Supreme Court Selects Wine, Beef Disputes

The Supreme Court ordered up wine and beef Monday, not for a grand meal but rather to decide two disputes that have divided the agriculture industry in California and across the nation.

In the first, the court will rule on whether small wineries may ship directly to out-of-state consumers. The wineries and some of their most devoted customers are challenging Prohibition-era laws that allow states to control all alcohol that crosses their borders. If wineries prevail, the decision could reshape how alcohol is sold.

In the second, the court will decide whether farmers and ranchers can be forced to pay for marketing campaigns for their products. In the case before the court, beef producers are challenging the $1-a-head fee on cattle that pays for government-sponsored ads such as “Beef, It’s What’s for Dinner.”

Although many beef producers were in favor of these fees, some opposed them and argued they have a right under the 1st Amendment against being forced to pay for such messages.

If the beef producers win, the ruling could unravel such generic ad campaigns throughout the agriculture industry. These programs, backed by federal and state laws, promote a range of items, from milk and eggs to cut flowers. California, the nation’s leading farm state, has scores of such programs.

The lower courts are split on both issues, and the Supreme Court said it would hear arguments on both during the fall.

The wine dispute poses a clash between two provisions of the Constitution, one that guarantees a free flow of goods across state lines and another that gives states special powers to control alcohol.

The 21st Amendment of 1933, repealing Prohibition, said the states may bar “the transportation or importation ... of intoxicating liquors.” Relying on that authority, most states adopted alcohol beverage control laws that gave licensed wholesalers the exclusive authority to import beer, wine or distilled spirits.

Those laws have been challenged by wine makers -- as well as by some big retailers -- who say consumers deserve wider choices at lower prices. The wholesalers and state officials have defended the laws, saying they are needed to collect taxes and keep alcohol from minors.

New York and Michigan prohibit out-of-state wineries from shipping directly to consumers there. At the same time, these states permit wineries within their borders to ship to New Yorkers or Michiganders.

Eleanor and Ray Heald, wine critics in Troy, Mich., challenged the state’s ban on wine imports because they were unable to get a variety of wines shipped to their home. They won in the U.S. 6th Circuit Court of Appeals, which ruled this discrimination against interstate commerce violated the Constitution.

David Lucas, the owner of a small California winery, and Juanita Swedenburg, a Virginia vintner, challenged New York’s law, but the U.S. 2nd Circuit Court of Appeals sided with the state, citing the 21st Amendment.

The Supreme Court said Monday that it would hear Granholm vs. Heald and Swedenburg vs. Kelly in the fall.

“This case will decide whether consumers or a cartel of billion-dollar liquor distributors will determine what wine is available to consumers in New York or two dozen other states,” said Clint Bolick of the Institute for Justice, which represents the two family-owned wineries.

He said only a fraction of America’s 2,500 wineries were big enough to distribute their wine nationally. He also cited studies showing that wholesalers marked up prices by 18% to 25%.

If wineries win the right to by-pass licensed wholesalers and ship directly to consumers, big retailers, such as Costco, would also presumably be free to go around wholesalers and buy alcohol at lower prices.

Beer and wine wholesalers and 36 states joined Michigan in defending the principle that state law should control the import of alcohol products.

“We look forward to a ruling that once and for all resolves this issue and reaffirms a state’s right ... to protect its citizens,” said Juanita Duggan, president of the Wine and Spirit Wholesalers of America.

The outcome may have a significant effect on California’s hundreds of small wineries, but presumably less on the state’s wine drinkers, who are thought to favor California wines.

California also permits wine to be shipped directly from two other states, Washington and Oregon. It is unclear whether the ruling will affect wine purchases from abroad. Currently, direct shipments to U.S. consumers are generally prohibited.

The ad campaigns for beef and other farm products also date to the 1930s. During the Depression, Congress enacted programs to revive the farm economy, including boards that were authorized to promote products.

By the 1970s, these boards turned to generic ads to increase sales of their products. The efforts were funded by farmers or producers, usually through a mandatory fee. The activities of the Beef Board were funded by a $1-a-head assessment on all cattle sold in the United States.

But many producers continue to oppose these assessments, and they have challenged them in lawsuits.

The Supreme Court has issued two contradictory rulings. on the subject. Lower courts have been split on the issue, and the justices said Monday they would hear the case, Veneman vs. Livestock Marketing Assn.