Today’s wine-shipping decision …

… arrives courtesy of the Seventh Circuit Court of Appeals.

In this case the plaintiffs, who are described as “oenophiles who want easier access to wine from small vineyards in other states,” challenged two provisions of Indiana law. These provisions state that wineries inside and outside Indiana may ship to customers, if (a) there is one face-to-face meeting at which the buyer’s age and other particulars can be verified; and (b) the vintner is not allowed to sell to retailers in any state as its own wholesaler. The latter provision offends the Commerce Clause; the former doesn’t.

Writing for the court, Chief Judge Easterbrook held:

Indiana thinks that in-person verification with photo ID helps to reduce cheating on legal rules, for both buying wine and voting (and perhaps other subjects). After the Supreme Court held in Crawford v. Marion County Election Board, 129 S. Ct. 1610 (2008), that a belief that in person verification with photo ID reduces vote fraud has enough support to withstand a challenge under the first amendment, it would be awfully hard to take judicial notice that in-person verification with photo ID has no effect on wine fraud and therefore flunks the interstate commerce clause.

Given the state of this record, and the state of the empirical literature, we know very little. What we can guess at implies that face-to-face verification will reduce the fraction of all wine shipments that go to minors, though the size of this effect is hard to estimate. Minors who can get beer locally may not want to pay for costly, upmarket wine plus shipping charges; if so (and we don’t know whether it is so), then Indiana may come to conclude that age verification for direct shipments is not vital. The cost of verification per winery rises with distance, if consumers sign up at only one winery per trip;but when traveling through wine country consumers may be able to sign up at many wineries at small incremental cost. So both the marginal cost and the marginal benefit of Indiana’s face-to-face system may be modest. That is not enough to declare a law unconstitutional—not when the effect on interstate commerce is negligible.

The challenge to the face-to-face provision came down to this:

But if what the Guild says is true, then the statute—although bad economically for Indiana’s wineries—must be sustained against a challenge under the commerce clause. Favoritism for large wineries over small wineries does not pose a constitutional problem, and the fact that all Indiana wineries are small does more to show that this law’s disparate impact cuts against in-state product than to show that Indiana has fenced out wine from other jurisdictions.

But is there a crack in the dam for wholesalers?

Pike asks whether the putative local benefits could possibly justify the burden on interstate commerce. All the wholesalers can muster in support of the statute is that the three tier system may help a state collect taxes and monitor the distribution of alcoholic beverages, because there are fewer wholesalers than there are retailers, so state enforcement efforts can focus on the middle layer. That may be so, see Granholm, 544 U.S. at 489 (stating in dictum that the three-tier system is compatible with the dormant commerce clause), but once a state allows any direct shipment it has agreed that the wholesaler may be bypassed. It is no harder to collect Indiana’s taxes from a California winery that sells to California retailers than from one that does not. The wholesale clause protects Indiana’s wholesalers at the expense of Indiana’s consumers and out-of-state wineries.

Don’t hand your local wholesaler a life jacket just yet. I’ve seen wholesalers up close, and they’ll be captaining the ferries for a while.

My question for now: What’s an oenophile?

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