Last week, in Connecticut Fine Wine and Spirits LLC v. Seagull, the US Court of Appeals for the Second Circuit affirmed a lower court’s motion to dismiss a lawsuit from Total Wine & More challenging parts of Connecticut’s Liquor Control Act and related regulations. Though the decision represents a victory for state alcohol regulatory regimes, the Second Circuit’s ruling was decided on the basis of established antitrust law and did not raise or rely on state regulatory authority under the 21st Amendment. Nonetheless, state alcoholic beverages regulators will embrace the court’s ruling.

In Connecticut Fine Wine, Total Wine challenged three sets of provisions in Connecticut’s alcohol laws. First, Total Wine challenged “post-and-hold” provisions. Under the post-and-hold provisions, state-licensed wholesalers are required to post a “bottle price” and “case price” each month with the Connecticut Department of Consumer Protection. Those prices are then made available to industry participants. During the four days after prices are posted, wholesalers may “amend” their posted prices to match—but not drop below—lower prices offered by competitors. Wholesalers are then obligated to “hold” their prices for a month.

Second, Total Wine challenged the state’s minimum-retail-price provisions. The minimum-retail-price provisions require retailers to sell alcohol beverages to customers at or above a statutorily defined “cost,” which is determined by adding the posted bottle price and a markup for shipping and delivery. Combined with the post-and-hold provisions, the minimum-retail-price provisions bind retailer prices to wholesaler prices.

Third, Total Wine challenged the state’s price discrimination and volume discount provisions. The price discrimination/volume discount provisions preclude wholesalers from offering a given product to different retailers at different prices and from offering discounts to retailers who are high-volume purchasers.
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Rapid growth in the number of small and independent breweries that rely on taproom sales has received a lot of attention—not all of it positive—across the beer industry. Until this unprecedented growth, taproom sales went largely unnoticed. Competing retailers, beer wholesalers, and even well-established craft brewers were pleased with steadily growing craft beer sales and

In late September 2018, the U.S. Supreme Court granted a petition for a writ of certiorari (i.e. the Court agreed to hear a case) brought before the Court by the Tennessee Wine and Spirits Retailers Association (Tennessee Retailers) in Tennessee Wine and Spirits Retailers Association v. Byrd. The petition requested that the Court review the

The recent US District Court for the Eastern District of Michigan opinion strikes down a Michigan statue and authorizes out-of-state retailers to sell and ship wine directly to Michigan consumers. Lebamoff Enterprises v. Snyder, E.D. Mich. Case No. 17-10191 (Sept. 28, 2018). More fundamentally, the Lebamoff decision underscores the stakes in the upcoming (as of September 27) Supreme Court review of the Sixth Circuit’s decision in Byrd v. Tenn. Wine and Spirits Retailers Ass’n.

The Lebamoff case involves 2016 legislation that amended Michigan law to: (1) make it easier for in-state retailers to ship directly to consumers by employing third-party carriers and (2) prohibit completely the sale and shipment of alcohol beverages to Michigan consumers by out-of-state retailers. The plaintiffs include an Indiana retail chain, its owner and several Michigan wine consumers.

The Lebamoff opinion first recaps the familiar dormant Commerce Clause analysis that: (a) asks whether the challenged law discriminates against interstate commerce or favors in-state interests over out-of-state interests; and (b) examines the state’s justifications for the law to see if they advance a legitimate local purpose that reasonable alternatives cannot adequately advance. Not surprisingly, the district court had little trouble concluding that the challenged law—which facially discriminates between in-state and out-of-state retailers—favors in-state interests and discriminates against interstate commerce.
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The “final word” may be in sight in a long-running dispute over state residency requirements imposed on applicants for retail alcohol beverage licenses as well as more fundamental questions about state powers under the 21st Amendment.

As anticipated last July in the Alcohol Law Advisor blog, a single sentence order of the US Supreme Court issued on September 27 granted a petition for a writ of certiorari filed by the Tennessee Wine and Spirits Retailers Association (Tennessee Retailers) requesting the high court to review lower court decisions that invalidated Tennessee’s two-year residency requirement for retail license applicants.

Earlier this year, the US Court of Appeals for the Sixth Circuit reviewed the Tennessee law at issue and held that, “a three-tier system can still function” without the two-year durational residency restriction imposed by Tennessee. The 6th Circuit quoted a 1984 Supreme Court decision: “The central purpose of the [Twenty-first Amendment] was not to empower States to favor local liquor industries by erecting barriers to competition.” The court went on to analyze the Tennessee restrictions and found that they violate the dormant commerce clause, a legal concept designed to prevent states from engaging in economic protectionism.
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Last week, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published a TTB Procedure governing the transfer in bond of beer between breweries of different ownership. See TTB Procedure 2018-1 (July 17, 2018). In bond transfers between breweries of different ownership were authorized by the 2017 tax reform act and like many provisions

The latest development in a lengthy legal challenge to advertising restrictions in Missouri’s tied house laws and regulations raises practical economic issues for the alcohol beverage industry and significant legal and policy issues for legislators and regulators at all levels of government. On June 28, Judge Douglas Harpool of the US District Court for the

As a craft distiller, getting your products into the hands of consumers is, of course, critical to your business. As a general matter, state alcohol laws separate the alcohol beverage industry into three tiers (i.e., the three-tier system): the supplier tier, the wholesaler tier, and the retailer tier. To get its product to market,

Two recent developments reinforce my expectation that the Supreme Court will need to clarify the scope of its 2005 Granholm v. Heald decision within the next few years.

Granholm struck down state restrictions on the interstate sale and shipment of wine by wineries, where the state permitted in-state wineries to engage in such direct-to-consumer sales activities but withheld that privilege from out-of-state wineries. According to that decision, such facially-discriminatory laws are virtually per se unconstitutional under the so-called “dormant” Commerce Clause, and are not saved by the additional power that states have over alcohol sales under the 21st Amendment. The Granholm court also referred to the three-tier system as “unquestionably legitimate.”

In the years since Granholm, lower federal courts have wrestled with the question of whether or not the Commerce Clause’s non-discrimination principle is limited to state laws imposing different rules on in-state versus out-of-state producers and products. Decisions by several Circuit Courts of Appeal, including the US Court of Appeals for the Second Circuit (Arnold’s Wines, 2009) and the Eighth Circuit (Southern Wine, 2013), have concluded that only those state laws discriminating against out-of-state producers or products face the high level of scrutiny mandated by Granholm. Others, including the Fifth Circuit (Cooper II, 2016) and the Sixth Circuit (Byrd, 2018), have concluded that state laws regulating the wholesale- and retail-tiers remain subject to vigorous Commerce Clause scrutiny. Notably, however, the Fifth and Sixth Circuit opinions also suggest that the outcome of a challenge to a state law regulating the wholesale- or retail-tier may depend on the type of law challenged, and both involved residency requirements for licensees, not laws directly regulating the sale and shipment of alcohol.
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