This spring marks the 15th anniversary of the US Supreme Court’s 2005 Granholm decision, which made it possible for the US’ direct-to-consumer wine market to grow to $3bn a year.
But the ruling was also supposed to make it possible for Americans to buy wine from out-of-state retailers or Amazon – anyone, in fact, with a retail license who wanted to sell to them, regardless of location. Which would have made it possible for someone in New Jersey to buy a bottle of Italian wine from a retailer in California, or for an Illinois resident to buy French wine from a retailer in Florida.
This is the law in almost every other country. Amazon UK, for example, sells wine from all over the world. But it’s not the law in the US, where liquor regulation is still governed by the 100-year-old political compromise that ended Prohibition. That established the "public health and safety" standard, which says if a regulation protects the public health and safety, then it’s constitutional.
In other words, the regulators, lawmakers, and the courts in the US still say it isn’t safe for wine drinkers in one state to buy wine from a retailer in another state – no matter how silly and outdated that may sound in the second decade of the 21st century.
The health and safety argument
“Our 15 years experience with DtC sales by wineries demonstrates what has always been painfully clear to anyone with eyes to see,” says attorney Lou Bright, the former general counsel of the Texas Alcoholic Beverage Commission. “We’ve been told that the new style of commerce is effectively ungovernable and that regulatory methods will be ineffective, but none of that has happened. We now have 15 years experience with post-Granholm commerce and we see no disasters.”
Granholm was supposed to change all of that, says Alex Koral, senior regulatory counsel for SOVOS Ship Compliant, which helps producers navigate DtC shipping regulations. So what happened? Why do 11 states still restrict or prohibit DtC, while only 13 states and the District of Columbia allow direct retail sales?
“I suppose we have to keep in mind that it often takes years and years for Supreme Court decisions to take effect,” says Koral. “That’s the nature of law reform in general, that we can’t expect one decision to change everything. Courts and judges are reluctant to change, which isn’t as much about politics as it is about the way courts work.”
In fact, lower courts have thrown up roadblocks since Granholm, insisting that the ruling had nothing to do with interstate retail sales and reaffirming the public health and safety doctrine. And on those rare occasions when a judge has loosened retail restrictions, a higher court has voided the ruling.
This happened again in the spring, when a federal appeals court barred an Indiana retailer from selling wine in neighboring Michigan without opening a store in the state, citing public health and safety.
In this, says Koral, the best way to reach the open marketplace that Granholm seemed to promise may not be through the courts. The answer may lie in state legislatures, which could pass laws allowing for Amazon-style wine sales in each of the states. Yes, that would be ironic given Granholm’s anniversary, but irony is part and parcel of US liquor regulation.