California Wine From Texas

This week a federal judge ruled that a Texas law prohibiting out-of-state retailers from shipping wine directly to consumers while permitting in-state retailers to do so violates the Commerce Clause by creating a discriminatory barrier to interstate trade. You may have thought that issue was settled by Granholm v. Heald, the 2005 case in which the U.S. Supreme Court said discriminating against out-of-state wineries in this manner was unconstitutional. But liquor wholesalers, who are desperate to preserve the "three-tier system" that gives them a stranglehold on the distribution of alcoholic beverages in most states, argued that retailers did not deserve the same evenhanded treatment as wineries. Although U.S. District Judge Sidney Fitzwater disagreed, he handed the wholesalers a partial victory by agreeing that Texas has a legitimate regulatory interest in maintaining the three-tier system and may therefore require that out-of-state retailers buy the wine they ship directly to Texans from wholesalers in Texas. What that means, according to the Santa Rosa, California, Press Democrat, is that "a California retailer like Wine Country Gift Baskets would have to buy wine from a Texas wholesaler, ship it back to California and repackage it in baskets, and then ship it back to Texas."

That does not sound very practical, and it leaves Texas wholesalers with the same privileges they had before, controlling nearly all the alcoholic beverages sold to Texans (except for those sold directly by wineries, which are allowed to circumvent wholesalers under state law). The Specialty Wine Retailers Association is nevertheless calling this decision an important victory, since it undermines the arguments wholesalers throughout the country have been pressing in support of protectionist laws. The ruling also may put out-of-state retailers in a better position to ask the Texas legislature to endorse a more sensible and consumer-friendly system.

[Thanks to The Wine Commonsewer for the tip.]