Get on the offensive

Far be it from me to give PR advice to someone who is in the PR game—if I had any PR talent, I’d certainly be a much wealthier wine writer. But a recent series of posts at Fermentation.com compelled me to both pull out of the discussion and give my opinion here where I am safe and comfortable!

I applaud Tom Wark’s work with the Specialty Retailers Association. I believe fully that the present system of alcohol regulation that was left to the states to decide, individually, is a disaster of great proportions, not to mention the little matter of it being the result of a Constitutional Amendment (the 21st) that contradicts an earlier and still existing Constitutional clause (the Dormant Commerce Clause in Article 1, Section 8).

Yet, I am of the opinion that Tom’s counter arguments to the specious arguments put forward by the Wine and Spirits Wholesalers of America (WSWA) may be helping to create more fog rather than to lift it.

WSWA is obviously in favor of maintaining the present three-tier wine distribution system, and even to tighten it further. The system is perfect for the group. It makes wine wholesalers among the few, if there are any other, industries that survive by way of government revenue protection–a cursory glance at many state regulations clearly shows that the purpose of the three-tier system is to contain the industry so that the state can easily identify and collect its tax revenue.

That same glance at the regulations will show the astute among us something more enlightening about the system.

When Prohibition ended in 1933, the country did not automatically lose those with “dry” sentiments. The Congress knew this fact, and some in congress knew they had constituents and lobbyists back home who were watching. So, the mealy bunch in Washington punted the ball to the states. After the feds set up their alcohol tax revenue interests, they allowed the states to set up their own, plus their own idea of what constitutes alcohol commerce.

States where powerful “dry” interests resided were more severe with regulations than those with a weaker “dry” interest. In the former states, legislators brazenly stated that their interests were to make it difficult for businesses to traffic in and for consumers to have access to alcohol—in a recent court case in Washington State involving Costco, that state’s liquor control authority plainly said so in testimony.

The 75-year three-tier system is entrenched. It will not go away easily if at all. The only way that it can ever be abolished is through a national frontal attack on its obvious Constitutional conflict, and even then it would take a less moralistic Supreme Court than the present one to shoot down those contradictions.

When Tom Wark rails against the self-interested bullshit that WSWA puts out, he gets himself sucked into the wrong arguments. Those who support the WSWA bring up all the side issues that have little or nothing to do with the real issue; then, Tom responds and some other subject comes up. With each response, a new subject comes up and soon enough, people are arguing over everything except the plain fact that the three tier system may not have been designed in conflict with the U.S. Constitution, but the Congress of 1933 certainly opened the doors for abuse of the Constitution.

If Tom or anyone else wants to do something positive concerning the disgusting way that wine is regulated and controlled across the U.S. it would seem best to ignore the WSWA and go straight to the courts. Build a coalition of legal minds from state-to-state to attack the constitutionality of state legislation over the commerce of wine and get that story into the mainstream press.

The people who agitated for Prohibition were successful because they learned that reformers do their best work when they turn the tides from being on the defensive to being on the offensive.

(Anyone reading this blog on a site other than Vinofictions is made aware that it has been used without permission–a violation of my copyright.)

Fermentation blog

Copyright Thomas Pellechia
December 2008. All rights reserved.

8 Responses to “Get on the offensive”

  1. Keith L. says:

    Hi Thomas! — As you know I’m a free marketeer on this and most other issues, but I’m afraid I must play devil’s advocate on your constitutional analysis.

    You write that the 21st Amendment “contradicts an earlier and still existing Constitutional clause.” But there’s nothing problematic and unusual about this. Indeed, the whole point of constitutional amendments is usually to contradict an existing clause of the Constitution — and thereby amend and override it. Most famously, of course, the clauses ending slavery contradicted the existing clauses of the Constitution explicitly providing for it. If the 21st Amendment indeed contradicts an earlier constitutional clause, we must regard that clause as amended out of the Constitution to the extent of the contradiction.

    The clause in question, as you point out, is the “dormant commerce clause.” This problem here is that the dormant commerce clause is not a clause of the Constitution at all. There is a “commerce clause” which provides that “[t]he Congress shall have Power . . . [t]o regulate Commerce . . . among the several States.” The courts have deduced that if Congress has this power, the state governments do not, and that logical deduction became the so-called “dormant commerce clause.”

    Thus, Judge Easterbrook of the Seventh Circuit, writing the opinion in the 2000 wine-shipping case of Bridenbaugh v. Freeman-Wilson, 227 F.3d 848 (7th Cir. 2000), cast the question before the Court as follows: “This case pits the twenty-first amendment, which appears in the Constitution, against the ‘dormant commerce clause,’ which does not. . . . [The 21st Amendment] directly authorizes state control over imports, while the premise of dormant commerce clause jurisprudence is an inference that the grant of power to Congress in Art. I § 8 cl.3 implies a limitation on state authority over the same subject.”

    Since the commerce clause came first and the 21st Amendment came later, the two clauses, read in concert with one another, would provide that Congress shall have the exclusive power to regulate commerce among the states except insofar as the regulations pertain to “[t]he transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors.” The 21st Amendment gives the states non-exclusive regulatory authority in that sphere.

    The current state of the law following the Supreme Court’s interstate wine-shipping case is that the states do indeed have this regulatory authority but if they exercise it must do so on a non-discriminatory basis. I.e., they may ban all wine shipments, but cannot ban wine shipments originating in some states but not others.

    The ideal solution from a policy perspective would be to repeal Section 2 of the 21st Amendment. But these days, when people don’t like what the Constitution says, they tend to ask the courts to rule that it says something else, rather than jump through the hoops of actually amending it. This is one of the main reasons that there are hardly any Americans left today who can distinguish between their interpretation of what the Constitution says and their opinion of what the law should be.

  2. Thomas says:

    Thanks, Keith, for a most lucid and explanatory comment.
    Not being either a constitutional or otherwise lawyer, like most others concerned with this issue, I am one of those Americans who can’t distinguish between interpretation and opinion. Here’s what I hang on in your comment:
    “The ideal solution from a policy perspective would be to repeal Section 2 of the 21st Amendment.”
    That’s exactly what I believe should be the aim of organizations trying to make headway on this issue; either that, or eviscerate the meaning of the dormant commerce clause, as it surely seems to apply to all legal commerce except that which is regulated and excise taxed.
    Without a clear amendment, this will remain a battle with a consistent loser because, as you further say:
    “But these days, when people don’t like what the Constitution says, they tend to ask the courts to rule that it says something else…”
    Which is exactly the tactic of the WSWA.
    In the 2005 Granholm decision, I remember that Justice Kennedy explicitly pointed out the exceptional nature of alcohol, hinting that the present Supremes aren’t about to agree that the 21st Amendment contradicts anything in or as a clause within the Constitution.
    That says to me that the only solution is an Amendment to amend the 21st. Other than that, it will be taxpayer dollars fighting court battles with WSWA-sponsored legislation across the nation and back for who knows how long.
    I’m getting tired of following the argument, as it has taken on a drone familiarity.
    By the way, how are the wine fori going these days? Talk about droning…

  3. Thomas says:

    Keith,

    If you are still with this, I have a couple of questions, not for argument sake, but for clarification.

    You stated: “If the 21st Amendment indeed contradicts an earlier constitutional clause, we must regard that clause as amended out of the Constitution to the extent of the contradiction.”

    If this is true, and if an amendment can be worded so as to omit a specific reference yet still contradict and null a specific clause, what assurance is there that the complete congress understood what they were amending and, more important, that the ratification process went ahead without prejudice or ignorance?

    Plus, if it is true, why did the Supreme Court even waste its time claiming that there is a constitutional issue. If the passage of the 21st Amendment already singled out alcohol as a special commerce not to enjoy the same benefits as other interstate commerce, then why would one any facet of the commerce clause apply while the rest does not?

  4. Keith L. says:

    Groan. I had a nice response written out which my browser gobbled up when I forgot to do the math question.

    The short answers are #1) Repeals by implications are generally not favored for that exact reason, but how explicit must a repeal be? The 21st Amendment is pretty explicit. and #2) For just that reason — an explicit exception is carved out, so the original provision remains operative except within the scope of the exception. The constitutional issue wasn’t whether the states have the power to regulate commerce in liquor (that much is settled), but whether the state regulation at issue violated some other constitutional principle. For example, a state couldn’t, consistent with its power to regulate commerce in liquor, pass a law stating that the penalty for selling liquor to minors is torture, because that would violate the 8th Amendment. So can the state, consistent with its power to regulate commerce in liquor, pass a law stating that mail shipment by in-state wineries is OK but out-of-state wineries is felonious? SCOTUS said no on the grounds that the dormant commerce clause prohibts discrimination between the states (and since the 21st Amendment says nothing about that, it can’t be read to repeal that part of the dormant commerce clause).

  5. Thomas says:

    Aha! I see. Re, mailing wine across state lines: that issue was decided narrowly as out of state wineries to consumer. Now WSWA is trying to make sure it does not extend to out of state retailers to consumer.
    It seems sad that the Constitution is open to implication rather than to clear intent, and I wonder how a so-called originalist justifies that kind of thing, but then, I know that ideology often forgoes reason.
    It appears that the only issue that would stop the WSWA nonsense and the state legislative attacks on human reason is repeal of a section of the 21st Amendment.
    Sounds like a plan that I could embrace.

  6. Keith L. says:

    That’s the plan I’d favor as a matter of principle. Too bad it could never happen.

    I don’t have a fundamental problem with divining constitutional principles by implication, provided the implication progresses logically and unavoidably to a particular conclusion. For example, the rights granted in the Bill of Rights usually start out “Congress shall make no law…” — so if you’re only going to respect clearly and literally expressed intent, you would have to conclude that the U.S. Congress can’t abridge your right to free speech, but your state legislature and town council can censor you all they want. The only reason the First Amendment has been interpreted to prevent states and municipalities and not just Congress from abridging your right to free speech is by implication from the Fourteenth Amendment, which provides “nor shall any State deprive any person of life, liberty, or property, without due process of law.” It doesn’t specifically say no state shall deprive you of your First Amendment rights, but it’s a fair implication that most (but not all) people who’ve considered the issue accept. I don’t think that poses a particular problem for originalists or textualists, since the touchstone in interpreting the Constitution isn’t so much what the framers *meant*, but what they *wrote*.

    I would also argue that the implication of the Supreme Court’s decision regarding shipments by out-of-state wineries is that the same result should obtain in a controversy over shipments by out-of-state retailers, since I can see no constitutionally meaningful distinction between a wine producer and a wine retailer.

  7. Thomas says:

    Keith, there is one distinction between producer and retailer–it may not be constitutional, but it’s meaningful nonetheless.
    Many states require alcohol that is in transit to make a “rest” stop in a distribution warehouse as a way of tracing the taxes. Some of the states have devised ways to ensure the taxes are paid through licensing and fees applied to out of state wineries who ship direct to consumers.
    If a retailer in one state ships wine to a consumer in another state, that state’s distributor is not in the transaction and so the retailer would have to be accountable for the tax, and that makes the recipient state nervous.
    Taxes get confused in this discussion. There’s excise tax, which is paid to the govt by the winery when it sells to consumers or retailers, and when the distributor releases wine to the retailer; and there’s sales tax, which is collected by the retailer.
    To confuse the issue even more, there are two excise taxes: one to the federal govt and one to each individual state. From what I remember, the federal excise tax is paid when wine leaves the producer’s premises. State excise taxes are paid when wine goes either to retailer or to consumer in a tasting room.
    The whole issue is really all about the tax money, and the states have made the decision that their best and easiest bet for collecting it all is with the status quo ante.
    You never hear the TTB weigh in on this issue–its revenue stream is secure at the source of production. If the states could institute such a method, they wouldn’t need to protect distributors, but states have no way to enforce excise tax collections on out of state producers.
    Because this is about state tax revenue, its only real solution has to be at the legislative level, and that is as likely to happen as it is to change the Constitution.

  8. Keith L. says:

    Uh-oh, Thomas. That does complicate things immensely, since constitutional rights are relaxed/violated all the time in service of “compelling state interests,” and we all know there’s no interest the State ever finds nearly so compelling as the collection of taxes.