Making Wine Flow in the Desert

December 1, 2003

Representing a family-owned Virginia winery and an Arizona consumer who can’t purchase its wines, the Institute for Justice filed its second constitutional challenge against protectionist direct wine shipping laws when it sued Arizona liquor licensing officials on October 7.

IJ represents Willowcroft Farm Vineyards and Arizona resident John Norton, who served as Deputy Secretary of Agriculture during the Reagan Administration. Norton tried to order a case of Willowcroft’s award-winning Traminette wine, which is available only from the winery, but the winery was compelled to decline the order because Arizona prohibits direct interstate shipments of wine to consumers.

“As a consumer, I’m outraged that the State of Arizona is tying up my right to conduct interstate commerce with all this red tape,” declared Norton.

“This is part of a continuing struggle to gain the right to ship our products to consumers in a way that enhances a free and open marketplace,” explained Lewis Parker, Willowcroft’s owner. Parker has supported efforts to deregulate wine shipments in New York and Virginia.

The number of cases challenging direct shipment bans has decreased as Virginia, North Carolina and Texas each decided to permit direct shipping in the face of adverse court decisions. Those legislative reforms reduced to 24 the number of states with such bans.

Clint Bolick, left, and Ken Starr, not pictured, met in Washington, D.C., to debate Robert Bork, center, and C. Boyden Gray on the trade barriers against wine.

?For the first time, a majority of states have removed their protectionist barriers,? declared Clint Bolick, who is leading IJ’s litigation effort. ?Step by step, the litigation campaign is working.?

Meanwhile, a ruling favorable to wineries and consumers in Michigan may be headed to the U.S. Supreme Court. The appeal of IJ’s trial court victory in New York is pending before the U.S. Court of Appeals for the Second Circuit.

Arizona conjoins its protectionist trade ban with a discriminatory exemption allowing in-state wineries to ship directly to consumers. The discrimination is the basis of the legal challenge under the Commerce Clause, which strongly discourages such discrimination. But it also means that Arizona wineries are foreclosed from markets in states that allow direct shipping only from wineries in states that also allow direct shipping.

The interstate shipping ban protects in-state wholesalers and retailers, who are given a monopoly over alcohol distribution. Southern Wine & Spirits, a $2.8 billion liquor distributor that dominates the Arizona market, has tenaciously resisted legislative efforts to allow direct shipping. It was not clear from the Arizona statutes whether the law was discriminatory until Leesa Berens Morrison, director of the Department of Liquor Licenses and Control, responded to an inquiry from IJ. “A domestic in-state winery can deliver directly to a residence within the state. An out-of-state winery cannot,” she affirmed.

Meanwhile, the issue is drawing national attention as it moves toward the U.S. Supreme Court. A recent study by the Federal Trade Commission outlined the magnitude of the trade barriers against wine, and demonstrated that justifications for the bans were meritless. In October, Bolick and Ken Starr debated Robert Bork and C. Boyden Gray at a Federalist Society debate on wine laws at the National Press Club in Washington, D.C.

The wine bans are only one example of protectionist trade barriers affecting direct transactions between producers and consumers for such products as automobiles, contact lenses and, as IJ supporters know, caskets. If efforts to allow consumers greater choice in wine succeed, it will be a critical step in ensuring free trade in the Internet era.

Lewis Parker’s award-winning Willowcroft wines are shut out of the market in many states because his winery does not produce enough inventory for the wholesalers to carry them.

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