Cases in Transit: The Supreme Court Decision's Impact on MD
While Maryland wine-lovers popped many a cork when
the Supreme Court’s wine shipping decision was announced,
reality soon set in. The State of Maryland allows neither in-state,
nor out-of-state wineries to ship to Maryland consumers. Hence,
the state’s ban on wine shipments is perfectly constitutional.
The Supreme Court heard cases from Michigan and New
York, two states that allow in-state wineries to ship to in-state
citizens, but ban out-of-state wineries from shipping in. Put another
way, does a state’s rights under the 21st Amendment allow
it to regulate alcohol to the detriment of other states’ rights
under the Commerce Clause. The Court, in a razor-thin, five to four
decision, stated that states must allow all wineries to ship, or
no wineries to ship.
The decision was monumentally in-favor of small, family-owned
wineries. These wineries often find themselves in a difficult situation
when it comes to selling their wines. In many cases, these wineries
are too small to send their wines through a distributor (which then
gets the wine to retail stores) or cannot find a distributor interested
in selling their wares (either because the winery’s too small,
or there’s no perceived market for the wines or wine region).
The justices wrote clearly that while the three-tier
system employed by many states – through which wine passes
from the producer to a distributor, and on to a retailer –
is perfectly constitutional and works well in many instances, it
does not always benefit these small wineries. Provisions must be
made to allow these wineries to compete in the market place.
At wineries in every state, visitors flock to tasting
rooms, taste great wines, then ask where they’re available.
In many cases, wines are available at the winery and at surrounding
retail stores only. That’s where direct shipping comes in.
There are two important aspects of wine shipping that
are important to remember. First, wine weighs a lot. Second, the
established distribution system successfully places thousands of
sought-after wines on retail shelves. Thus, the wines that consumers
would be ordering via shipment would be wines not already available
in their market, simply because it will be much less expensive to
purchase your favorite distributed wine from a retail store than
to have it shipped direct.
A small winery can make 10-15% additional revenue
by shipping wines to consumers. And in many direct-ship states,
retail stores are also allowed to ship. These stores have quickly
found vast new revenue by creating their own wine-of-the-month clubs.
An interesting element of the Supreme Court’s
opinion is that it quickly dismissed the two primary concerns about
direct shipping – that taxes cannot be collected, and that
minors will use the system to obtain alcohol. The justices clearly
noted that neither of these concerns are justified, based on years
of experience in states that allow the shipping of wine.
The justices also noted that commerce has changed
since the repeal of Prohibition – and that Internet, phone
and catalog sales have become status quo. States must come to understand
this, and let the wine flow across state lines.
So what about Maryland? For now, neither Maryland wineries –
nor those from outside our state line – may ship wine to Maryland
consumers. While this is likely to change in the coming years under
pressure from other states’ wine industries, Maryland wine
lovers must log-off the computer, hang up the phone, and stick to
the law by purchasing wines the old-fashioned way: with their feet.
Or, be in touch with your legislators and let them
know how you feel about the issue.