Congress Corrodes Commerce Clause, Buffett Buys Booze Biz

Congress is in the mood for some re-regulating, and not just of financial markets. Since the Granholm Supreme Court decision in 2005, challenges to state-based alcohol wholesale monopolies are on the rise. The National Beer Wholesalers Association got nervous, fearmongering rhetoric about the rise of alcohol consumption is like crack to legislators, and as sure as happy hour follows a workday:

Members of Congress yesterday introduced a bill (HR 5034) that could end direct shipping of wine and other forms of alcohol in the United States, or at least put major roadblocks in front of lawsuits by consumers and wineries trying to reduce restrictions on direct shipping.

The bill seems to be pretty extreme—you can read all about it in the Wine Spectator—and it definitely throws some elbows at the Commerce Clause, but the most disheartening sign about the industry is a recent buy by Warren Buffet:

Berkshire Hathaway chairman and CEO Warren Buffett might have given an important signal of the security of the wholesaler business and the future of the three-tier system when he purchased Georgia-based wholesaler Empire Distributors in March. "[Buffett] understands that alcohol wholesaling is one of the few government-protected industries in the country," [Tom Wark, executive director of the Specialty Wine Retailers Association] said. "When you find an industry where the state says these types of businesses must carry out all transactions, that's pretty good."

More on the national flow of wine and spirits here.

Comments

[techreseller]

After all that work by the owner of Swedenburg Winery in Va. For those of you who do not know, a little old lady who owned a small winery in Virginia, drove the current laws allowing direct shipping of wine to consumers out of state. How exactly does that distributor assist me in obtaining the wine or small brew beer I desire? Oh yeah, buy raising my costs and time spent obtaining it. Ok, time for another set of letters to my congressman and Senators.

[Mixter metapher]

a clod of pond scum
rises to the upper crust
and sh*t flows down hill

[Enyap]

"and it definitely throws some elbows at the Commerce Clause"

Lol, silly Libertarian, expecting the Commerce Clause to be used for it's original intention.

[kinnath]

Gee, I posted that link early today 😉

[BakedPenguin]

Is it just me, or is Buffett trying to be George Soros Junior?

[John Thacker]

Buffett has always made his money by investing in monopolies and duopolies, particularly when government-regulated and thus protected. There's not really a need to say "trying."

[Graphite]

Buffett is worse than Soros. Soros is much less blatant and self-righteous about pursuing investments that benefit from government protection and conclusion. Buffett is a scumbag.

[R C Dean]

Thank God we have the Right People In Charge, who would never pass legislation intended to benefit powerful corporations at the expense of small businesses and consumers.

[CoyoteBlue]

Hey H&R'ers! Can you make a award winning PRO-regulation video? The EPA has a contest.

Almost every aspect of our lives is touched by federal regulations. Even before you leave the house in the morning, government regulations help set the price of the coffee you drink, the voltage of electricity your alarm clock uses, and the types of programming allowed on the morning news.
They say it like it's a good thing.

[CoyoteBlue]

crap messed up the EPA link.

I'm thinking something with prohibition and slavery.

[Butts Wagner]

I was thinking the National Anthem in the key of fart noises.

[Jeffersonian]

Sorry, but Terry Gilliam already made Brazil. I got nuthin' to add to that.

[J sub D]

During the session, wholesalers and state regulators argued that the three-tier system is under attack and that the U.S. faces "an alcohol epidemic" if Congress does not intervene and prevent deregulation of alcohol sales.

Our present system succeeds so well in identifying problem drinkers and keeping alcohol away from them as well as keeping the kiddies safe from demon run make it hard to argue with them.

[kinnath]

Nida Samona, chairwoman of the Michigan Liquor Control Commission said, "In 1941, Supreme Court Justice [Robert] Jackson stated that liquor is 'a lawlessness unto itself.' That was true then and is true today. Alcoholic beverages must be highly regulated."

Destroying the domestic auto industry wasn't enough for Michigan?

[Almanian]

Nope - they won't be happy till all that's left is tree stumps and dried up Great Lakes beds. Absolute morons in charge, and, unfortunately, a majority of the populace either willing to put them there, or to sit on the sidelines and let others decide for them.

I grieve for my home state...Mrs. Almanian and I are making plans to head elsewhere. 🙁

[John]

The only thing standing between us and Chaos is that thin blue line of wholesale liquor distributors who prevent you from mail ordering that bottle of Merlot from that vineyard in Texas. I mean it would just be chaos if you could do that. Dogs and cats living together kind of chaos.

You ingrates just don't realize how much you owe your local government sponsored monopolists.

[Almanian]

John, thank you for putting this in perspective. Now I don't feel like hanging myself, cause, y'know, I'm laughing and all...

[Zeb]

Yeah, it's really hard to get alcohol now. Naughty kids are just waiting for their chance to by $300 cases of wine from out of state because only then will they be able to drink as much as they want to.

[creech]

Unfortunately, the 21st amendment would appear to put interstate liquor shipments under state control.

So good to know that the kiddies who want to pull their bucks to buy Screaming Eagle are just going to have to send Big Sis up to the local liquor store to get a few (dozen) cases of beer instead.

[kinnath]

Those lawsuits have been growing in number since the landmark 2005 Supreme Court Granholm decision, which ruled that states cannot discriminate between in- and out-of-state wineries in matters of direct-to-consumer wine shipping. The Granholm decision argued that the 21st Amendment, which ended Prohibition and put states in charge of alcohol regulation, does not trump the Constitution's Commerce Clause, which prevents states from restricting interstate trade.

The ruling said that states could not treat out-of-state wineries different than in-state wineries. However, one obvious outcome would be to ban all direct shipments in a given state.

[Tulpa]

Yeah, how can an amendment not trump a part of the original Constitution it contradicts? Doesn't that mean that the 13th amendment is null and void as it contradicts the Bill of Rights' prohibition on property forfeiture without due process, as well as the fugitive slave provision of Article IV?

[Penn Jillette]

There is no contradiciton between the 21st and the commerce clause. Once the alcohol enters the state, it is up to the state to regulate it, but the commerce of shipping it into the state cannot be restricted by the states.

[cynical]

I think their point is that the states have the right to determine the legality of alcohol, but not to use that power to undermine trade between the states by discriminating based on point of origin alone. It was clear in the case, I think, that the states were trying to erect barriers to trade, not to regulate the nature of the traded product.

Granted, while Congress's power to standardize trade in alcohol would trump the states' power to ban out-of-state distilleries, Congress would still have to exercise that power re booze, it doesn't self-execute. It's possible that there was an issue with Article I, Section 10, but that isn't "the Commerce Clause".

[kinnath]

Basically, the state in question was allowing in-state wineries to distribute wine through the three-tier network and to direct-ship to customers. The state prohibited out-of-state wineries from direct-shipping to customers thereby forcing them to use only the three-tier network. The supremes said this was a violation of the Commerce Clause. The state in question, plus many other states as well, then began looking at killing in-state direct-shipments. The wholesalers are a powerful block of campaign donors.

[cynical]

After a little research, I think I see where I went wrong. SCOTUS has apparently manufactured, contra the obvious text of the Constitution, a doctrine that states that the power granted in the Commerce Clause self-executes even in the absence of Congressional legislation. Of course, since the courts decide when that happens, they essentially annexed part of the power of the Commerce Clause for themselves.

Man, we really have to get rid of that thing. Free trade is nice, but general freedom is better.

[Solanum]

alt text: "It works every time!"

[kinnath]

Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.

Section 2. The 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.

Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several States, as provided in the Constitution, within seven years from the date of the submission hereof to the States by the Congress.

I'm struggling to see where the constitution demands each state implement the three tier distribution network.

[Almanian]

I think it's in the "penumbra and emanations" section

[Tulpa]

States can still ban delivery and use of intoxicating beverages within their borders. The Granholm decision just says they can't selectively ban delivery from out of state producers.

[Penn Jillette]

Yes, but Kinnath is saying that is DOESNT HAVE TO BE done by the 3 tier method.

[kinnath]

Duh

[Cindy McCain]

section 2.
it trumps the commerce clause
Fed anti-trust laws don't apply either

[T]

While I agree this is an abomination, I'm still pissed off about how illegal it is to distill alcohol for your personal use. God forbid you make your own booze and not pay taxes on it.

Alcohol brings the stupid out in legislators almost as much as drugs.

[Pip]

Because it makes you feel good, silly T.

[ChrisO]

You'd think that progressives would be opposed to this sort of puritanical crap, given the hard-on they have for The Way They Do Things In Europe.

[R C Dean]

Kind of an interesting Constitutional question here. The 21st amendment says (article 2):

The 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.

Why does that need to be in the Constitution at all, if the Commerce Clause gives the federales the authority to regulate alcohol via legislation? For that matter, why did the 18th Amendment need to be adopted to enact Prohibition?

The fact that the 18th and 21st Amendments exist at all would seem to indicate that the Commerce Clause does not give the federal government plenary authority to regulate alcohol, no? Even though there is an interstate market in alcohol?

Perhaps the Framers only intended the Commerce Clause to give the federal government the authority to regulate the interstate trade in alcohol, and not intra-state distribution, purchase, and consumption thereof? If so, then an amendment was necessary for Prohibition (otherwise, the Feds could have banned transporting alcohol across state lines, one supposes, but not the possession and consumption of alcohol).

I have always wondered: Why was an amendment necessary to ban alcohol, but not marijuana?

[Penn Jillette]

Yep, Ive always argued that the existence of the 18th and 21st is why the feds cannot outlaw marijuana, heroin, etc, etc.

They require an amendment, just like alcohol.

[kinnath]

It looks to me that the second clause was leaving open the opportunity for individual states to ban all sales of alcohol without their own borders.

[Tulpa]

That may not be an admission that alcohol could not be regulated by the feds. It could have been a strategy for making it very difficult for future politicians to overturn the ban (as they would need 2/3 of Congress and 3/4 of the states to agree). This is the idea behind most state constitutional amendments prohibiting gay marriage, after all.

I mean, most of us today would agree that the 13th amendment was not necessary to prohibit slavery; a correct interpretation of the Bill of Rights already prohibits it.

And in any case, one could argue that the fact that an amendment was passed only shows that people at that time thought that an amendment was necessary -- they may have been mistaken.

[robc]

Stupid joke names, Penn Jillette is me.

[JB]

Warren Buffett = CUNT.

[Douglas Fletcher]

Did that cheap bastard Buffet ever give his secretary a raise?