I t’s not always easy to keep track of the many pointless government regulations that have nothing to do with protecting consumers and everything to do with artificially propping up influential industries. Fortunately, thanks to the persistence of the Washington, D.C.-based Institute for Justice, the U.S. Supreme Court will consider a case that could roll back one of these oppressive rules.
The court agreed Monday to consider whether New York state’s restriction on interstate wine shipments to consumers is legal under the U.S. Constitution. New York allows in-state wineries to ship their products directly to New York consumers. But it forbids out-of-state wineries from shipping wine to New Yorkers.
California, for instance, allows out-of-state wineries to ship directly to California consumers provided there are reciprocal agreements among those states. (Several states allow direct shipping without many restrictions, while 24 states ban such shipments. Five even consider it a felony for wineries to ship wine to consumers.)
“The case pits the Commerce Clause of the U.S. Constitution, which guarantees free trade and business opportunities among the states, against the 21st Amendment, which gives states broad latitude in regulating alcohol,” according to an Institute for Justice statement. The Institute argues that while the 21st Amendment grants the states wide regulatory latitude, it wasn’t designed to allow them to engage in raw protectionism.
“The only way for an out-of-state winery to ship wine to New York consumers would be to establish a New York winery, which requires it to obtain a New York commercial winery license, maintain a staffed branch office and warehouse in New York, secure a retailer license and then use its own or register vehicles to deliver (the wine),” the Institute argues in its lawsuit.
Ironically, New York wineries don’t favor the current restrictions because such restrictions also keep them from shipping their wine to other states. The protectionism is done on behalf of liquor distributors, who don’t want out-of-state wineries selling directly to consumers, undercutting the 18 percent to 25 percent markup distributors levy on each bottle of wine, the Institute explains.
The Supreme Court is considering an appeals court ruling that upheld the state’s direct shipping ban. If the court overturns the appeals court, it could open the direct wine industry across the United States, with consumers gaining the most from the decision. Here’s another instance where freedom, rather than government control, benefits everyone — except perhaps for a special interest group that unfairly wielded its political power.