New Tennessee ruling could lead to a more national alcohol marketplace
In 2016, Mary and Doug Ketchum decided to move from Utah to Tennessee. They made the move after their daughter suffered a collapsed lung and was in need of a locale with better air quality. Around the time of their relocation, the Ketchums decided to start a new business by purchasing a historic liquor store in downtown Memphis.
Unfortunately, Tennessee laws complicated their plans. A 1939 state statute requires all applicants for liquor store licenses to have resided in the state for at least two years. And in order to renew the license — which is required each year — store owners must have resided in the state for 10 years.
Facing a lawsuit that sought to revoke their license, the Ketchums and other out-of-state liquor store owners argued that Tennessee’s residency requirement was unconstitutional. Under the U.S. Constitution’s Commerce Clause, courts have long held that one state should not be allowed to economically discriminate against residents from other states. Because Tennessee’s residency requirement for liquor store owners directly favored in-staters over out-of-staters like the Ketchums, it violated this principle.
Defenders of the Tennessee law pushed back by arguing that the 21st Amendment, which repealed Prohibition but also granted state governments broad power to regulate alcohol, allowing states to enforce even discriminatory booze laws. But the Supreme Court disagreed. In Tennessee Wine v. Thomas, the Supreme Court sided with the Ketchums, stating that the amendment is “not a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages.” Because the Tennessee residency requirement “blatantly favors (in-state residents) and has little relationship to public health and safety,” the court found it unconstitutional.
A game changer
The court’s holding might seem limited to the unique circumstances of Tennessee’s law, but it has the potential to be a game changer in the world of booze. The biggest change could involve the shipment and transportation of alcohol.
Unlike just about every other product on the market today — nearly all of which can arrive at your door in two days — direct-to-consumer alcohol shipping is incredibly limited. While a previous Supreme Court case allowed wineries to ship their bottles to consumers in neighboring states, very few states allow out-of-state retail stores — not to mention breweries and distilleries — to engage in interstate shipments.
Under the logic of the court’s holding in Tennessee Wine, however, allowing in-state shipments of alcohol while forbidding out-of-state shipments violates the Constitution. If more of these laws are challenged accordingly, it could mean that a Michigander could soon be able to have her favorite Vermont beer shop send IPAs directly to her door.
The potential transformative effect of liberalizing alcohol shipping laws could be dramatic. It would allow more online retailers to enter the alcohol space, meaning that Americans across the country could suddenly have the latest craft spirits right at their fingertips. In turn, this would help the country’s growing craft spirit boom expand even further — something that all Americans should be rooting for, given the alcohol sector’s entrepreneurial spirit and vast blue-collar job-creating potential.
In light of the decision, state governments should take preemptive steps — before they potentially face litigation — to reform their alcohol shipping laws. For its part, Congress could pass pending legislation that would allow the Postal Service to ship alcohol (something that only private carriers do now).
To be sure, some laws surrounding alcohol are important. For example, laws concerning public health and safety, such as drunken-driving laws, are vital. As the Supreme Court clarified, these laws will remain safe in the wake of Tennessee Wine. But for the many laws and regulations that serve no purpose other than to protect one state’s residents over another state’s, the court’s decision holds great promise.
It could be the first step that ushers in a wave of alcohol reforms, starting with clearing away the countless antiquated and harmful alcohol laws still on the books across the country. The winners will be craft spirits producers, retailers and consumers.