided the two dissenting votes.