Being freelance wine critics may sound like a sweet gig, but Ray and Eleanor Heald have soured on it. Because their home state, Michigan, blocks direct shipments from out-of-state wineries, the husband-and-wife team often cannot obtain the wines they need to run tastings for wine lovers and to produce what they call “high-quality wine journalism.”
Seminars have been canceled. Freelance fees have been lost to writers who live in 26 states that allow direct shipping. Perhaps worse, as Ray says in a lawsuit that the U.S. Supreme Court takes up today, oenophile charities have suffered.
“I frequently donate old and rare wines to charity auctions,” Heald says. “We are (now) both losers because of Michigan’s restrictive laws.”
In lawsuits brought by the Healds and small winery operators, the Supreme Court will examine two questions of importance to connoisseurs, consumers and the nation’s $18 billion-a-year domestic wine industry:
• Does the Constitution’s “commerce clause” prevent states such as Michigan from restricting out-of-state alcohol shipments because such laws interfere with interstate commerce?
• Or does the Constitution’s 21st Amendment, which abolished prohibition and turned most alcohol regulation over to the states, empower states to restrict interstate sales regardless of what the commerce clause says?
Wine lovers such as the Healds and others say the ability to ship directly to consumers is needed to keep the nation’s growing number of small wineries solvent. Shipping bans, they argue, unfairly protect home-state wineries and raise costs to consumers.
Michigan, New York and 22 other states, supported by the beer and wine wholesale industry and some alcohol-abuse specialists, argue that shipping bans ensure that alcohol is sold only by state stores or licensed retailers. That, they argue, allows states to collect tax revenue and keep intoxicants from being sold to minors or chronic abusers.
The Healds won their lawsuit in the U.S. Court of Appeals for the Sixth Circuit. But in a similar case, Juanita Swedenburg, owner of a small Virginia winery, lost her challenge to New York state’s law against shipping directly to consumers in the U.S. Court of Appeals for the Second Circuit.
The Supreme Court has consolidated the two cases. Four other federal appeals courts have ruled on aspects of shipping wine with conflicting results. About two dozen similar challenges are pending in lower courts.
A victory by the small wineries could open the door to the direct sales of beer by micro-breweries that are subject to some of the same laws. The case seems unlikely to affect the hard liquor industry, which has few legal small producers.
The American wine industry sold $18 billion worth of products last year, about two-thirds of it made in California. Most domestic wine was sold in-state or shipped to wholesalers who then re-sold it through local retailers. That approach has been in place since 1933, when national prohibition ended and states were permitted to regulate alcohol sales.
Small wineries — those that produce on average about 4,000 cases a year — have quadrupled since 1980 and account for about three-quarters of the nation’s estimated 3,726 wineries, according to the U.S. Treasury. Driven by the Internet, direct sales from wineries to consumers reached an estimated $200 million last year.
Michigan Attorney General Michael Cox, arguing in favor of the ban, acknowledges in a legal brief that the Constitution gives Congress, and not states, the power to regulate interstate business. But Cox says the 21st Amendment, which ended prohibition in 1933, “carves out a broad exception to the commerce clause” that permits a state to regulate alcohol sales within its borders. Supreme Court cases, Cox argues, have “reiterated a principle of truly unfettered state control” over liquor.