The 21st Amendment continues to choke the drinks trade

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Tennessee recently passed a law limiting any company from owning more than two liquor-store licenses. Why? Well, current holders of liquor licenses don’t want out-of-state grocery chains to enter the market and, gasp, sell more brands of liquor at lower prices.

Would that this were an egregious exception, but such consumer-unfriendly policies are the norm. Consider some examples from around our great nation:

  • In Ohio, the only liquor that gets sold are brands approved by the government. If you are a distiller, you need to ask the state to allow your hooch to cross Ohio’s borders, and you need to ask that the state liquor authority purchase your product and stock it in the state-run stores. If the bureaucrats don’t think consumers want your booze, well, you’re out of luck. Ohio, it should be noted, is but one of the 17 control states.
  • The Texas Legislature has banned corporations from obtaining liquor licenses. Why? Well, as in Tennessee, the concern is that out-of-state grocers will outcompete current retailers. Texas, hypocritically, nonetheless permits in-state liquor chain stores to form by permitting family members to pool their liquor licenses.
  • Four states allow consumers to purchase wines made out of state directly only if their home state has a “reciprocal agreement” with the state where the winery is located.

One could go on. Plainly, all these policies have nothing to do with public safety or well-being. Such protectionist measures are designed to enrich entrenched interests.

The 21st Amendment is the well-spring for all this bad regulation. It has imposed huge costs and hassles and consumers and fostered all sorts of corruption.

Done properly, the 1933 amendment should have struck down the 18th Amendment (Prohibition) and left it at that. But no. The amendment also decreed:

The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

At first glance, this looks like federalism. It isn’t. This is an invitation to mischief that has allowed states to erect all sorts of rules that inhibit the commercial drinks trade.

This provision also is offensive to the Constitution on two counts. First, it runs directly contrary to the Commerce Clause (Article 1, Section 8, Clause 3), which assigns the federal government –not states—the authority regulate commerce among the states. There’s a massive corpus of constitutional law that greatly curtails the authority of states to interfere in commerce. A state –say, Ohio – cannot protect its domestic manufacturers by forbidding out-of-state manufacturers from selling their gewgaws and widgets in Ohio.

Second, the Constitution is wholly silent on the specifics of trade, leaving the regulation of specific goods and services to Congress to decide on a case-by-case basis. Quick civics quiz: what two types of commercial trade does the Constitution explicitly limit? Guns and drugs? Nope. Illicit drugs and prostitution? No. The correct answer is: the slave trade and the alcohol trade. How’s that for a moral equivalence?

When the Supreme Court took up the matter of state policies inhibiting out-of-state alcohol shipments to consumers, it split five to four. The 2005 Granholm case curbed some of the most egregious state policies, but the justices could not wish away the 21st Amendment. The text is the text.

Ideally, we would wipe the 21st Amendment’s offending provision from Constitution. This would remove any ambiguity about the extent of the Commerce Clause. Amending any part of our national charter is a heavy lift, but that does not mean it is not worth doing.

The internet is making it tougher for states to maintain indefensible liquor traffic. Sites like InternetWines.com and others have ways to ship drinks licitly. Consumer expectations have risen, and states are going to have a hard time telling the public, “No you can’t have that beverage. Because.” Over time, more of these bad policies to will crumble, so long as voters keep telling state legislatures that we want better.

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  • Keith Pritchard

    Ohio has even further regulation on wineries and other producers of craft beverages. We have duplicate regulation as food processors by the Food Safety Division to license and regulate the same as in our liquor contol divisions codes. Wine has no history of food safety issues, and since licensing passed in a 2009 budget bill (by surprise) we have been subject to food processing licensing and regulation. This is duplicate of licensing and regulation as provided in Ohio liquor codes. Many other states exempt from this sort of duplicate licensing and regulation. Ohio’s regulation is superfluous, unnecessary, duplicate and also discriminates against Ohio wineries by wineries from out of state that are not subject to the same food processing licensing and regulatory costs that sell wholesale in Ohio. As a traditional artisan winemaker that values microbial diversity in the winery environment I also find the regulation is in direct opposition to my winemaking principles. I find the regulation to be untenable. http://www.FreeTheWineries.com or http://www.facebook.com/FreeTheWineries

    • Thanks for reading, Keith Pritchard. I grew up in Ohio, and my cousin runs a microbrewery there. I was just in town the other weekend. Let’s talk—I’d like to learn more. I’m reachable at kkosar [at] rstreet.org.

  • johnwerneken

    Regulation to protect property values or profits or businesses or jobs is unconstitutional regardless of the excuse.

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