A Supreme Court tobacco ruling that may have implications on wine direct shipping: Rowe v. New Hampshire Motor Transport Association
I was intrigued by a story in the New York Times today on a unanimous ruling by the Supreme Court on a tobacco case. This case, Rowe v. New Hampshire Motor Transport Association, was brought by the New Hampshire Motor Transport Association in challenge of a Maine law requiring shippers of tobacco products to identify and intercept packages from sellers unlicensed to ship tobacco, and to conduct age verification on delivery. The law seems unexceptional, except that the federal government is given exclusive authority over common carriers under the 1994 Federal Aviation Administration Authorization Act. The First US Circuit Court of Appeals overruled Maine's law, and the Supreme Court agreed that the 1994 act (which established the deregulation of trucking to put it on a level playing field with the newly-deregulated airline industry) superseded a state's desire to achieve specific public policy goals through regulating the distribution and delivery of a controlled substance.
Particularly interesting as the ruling might apply to wine is the Court's dismissal of a public health argument by states as a means of overriding the federal legislation. From Justice Breyer's opinion:
"Despite the importance of the public health objective, we cannot agree with Maine that the federal law creates an exception on that basis, exempting state laws that it would otherwise pre-empt."
As the regulatory patchwork allowing direct shipping of wine has coalesced, it has become clear that the compliance costs for wineries will be enormous. Each state has different regulations, requires different remittances and reports, and exacts different fees. An industry has developed around knowing these regulations, with companies like Ship Compliant arriving to fill the growing needs of wineries to handle the regulations created by filling the orders of their customers.
It will be interesting to see whether the statutory authority of states to regulate the sale and distribution of alcohol within their borders (granted by the 21st amendment repealing prohibition) takes precedence over the Federal Aviation Administration Authorization Act. All state regulations (and the model direct shipping bill drafted by the Wine Institute) include portions requiring shippers to verify age upon delivery. This specific clause was singled out by the Supreme Court as:
"the very effect that the federal law sought to avoid, namely, a State’s direct substitution of its own governmental commands for 'competitive market forces'"
Certainly, the phrasing in the recent ruling suggests that the Supreme Court is not likely to look favorably on many of the "risk to public health" arguments put forth by the states and their distributor financiers. Again, from Justice Breyer's ruling:
"Many products create “public health” risks of differing kind and degree. To accept Maine’s justification in respect to a rule regulating services would legitimate rules regulating routes or rates for similar public health reasons. And to allow Maine directly to regulate carrier services would permit other States to do the same. Given the number of States through which carriers travel, the number of products, the variety of potential adverse public health effects, the many different kinds of regulatory rules potentially available, and the difficulty of finding a legal criterion for separating permissible from impermissible public-health-oriented regulations, Congress is unlikely to have intended an implicit general “public health” exception broad enough to cover even the shipments at issue here."
Of course, there are constitutional debates involved in the debate on wine shipping, as the Granholm v. Heald ruling demonstrated. The Commerce Clause has its own contradictions with the 21st Amendment. I don't know whether the Federal Aviation Administration Authorization Act would be viewed as bowing to the 21st Amendment as it impacts the common carriers who deliver wine shipments. But, I am cheered by the Court's understanding of the difficult burden that various state regulations put on a business trying to deliver a product within the fifty different United States. This recent ruling gives me additional hope that when the next direct shipping case reached the Supreme Court, wineries are likely to receive a sympathetic hearing.