Are Terrible State Alcohol Laws on the Way Out?
A South Carolina Supreme Court decision rejects rules based on economic protectionism.
Alcohol regulations in this country could improve dramatically if more state courts would reject bald economic protectionism as a valid basis for lawmaking. That's the conclusion of a new study published last week by the R Street Institute, a free-market think tank in Washington, D.C.
The new study, Could Economic Liberty Litigation 'Free the Booze'?, uses the hook of a recent South Carolina court case to suggest—hopefully—that we may be seeing the dawn of a new period of much-needed state alcohol deregulation.
The lawsuit in question concerned section 61-6-140 of South Carolina's Alcohol Beverage Control Act, which stated that "[n]o more than three retail dealer licenses may be issued to one licensee[.]" The case involved national alcohol beverage superstore Total Wine, which owns three locations in South Carolina but was rebuffed by the state in its efforts to open a fourth. Total Wine sued to overturn the South Carolina law.
The state, the court found, "offer[ed] economic protectionism as the sole justification of this extreme business regulation." The court determined the state's "only justification for these provisions is that they support small businesses."
Thankfully, the court was unwilling to accept that justification.
"The record does not contain any evidence of the alleged safety concerns incumbent in regulating liquor sales in this way," the court ruled. "Without any other supportable police power justification present, economic protectionism for a certain class of retailers is not a constitutionally sound basis for regulating liquor sales."
The court rightly concluded that "'it's just liquor'… is not a legitimate basis for regulation."
While it may seem trite for a court to conclude this, the truth is that in the seven-dozen years since the end of alcohol Prohibition in this country, courts have held time and again that the mere fact a law regulates liquor has indeed been a sufficient basis for that regulation.
But that view began to change after the U.S. Supreme Court ruled in a 2005 case that Michigan, New York, and other states cannot discriminate against out-of-state alcohol sellers. (Alas, I discussed "a new Michigan law that bars out-of-state retailers from shipping wine into the state" earlier this year.) More recently, in 2014, a federal court overturned Florida's inane ban on 64-ounce beer growlers.
The message: federal courts have acknowledged that "it's just liquor" may no longer be a sufficient constitutional basis for lawmaking. But state courts have been mostly loath to overturn alcohol laws within their borders, choosing instead to defer to state lawmakers for whom cronyism and protectionism are legitimate bases for lawmaking.
"From Virginia's food-beverage ratio law, which arbitrarily mandates how much booze versus food a restaurant can sell, to Indiana's cold beer law, which only allows liquor stores (but not gas stations or grocery stores) to sell refrigerated beer, the examples are legion," the R Street report notes.
That's why the South Carolina decision is such a big deal.
"Nearly every state in the country has oppressive alcohol laws that could be ripe for judicial review, and using a litigation-based model allows reformers to circumvent cronyist state legislatures that are often bent on protecting the status quo," said study author Jarrett Dieterle, a fellow at the R Street Institute and editor of DrinksReform.org, in an email to me last week.
"If this model of targeting irrational alcohol regulations through economic liberty litigation takes hold in other states, it could upend the booze world as we know it," Dieterle tells me. "The examples of protectionist alcohol laws across the country are legion and this could be one method of clearing away the antiquated post-Prohibition legal structure that the alcohol industry still labors under."
Dieterle kindly quotes me in the piece for the proposition that the Twenty-First Amendment, which ended alcohol Prohibition, is largely rubbish.
The Twenty-First Amendment "simply shifted much of the power to prohibit and incessantly regulate alcohol from the federal government to the states," I wrote in a column earlier this year. "The Twenty-First Amendment—particularly the language in its second section, and the way lawmakers and courts have interpreted that language—is why we have things like dry counties, happy hour bans, and a mandatory three-tier system in forty-nine of fifty states."
All of those laws must go. And courts should overturn awful alcohol laws that state legislatures fail to repeal.
"If more courts begin to conclude that some ends—such as promoting economic protectionism—remain beyond state governments' proper police powers, it could usher in an era of booze-related economic liberty litigation," reads an R Street press release on the study.
Given the sheer volume of awful state alcohol laws, alcohol producers, sellers, and drinkers alike should welcome that era's potential arrival with open arms.