Constitutional Crossroads: Reconciling the Twenty-First Amendment and the Commerce Clause to Evaluate State Regulation of Interstate Commerce in Alcoholic Beverages

By Douglass, Duncan Baird | Duke Law Journal, April 2000 | Go to article overview

Constitutional Crossroads: Reconciling the Twenty-First Amendment and the Commerce Clause to Evaluate State Regulation of Interstate Commerce in Alcoholic Beverages


Douglass, Duncan Baird, Duke Law Journal


INTRODUCTION

Trying to purchase a highly rated, limited-production wine(1) from a local wine retailer can be a fruitless endeavor. In most states, wine retailers are permitted to purchase stock only from a state-licensed wholesaler. If a licensed wholesaler does not carry the particular label a customer desires, the customer will find it difficult or impossible even to special order the wine through a local retailer. Growth in mail-order and electronic commerce, however, has provided new channels through which consumers and producers or retailers can reach each other. The wine industry, particularly small wineries and specialty wine retailers, has made swift use of these burgeoning avenues of commerce. Many wineries and wine retailers permit customers to order coveted bottles of wine over the Internet through their websites. Some oenophiles may be concerned that wines purchased through mail-order or over the Internet will suffer poor travel or storage conditions in the hand of common carriers during the necessary shipping. A Florida resident who purchases wine from an out-of-state producer or retailer, however, should be far more concerned about avoiding a prison sentence. Florida is one of a number of states that have made it a felony for out-of-state sellers to ship alcoholic beverages to unlicensed residents and for unlicensed residents to receive alcoholic beverages shipped by out-of-state sellers.(2) Thirty states outlaw the direct shipment of alcoholic beverages;(3) six of these states make it a felony.(4)

The Twenty-first Amendment is known best for what it accomplished in its first section, repealing the Eighteenth Amendment and ending national Prohibition.(5) Section two of the Amendment, however, has been much more important and controversial. Without section two, ratification of the Twenty-first Amendment in 1933 would have simply and clearly returned commerce in alcoholic beverages to its pre-Prohibition, unfettered status. Instead, section two of the Amendment prohibits the transportation or importation of alcoholic beverages in violation of state law.(6) This peculiar constitutional provision, which seems to afford explicit constitutional protection to state regulation of trade in alcoholic beverages, led Laurence Tribe to note sardonically that carrying an alcoholic beverage across a state line in violation of the state's liquor laws is one of only two ways that a private individual, not acting under color of state law, can violate the Constitution; the other way is to enslave a person.(7)

Following its ratification, states were quick to rely on the Twenty-first Amendment in establishing a three-tiered system to control the importation and distribution of alcoholic beverages.(8) Under a three-tiered distribution system, producers of alcoholic beverages are permitted to sell only to state-licensed wholesalers, who in turn may sell only to state-licensed retailers, who then sell to consumers.(9) States justified the three-tiered distribution system as a way to prevent organized crime--which had run illegal liquor empires during Prohibition--from dominating the legalized liquor industry,(10) By making the direct sale from producers and wholesalers to consumers illegal and by precluding investment in more than one tier of the distribution system, states were able to prevent organized crime from dominating the industry.(11) The highly-regulated three-tiered system had virtually no detrimental effect on interstate commerce in alcoholic beverages during the post-Prohibition era, when competition among the many wholesalers was abundant and there were few producers of alcoholic beverages. Few products and many wholesalers competing to distribute those products meant that the limited varieties of alcoholic beverages were widely available. In fact, by the mid-1960s there were more than 10,000 independent wholesalers engaged in the local distribution of liquor.(12) But over the past forty years the balance has shifted. …

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