The Supreme Court can save craft alcohol from COVID-19
While many parts of the economy are struggling, no other sector has fared worse than the U.S. on-premise food and drink industry. One out of every 4 jobs lost during the pandemic has been from bars or restaurants, and the situation is hardly better for other popular in-person drinking businesses such as breweries and distilleries. In the coming weeks, however, the Supreme Court will have a unique opportunity to change the drinks sector for the long haul.
One of the best ways to help gathering-oriented businesses survive the pandemic is to expand their ability to sell to their customer base. Simply put, the more products they can sell, the better chance they have of surviving.
In this vein, much of the recent focus has been on state legislatures and governors, who have been busy overhauling laws around to-go alcohol. Fortunately, over 30 states have heeded the call by temporarily allowing bars to sell to-go cocktails during COVID-19, and early reports indicate that these reforms have already saved jobs and businesses. Several state legislatures have made the changes permanent, as well.
But courts can also play a role. Numerous states have laws in place specifying which types of private businesses are allowed to sell alcohol, and these rules can often run afoul of constitutional legal principles. For instance, Maryland effectively prohibits grocery stores from selling beer and wine by barring chain stores from possessing a liquor license while at the same time only permitting in-state residents to obtain a license. Texas has a similar rule in place that bars any publicly owned company from obtaining a liquor license in the Lone Star State.
The way in which these types of laws purposely disadvantage outsiders is constitutionally problematic. Just last year, the Supreme Court struck down a Tennessee law that only allowed in-state residents to own liquor licenses. The court ruled that while states have substantial authority over alcohol rules, Tennessee’s law violated the U.S. Constitution’s Commerce Clause by blatantly discriminating against out-of-staters in the alcohol sector.
Similar lawsuits have been percolating through the lower rungs of the federal judiciary this year, and the Supreme Court now has another prime opportunity to free up alcohol markets should it choose to do so. The court is currently considering whether to hear a case challenging a Michigan law that bans out-of-state alcohol retailers from shipping to Michigan residents, another restriction that is legally suspect for its treatment of out-of-state alcohol interests.
The court is also deciding whether to hear a case challenging Texas’s aforementioned ban on public companies owning liquor licenses. This later case seems especially ripe for review since Texas’s law is functionally analogous to Tennessee’s recently struck down rule: It mostly serves to bar out-of-state residents from selling alcohol in the state.
While these lawsuits are often portrayed as a big vs. little debate pitting local mom and pop retailers against large corporate chains, the reality is that these restrictions are hurting the most vulnerable small businesses among us. Specifically, they’re preventing struggling breweries, distilleries, and wineries from selling their products in more types of stores and thus attaining much-needed sales revenue.
Changes to these laws could also have implications for public health amid the pandemic. People are trying to reduce the number of trips they make outside the home, and allowing them to buy their weekly allotment of food and alcohol in one location would limit the time individuals spend near one another.
Large grocery stores are also the entities most capable of efficiently delivering alcohol to consumers’ homes since most already have systems in place for delivering groceries. In states such as Texas, this means that alcohol deliveries are being stunted by cutting prominent retailers out of the marketplace altogether, which again causes drinks-oriented businesses to lose out on potential business-saving revenue.
Many industry observers are predicting even tougher months ahead for on-premise dining and drinking establishments as the weather turns colder. After all these businesses have been through, let’s hope both courts and lawmakers seize all available opportunities to help them.