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US Supreme Court turns its sights on interstate shipping

The United States Supreme Court – the highest court in the US – said yesterday it would consider the issue of state bans that prevent consumers from purchasing wine directly from out-of-state suppliers.

The Court, in Washington, agreed to hear three consolidated cases – one from New York, two from Michigan – probably late this year. Its ruling is likely to be handed down in mid-2005.

The cases involve profound – some say irreconcilable – constitutionally based rights.

The Constitution’s 21st Amendment, which ended national Prohibition in 1933, gave the states authority to regulate alcohol. But the Constitution’s so-called Commerce Clause gives Congress the power to regulate commerce across state lines.

Twenty-five states, including New York, bar direct interstate shipments to consumers. The other 25 allow them, subject to regulations that prevent minors from receiving wine and facilitate the collection of taxes. State courts are sharply divided over whether such sales are legal and constitutional.

On one side of the contending forces are states which want their control over alcohol left unchanged, and their powerful allies, alcohol wholesalers. On the other side are wineries that want to sell their products over the Internet, by phone and by mail, and consumers.

The potentially pivotal New York case was brought by the Institute for Justice, a libertarian organization, which represents two family winemakers, Juanita Swedenburg of Virginia and David Lucas of California, and a few New Yorkers who want to buy these producers’ wines.

Clint Bolick, the Institute’s main attorney, said, ‘This case will decide whether consumers or a cartel of billion-dollar liquor distributors will determine what wine is available to consumers.’

The Institute says it is unfair that Swedenburg must go through a complex, costly bureaucracy to sell her wine in New York while New York wineries can circumvent distributors and ship wine directly to in-state buyers.

New York’s ban on interstate shipping, it says, is discriminatory and protectionist, and reduces consumers’ choices. A lower court struck down that ban, but an appeals court overturned the lower court’s decision.

States do not want to lose millions of dollars in taxes from alcohol regulation, and generally assert that the established system helps prevent fraud and underage drinking.

‘The historical basis [for the state structure] is to protect against the collusion, price-fixing and monopolization problems that existed before Prohibition,’ Michigan governor Jennifer Granholm said in the state’s appeal to the Supreme Court.

Michigan requires out-of-state producers to sell alcohol only through

licensed wholesalers or vendors. Wine writers Ray and Eleanor Heald sued in an effort to get direct shipments from out-of-state wineries and won in appeals court last year. Attorneys general from 36 states signed a brief supporting Michigan in its appeal to the Supreme Court.

In 2003, a reported by the Federal Trade Commission said that bans presented a barrier to e-commerce and were unnecessary to protect legitimate state interests.

New York’s Legislature is considering a bill, supported by Governor George Pataki, that would allow direct shipping.

Written by Howard G Goldberg in New York

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