The common understanding of what the 21st Amendment means is that the individual states have the absolute power to regulate and control alcoholic beverages in their own boundaries, and that the federal government must take a “hands off” approach when dealing with state control of such products. That’s the common understanding, the Grand Assumption, if you will; it is the interpretation that was undisputed for a little over 50 years, the reason why alcoholic beverage regulation is so disparate among the various states.
That’s why states like Pennsylvania and Utah exert so much control over the distribution and sale of alcoholic beverages that they have deemed the State as the sole importer, wholesaler, and retailer of alcoholic beverages; in order for its citizens to purchase alcoholic beverages, they must do so through state stores.
This monopoly system is extremely lucrative for the state, but may not be as beneficial for its consumers, who may not find product that is openly available just across the border.
- That’s why other states have created elaborate licensing and tax systems for alcoholic beverages.
- That’s why wholesalers of alcoholic beverages support the continued existence of statutes that require that all alcoholic beverages MUST go through a wholesaler. In any other business, if you’ve found a way to effectively and profitably eliminate the middle distribution level, you’d be considered a business wizard. In the alcoholic beverage industry, you’d be considered a criminal.
- That’s why retailers of alcoholic beverages are the only ones that are authorized to sell alcoholic beverages to consumers in their states. Some states permit producers in their state to sell product directly to consumers. California, for example, allows wineries to sell wine to consumers.
- That’s why it’s so difficult to effectuate “silver bullet” legislation that would make mail-order wine available in all states to all consumers.
Nothing in the law is absolute, and our client wineries know that a state’s right to control alcoholic beverages within its own boundaries is not perfect. Still, while we may not agree at times with issues of temperance, we can all agree that states have a legitimate right to legislate in areas that deal with public safety. The controversies come about when state rights aren’t necessarily related to legitimate state interests.
You should realize that even today, as you read this document, there are state laws being enforced that for any other industry would be found to be an antitrust violation. As you read this article, you should know that there are state laws that isolate alcoholic beverages from the more general regulatory scheme simply because of the 21st Amendment. And you should keep in mind that alcoholic beverage regulation, while it may have started out with the noble purpose of addressing temperance issues, today are as much a product of politics and the twisted manipulation of the Grand Assumption. State statutes are justified, at times, in terms of public safety but in reality deal as much with profit and monopolies.
When a New Jersey ABC seizure of wine occurred in 1996, many were quick to cite the US Constitution’s Interstate Commerce Clause as the basis for the claim that the state lacked jurisdiction to empower it to seize the wine in the first place. Whether state prohibition of direct consumer wine shipments originating from outside the state are a violation of the Interstate Commerce Clause is a legal conclusion best left to the courts. It may very well be that interstate wine shipments are within the province of federal rather than state laws. But litigation costs an extraordinary amount of money, and the price of losing can sometimes have far-reaching repercussions. Alcoholic beverage producers have been careful when picking their legal fights.