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High court to weigh in on wine shipments

The Supreme Court said Monday it will take on the issue of direct wine shipments. While states insist on their right to regulate alcohol, winemakers see some shipping laws as a modern-day extension of Prohibition.
/ Source: The Associated Press

The Supreme Court said Monday it will referee a modern-day fight over state control of alcohol that recalls the days of Prohibition.

The high court agreed to hear three cases involving state bans that prevent consumers from buying wine directly from an out-of-state supplier. The dispute pits states and an established network of alcohol wholesalers against independent wineries that want to sell their products over the Internet or by phone.

Both sides can point to the Constitution and recent court rulings for support.

The 21st Amendment that ended national Prohibition in 1933 also placed control of alcohol regulation in the hands of state governments, as opposed to the federal government or localities.

Another part of the Constitution, however, gives Congress the power to regulate commerce across state lines.

Federal courts have reached conflicting conclusions about whether direct shipments are legal and constitutional, and the Supreme Court stepped in to settle the question.

About half the states prohibit direct interstate shipment of wine to consumers, while others allow it with some restrictions. States collect millions in taxes from alcohol regulation, and generally claim that the established system helps prevent fraud and underage drinking.

"The historical basis for the (state) structure, as recognized by this court, is to protect against the collusion, price-fixing and monopolization problems that existed before Prohibition," lawyers for Michigan Gov. Jennifer Granholm wrote in the state's Supreme Court appeal.

Michigan requires out-of-state producers to sell alcohol only through licensed wholesalers or vendors. Wine reviewers Ray and Eleanor Heald of Troy, Mich., sued in an effort to get direct shipments from out-of-state wineries, and won their case before the 6th U.S. Circuit Court of Appeals last year.

The appeals court cited the Commerce Clause in ruling Michigan's law unconstitutional.

Focus on regulation
Attorneys general from 36 states signed a friend-of-the-court brief supporting Michigan in its Supreme Court appeal. The high court should address the confusion from a patchwork of court rulings and regulations, the states said.

"Moreover, the recent proliferation of small-production wineries, whose sole marketing and sales agenda is direct shipment with sales made over the Internet, means that this area of regulation is increasingly important, both to the states from a police power perspective and to wineries and consumers," the state lawyers wrote.

Although the Michigan case and a companion ruling from New York govern only wine sales. industry groups representing distributors for beer and other kinds of alcohol also asked the high court to rule in favor of continued state regulation.

The New York case involved independent wineries from outside that state that wanted to ship wine to New York consumers. A federal appeals court ruled for the state earlier this year.

Lawyers for Juanita Swedenburg, who runs Swedenburg Winery in Virginia, told the Supreme Court it is unfair that she must go through a complex and expensive bureaucracy to sell her product in New York, while New York State wineries are allowed to go around the state distribution system and ship some products directly to in-state buyers.

The interstate shipment ban is discriminatory and protectionist and reduces consumer choice, the lawyers wrote.

The wine fight has divided the conservative legal establishment, with both sides hiring well-known and high-priced names. Former independent counsel Kenneth Starr is helping to represent a group of Michigan consumers in one case, while failed Supreme Court nominee Robert Bork is on the other side, representing alcohol wholesalers.

The cases are Granholm v. Heald, 03-1116; Michigan Beer & Wine Wholesalers Association v. Heald, 03-1120 and Swedenburg v. Kelly, 03-1274.