Friday, October 3, 2008

Judge rules against Michigan over wine shipments

LANSING — Barring a successful state appeal, Michigan wine lovers will be able to avoid the middle men and buy straight from out-of-state retailers now that a federal judge has struck down alcohol regulations as unconstitutional.

The decision released Tuesday by U.S. District Judge Denise Hood in Detroit is a blow to wholesalers that benefit from Michigan’s historic three-tier distribution system.
A similar ruling was issued in Texas earlier this year, and other states are watching to see how the issue is handled by federal appeals courts.“It’s extremely significant for Michigan consumers because now they have access to the full measure of wines available in the United States,” Tom Wark, executive director of the Specialty Wine Retailers Association, said today. “Michigan is notorious for not having a very good selection of wines.”State law prohibits out-of-state wine retailers from shipping direct to in-state consumers — unless the retailers have a location in Michigan and are part of the three-tier structure that includes beverage manufacturers and wholesale distributors.Hood said requiring a business to open a bricks-and-mortar location in Michigan violates the U.S. Constitution, which prohibits states from discriminating against interstate trade.The Michigan Beer and Wine Wholesalers Association called the court decision “disturbing.”“Michigan’s licensed alcohol distribution system ensures accountability, transparency, efficient tax collection and safety — and unfortunately, this ruling puts all these safeguards at risk,” said Mike Lashbrook, the group’s president.Michigan wineries also questioned the ruling, as did school principals who cited concerns about underage drinking. The decision is a win for those who sued the state — Florida-based online retailer Siesta Village Market and two Michigan residents who claimed they could not buy particular wines from in-state retailers.If the ruling stands, Michigan residents could buy from out-of-state online Web sites, wine auction houses and others.The state attorney general’s office, which defended existing alcohol laws, is reviewing the ruling. It expects a stay to be issued so the decision does not take effect while Attorney General Cox considers an appeal, spokesman John Sellek said.In 2005, the U.S. Supreme Court struck down laws in Michigan and New York that allowed wineries to ship directly to in-state consumers but prohibited out-of-state businesses from doing the same thing. The latest ruling affects retailers, not wineries.It may not have as widespread an impact as the 2005 case because that affected the entire country and out-of-state retailers get far fewer licenses than out-of-state wineries, Wark said.Still, another state has lost the argument that the 21st Amendment, which ended Prohibition, gives it wide powers to regulate the sale and distribution of alcoholic drinks. Wark said New York and Illinois are among states that could be affected by the issue.Michigan had argued that hundreds of out-of-state retailers complied with its licensing requirements and opened a location in the state in order to ship directly. State attorneys also had said requiring wine sales to go through the funnel of wholesalers helps prevent tax evasion.The judge faulted the state for not discussing why alternative methods would be unworkable.
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