Untangling the complex world of wine direct shipping and compliance
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    Granholm v. Heald

    October 1st, 2005
    By Jeff Carroll - VP of Compliance, ShipCompliant

    On May 16th, 2005, the Supreme Court of the United States issued a landmark decision in the case of Granholm, Governor of Michigan, Et Al, v. Heald Et. Al.. We will discuss this case at length in this blog, but let’s start with the basics.

    You can see the official Supreme Court decision here, but the key passage from Justice Kennedy’s opinion follows:

    These consolidated cases present challenges to state laws regulating the sale of wine from out-of-state wineries to consumers in Michigan and New York. The details and mechanics of the two regulatory schemes differ, but the object and effect of the laws are the same: to allow in-state wineries to sell wine directly to consumers in that State but to prohibit out-of-state wineries from doing so, or, at the least, to make direct sales impractical from an economic standpoint. It is evident that the object and design of the Michigan and New York statutes is to grant in-state wineries a competitive advantage over wineries located beyond the States� borders. We hold that the laws in both States discriminate against interstate commerce in violation of the Commerce Clause, Art. I, �8, cl. 3, and that the discrimination is neither authorized nor permitted by the Twenty-first Amendment. Accordingly, we affirm the judgment of the Court of Appeals for the Sixth Circuit, which invalidated the Michigan laws; and we reverse the judgment of the Court of Appeals for the Second Circuit, which upheld the New York laws.

    Basically, because the states of New York and Michigan were allowing in-state wineries to ship directly to consumers while prohibiting out-of-state wineries from shipping directly to consumers in their state, the states were in violation of the Commerce Clause.

    As a result, states must treat in-state and out-of-state wineries evenhandedly. This effectively means that states have two options – allow both in-state wineries and out-of-state wineries to ship directly to consumers in their state or prohibit direct shipments altogether.

    7 Responses to “Granholm v. Heald”

    1. [...] The second is more significant for wine shipping. Citing the Commerce Clause as does the Granholm decision, Judge Marsha Pechman agreed with Costco that Washington’s system that allows in-state beer and wine producers to ship directly to retailers while prohibiting out-of-state producers from doing the same is unconstitutional. She gave Washington lawmakers until April 14th, 2006 to either allow all beer and wine producers to sell directly to retailers or to prohibit direct sales to retailers altogether. [...]

    2. [...] A pending bill in the Kansas Legislature would prohibit the direct shipment of wine to consumers altogether. Currently, Kansas in-state wineries can sell directly to consumers, but out-of-state wineries are required to use the three-tier system. This uneven treatment was deemed unconstitutional by the US Supreme Court in May 2005. As a result of the ruling, states can essentially either allow direct shipments from all US wineries or prohibit all direct shipments. So far, Kansas seems to be leaning towards prohibition. [...]

    3. [...] In their effort to become compliant with the Granholm decision, Colorado introduced a limited direct bill that would ease restrictions on shipping wine. Currently, consumers in Colorado can not make offsite purchases from wineries unless they have visited that winery in the past. The new legislation would remove this previous visit requirement. [...]

    4. [...] Highlights from the study and the findings will be presented during NBC Nightly News this evening at 7pm EST. This is obviously a highly coordinated PR effort on the part of the WSWA and perhaps the beginning of a new campaign from an organization that has fought bitterly against the progress direct shipping has made since Granholm. No one wants to see alcohol in the hands of minors; however we know that states are taking the right steps to ensure that even orchestrated stings do not result in underage reception of alcohol. A specific example is Michigan, who will officially announce in a few weeks that ChoicePoint and IDology are approved as authorized vendors for online age verification. Combine this technology with the carrier’s responsibility at time of delivery and you’ve got enforcement at both ends of a transaction. [...]

    5. [...] Granholm case effectively established that states must treat in-state and out-of-state wineries [...]

    6. [...] its first Direct Shipping Seminar & Users Conference in 2006, one year after the groundbreaking Granholm v. Heald Supreme Court ruling that put the framework in place for the direct shipping landscape as we know [...]

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