12 Jan, 2019FORTUNE.COM
Can states bar retail wine shops from sending wine bottles (yes, boxes too) across state lines? The Supreme Court may upend 85 years of practice and modify some of its own precedents in a case coming before them next Wednesday. The outcome could make it legal for retailers to ship wine--and maybe all alcohol--to residents of legal age in any state that allows liquor sales.
But the possibility of shipping alcohol is, to some degree, a side effect of the case at hand. The Tennessee case started with a couple who were barred from purchasing and operating a wine store after moving to Memphis, and were barred from a license. The reason? State law said they hadn’t lived in Tennessee long enough.
The Court will hear arguments on Jan. 16 about whether the liquor control board in Tennessee acts unconstitutionally when it enforces a minimum residency requirement on those who want to sell beer, wine, and spirits in that state. However, this consideration about whether someone lives in a state could uncork a much bigger shift in regulation by striking down provisions that limit where retailers have to live and do business to sell wine into a state.
An appeals court found aspects of Tennessee law unconstitutional, but the Supreme Court will likely make a more definitive, and possibly sweeping decision.
In 2005, the Court struck down state laws that allowed only some winemakers to ship directly to consumers. States that allowed in-state wineries to ship to residents of the same state, but prohibited winemakers in other states from doing the same, violated the commerce clause of the Constitution. States had to play fair by all domestic winemakers, no matter the state in which they operated. That case didn’t include wine retailers, but it didn’t omit them, leaving a lack of clarity. Fourteen states made it legal for out-of-state retailers to ship to their residents.
While the 21st Amendment, which repealed Prohibition, gave states the right to regulate the sale of alcohol within their borders, it didn’t convey the power to override the interests of the federal government in facilitating commerce among the states. (The Tennessee case also involves whether a state can withhold from newly arrived residents rights available to people who have lived in the state longer.)
After the 2005 ruling, 39 states let out-of-state wineries ship to their residents, but only 14 states and Washington, D.C., permit wine retailers to send bottles. The New York Times reported that wine-and-spirits wholesalers lobbied hard to crack down on shipments sent to states in which it wasn’t permissible, and shipping carriers eventually fell in line, too.
The court has to mull over arguments and its decision will age quietly until May or June.