Wine Press

Protectionism disguised as liquor control

Perhaps I should have known better, but it didn't occur to me until afterward that I was breaking the law. I just wanted to find some decent kosher wine.

That was not hard to do in New York City, where I lived until last summer. Less than a mile from our house in Riverdale was a liquor store with several aisles of reasonably priced kosher wines from all over the world.

In Northern Virginia, where I live now, the pickings are much slimmer. A nearby supermarket carries half a dozen or so drinkable kosher wines, along with the alcoholic syrup that most people probably imagine when they picture Jews making a toast. If you drive a half-hour to Maryland (which has a larger concentration of observant Jews), you can find a better selection, but the prices are substantially higher than in New York.

Online merchants, by contrast, offer many different kinds of kosher wine at prices similar to what I used to pay. I realized that by shopping online I could enjoy more variety and save money even after paying for shipping (especially if I ordered a lot and got the per-case discount).

A few weeks later they arrived: Chianti and Nebbiolo, Cabernet from Israel and Chile, Shiraz from Australia, Gewurztraminer and White Riesling from California, Tokaji from Hungary. And every one of them contraband.

Virginia, you see, forbids direct interstate shipment of wine and beer to consumers. Alcoholic beverages from outside the state have to go through state-licensed wholesalers.

I cannot quite plead ignorance of the law. I've written about this issue before, and I must have seen the map distributed by the Institute for Justice (which is challenging New York's restrictions on interstate wine sales) showing which states maintain trade barriers for alcoholic beverages.

All I can say is that I wasn't thinking about that map when I ordered the wine. I didn't realize I was a smuggler until I told a friend that the Internet was a good way to buy kosher wine. "But isn't that illegal?" he asked.

Perhaps not for long. A federal judge recently ruled that Virginia's ban on direct interstate wine and beer shipments violates the Constitution, which reserves to Congress the authority "to regulate Commerce...among the several States."

The Commerce Clause was intended to make the country a free trade zone in which sellers and buyers could interact across state lines without tariffs, quotas, or other government-created impediments. The Framers knew that if states were allowed to set up such barriers they would try to shield local businesses from out-of-state competition.

That is exactly what Virginia and many other states do under the guise of liquor control. They boost the profits of local producers, wholesalers, and importers at the expense of consumers and potential competitors.

In response to a lawsuit by wine drinkers and out-of-state wineries, U.S. District Judge Richard L. Williams observed that Virginia's regulatory system "has both the purpose and effect of prohibiting an out-of-state entity from participating in direct marketing and shipment of wine and beer to Virginia residents." At the same time, it permits direct shipment of beer and wine made in Virginia. To add insult to injury, wines made outside Virginia are excluded from state-run liquor stores (the only legal source of distilled spirits).

Williams called this arrangement "the very definition of a discriminatory law." The finding of discrimination against out-of-state businesses is important because it means Virginia cannot hide behind the 21st Amendment, which repealed Prohibition and gave states special authority to regulate the sale of alcoholic beverages.

The Supreme Court has made it clear that the amendment is not a license for protectionism. As a 1986 decision explained, "When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry."

If Williams' decision is upheld on appeal, Virginia presumably could satisfy his constitutional objections by not selling wine in its liquor stores and broadening the restrictions on direct shipment to include Virginia producers. Alternatively, it could start selling out-of-state wines and lift its ban on direct interstate sales.

Better yet, it could get out of the liquor business altogether and stop telling adults what beverages they may purchase from whom. In a free society, it should not be so easy to commit a crime without realizing it.

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