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12/17/2018

As US Alc Bev Biz Goes Back to US Sup Court, What You Need to Know; Hearing on Tap Jan 16

With oral hearing on tap for Jan 16, US Sup Ct will review legitimacy of state alc bev regs for first time since 2005 Granholm case.  Balance between states’ rights to regulate alcohol under 21st Amendment and fed interest in level economic playing fields across states once again before the court.  Decision could have broad impact on state laws far beyond Tennessee’s 2-yr residency requirement for liquor retailers.  Then again, Justices could fashion a narrow decision with modest impact. Here’s a primer.

Players & History:  TN liquor store assn (TWSRA) and Tenn ABC defend TN’s 2-yr residency requirement for retail liquor licenses vs mega-retailer Total Wine.  TN law claims it’s in TN’s interest “to maintain a higher degree of oversight, control and accountability” for retailers of higher-alc bevs. When Total sought liquor license in 2016, state sought judgment whether 21st Amendment allowed TN to enforce residency requirement.  US Dist Ct tossed law; TN Retailers Assn appealed. US Appeals Ct for 6th Circuit affirmed lower ct.  Tenn Retailers appealed to US Sup Ct.  Decision expected in spring. US Dist Ct determined residency requirement not an “inherent aspect” of TN’s 3-tier system saved by 21st Amendment.  US Appeals Ct agreed, interpreting Granholm to bar discrimination vs out of state “economic interests” generally, not just producers.  Appeals Ct also said TN could meet public safety goals via “less discriminatory means,” i.e. require mgrs be residents.

What’s At Stake  Possibly only residency laws, or solely TN’s law.  Potentially much more, if Sup Ct rules that while states cannot discriminate vs out-of-state producers, they can (or cannot) discriminate vs out-of-state retailers/distribs, via residency, brick-and-mortar requirements, etc.  Most of law’s supporters don’t actually say states can discriminate in other tiers, but argue states have “unfettered” rights to “structure” distrib system. One veteran alc beverage atty (Richard Blau) suggests that, given changes on Court, Granholm itself could fall and Sup Ct could return to stricter states’ rights position under 21st Amendment vs the “amorphous” dormant Commerce Clause doctrine.

What Retailers’ Assn/Defenders of State Regulation Say  “Alcohol is not an ordinary article of commerce – it is both widely enjoyed and dangerously misused.”  Because of different attitudes about alcohol, “it makes sense to leave the regulation of alcohol to state and local officials.... This is precisely what our Constitution does” in 21st Amendment.  States are “unfettered by the dormant Commerce Clause when they exercise their ‘core power’ to regulate the sale or use of liquor within their borders.”  NBWA argues residency requirement just 1 part of comprehensive 3-tier system; tossing it could mean “pulling a thread that threatens to unravel the entire regulatory fabric.”  Also: TN law allows state to determine an applicant’s fitness, increases odds retailers will sell responsibly because local citizens more tied to communities. Besides, barriers to opening stores reduce supply; that helps prevent alcohol abuse/problems (i.e. the temperance argument).  Another common point: state legislatures, not courts, should decide appropriate regulation.

What Total, Free Market Allies Argue  Total and its allies haven’t filed briefs yet.  But, as Total argued when it advised Sup Ct not to take case: 1) US Dist/Appeals Courts got it right; 2) Dist Ct judge concluded TN “blatantly discriminated” vs out-of-state interests; 3) no one offered evidence of legit “non-protectionist purpose” advanced by residency law; 4) state itself did not appeal lower ct decision; 5) TN’s own AG “twice opined” that TN law “violated the dormant commerce clause and could not be enforced.”

Publishing Info

  • Year: 2018
  • Volume: 49
  • Issue #: 23
Read 552 times Last modified on 01/28/2019

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 2019 Beer Marketer's Insights Seminar

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The 2019 Beer Insights Seminar will be held in New York City, on Sunday evening, November 17th to Monday, November 18th at Convene.