High Court Strikes Down States’ Liquor Pricing Laws

The Supreme Court on Tuesday struck down liquor pricing laws in 38 states, including California, clearing the way for greater competition in what has been a highly regulated industry.

Four other states--Kansas, Tennessee, Rhode Island and Massachusetts--have similar pricing laws for wine, which attorneys say were also invalidated by Tuesday’s ruling.

Leaders of the liquor industry said the ruling will mean lower prices for consumers.

The state laws in question required makers of liquor to set a wholesale price within the state at the same level as the lowest price offered elsewhere in the nation.

Violation of Commerce Clause

“It meant they (distillers and wine makers) were locked into rigid pricing around the country,” said Arnold Lerman, a Washington attorney for the Wine Institute.

Because such a state law in effect regulated prices elsewhere, the statute “on its face violates the Commerce Clause” of the Constitution, said Justice Thurgood Marshall, writing for the court’s 5-3 majority.

“While a state may seek lower prices for its consumers, it may not insist that producers or consumers in other states surrender whatever competitive advantages they may possess,” Marshall said.

Lawyers on both sides of the case (Brown-Forman Distillers Corp. vs. New York State Liquor Authority, 84-2030) said the ruling shows that the court is whittling away at the 21st Amendment, which ended Prohibition in 1933 but also authorized tight state regulation of alcohol.

Struck Down 1963 New York Law

The liquor pricing laws have “penalized consumers by making it impossible for companies to respond to competition and offer lower prices,” said F. A. Meister, president of the Distilled Spirits Council.

“To take gin as an example, you couldn’t put it on sale in New York in the winter when it wasn’t selling well there because you didn’t want to put it on sale in Florida where it was selling well,” said Lisa Tate, a spokesman for the distillers group in Washington.

The high court’s ruling Tuesday struck down a 1963 New York state law designed to ensure low prices for consumers, but the attorney who defended it before the court agreed that the decision will likely lead to lower retail prices.

“This has been a heavily regulated market, and it will still be regulated. But it is a move toward a free market for distillers, so I think it should produce a pro-consumer result,” said Lloyd Constantine, the New York attorney. Twenty states, including California, have price-setting laws patterned after New York’s.

“I would assume this would call our law into question since it is essentially the same,” said Manuel Espinoza, assistant director for regulatory affairs of the Department of Alcoholic Beverage Control in Sacramento.

No Similar Laws for Wine, Beer

“If distillers are now free to base their prices on volume, it would have a potential for lower prices in the high-volume markets like L.A.,” Espinoza said. The state has no similar pricing laws for wine or beer, he added.

Eighteen other states fix a price for liquor, and Tuesday’s ruling indicated that those laws are invalid, too.

California wine makers said they were happy to see the high court move to deregulate the alcoholic beverage industry.

“This is another step toward a free-market operation,” said John De Luca, president of the Wine Institute in San Francisco. In recent years, he noted, the justices have struck down several state laws that relied on the 21st Amendment to regulate the wine and liquor industry.