The Camel’s Nose Under the Tent: Next Steps for State-Based Alcohol Policy After Tennessee Wine and Spirits

Abstract

Following the repeal of nationwide Prohibition with the ratification of the Twenty-first Amendment on December 5, 1933, states enacted broad controls on the manufacturing, distribution, and sale of alcoholic beverages. These state-based alcohol policies were adopted pursuant to § 2 of the Twenty-first Amendment, which provides that “[t]he 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.” Initially, courts construed this provision broadly to confer upon states the authority to exercise “large discretion” in protecting their citizens against the evil incident to intoxicants. States could prohibit any importation of alcoholic beverages which did not comply with conditions prescribed by the states “unfettered by the Commerce Clause.” But state-based alcohol policies must now overcome two additional considerations. First, the U.S. Supreme Court has recognized that § 2 of the Twenty-first Amendment does not supersede all previously adopted positive constitutional provisions. Second, particular attention must now also be given to the negative, or dormant, Commerce Clause. In fact, a trilogy of recent dormant Commerce Clause cases have called into question the states’ longstanding prerogative to regulate the importation of intoxicating liquors for delivery or use within their borders. The first was Bacchus Imports, Ltd. v. Dias, in which the Court held that Hawaii’s liquor-tax exemption for certain locally-produced alcoholic beverages violated the Commerce Clause. The second was Granholm v. Heald, which struck down wine-importation laws in Michigan and New York, finding that they discriminated against interstate commerce in violation of the Commerce Clause, and that such discrimination was neither authorized nor permitted by the Twenty-first Amendment. The third was Tennessee Wine & Spirits Retailers Association v. Thomas, which held that Tennessee’s two-year durational residency requirement for retail liquor store license applicants violated the Commerce Clause because it discriminated against nonresidents and was not justified as a public health or safety measure. Part II of this paper considers the history of state-based regulation of alcoholic beverages within the context of the states’ agreement to ratify the Twenty-first Amendment. It also provides a brief overview of the states’ regulation of alcoholic beverages immediately after the Amendment’s adoption. Finally, it considers the impact of other constitutional provisions. Part III discusses the Court’s initial interpretations of the Twenty-first Amendment. Part IV looks at the Court’s dormant Commerce Clause doctrine as it has been applied to state-based alcohol policies adopted pursuant to § 2. It analyzes Bacchus (liquor taxes), Granholm (imported wine), and Tennessee Wine and Spirits (durational-residency requirements). Part V considers Tennessee Wine’s impact on next steps for state-based regulation of alcoholic beverages. In particular, this part studies the decision’s impact on other states’ durational-residency requirements, direct-to-consumer shipping, and whether a national market for alcoholic beverages is inevitable. This section will also provide recommendations for state legislators, regulators, and the alcoholic beverage industry itself in the wake of the Tennessee Wine decision.