[*PG659]STATE POWER TO REGULATE ALCOHOL UNDER THE TWENTY-FIRST AMENDMENT: THE CONSTITUTIONAL IMPLICATIONS OF THE TWENTY-FIRST AMENDMENT ENFORCEMENT ACT
Abstract: Over forty states have direct shipment laws prohibiting, or severely limiting, an individual’s ability to purchase wine from outside of the state and have it shipped home via a common carrier. Congress recently proposed a bill entitled the Twenty-first Amendment Enforcement Act (“Enforcement Act”) that would authorize State Attorneys General to bypass the state courts and bring action in the federal courts to enforce direct shipment laws. This Note argues that direct shipment laws are unconstitutional, and that the proposed Enforcement Act cannot enable states to enforce these unconstitutional state laws.
Before coming to law school, I spent five years in the wine business, during most of which I worked in California’s Napa Valley. The small but famous winery where I worked is busy all year long with visitors who travel from around the world to visit the vineyards and taste hard-to-find wines. When a visitor would ask where she could find our famous estate-grown Cabernets Sauvignon back in her home state, I would explain that because of the limited production, most of the wines were not distributed outside of California. Smiling, the visitor would ask how much she could purchase and have shipped back home for her. “It depends,” I would say; “where are you from?” Curious why I had asked, she would answer that she was from Florida, or Texas, or North Carolina. I would then be forced to explain that her home state, like many others, prohibits out-of-state wineries from shipping wine directly to a consumer in that state.1
[*PG660] The Florida law is a typical example of a direct shipment law.2 These laws restrict the ability of an out-of-state party, such as a winery, to ship wine directly to a consumer in the state.3 Over forty states have similar laws prohibiting, or severely limiting, an individual’s ability to purchase wine from outside of the state and have it shipped home via a common carrier.4 Furthermore, Congress recently proposed a bill entitled the Twenty-first Amendment Enforcement Act (“Enforcement Act”) that would authorize State Attorneys General to bypass the state courts and bring action in the federal courts to enforce direct shipment laws.5 Nevertheless, in spite of new incentives encouraging states to enforce their direct shipment laws, the laws themselves may be constitutionally unenforceable.
The dormant Commerce Clause prohibits states from enacting legislation that discriminates against or unreasonably burdens interstate commerce.6 Under the dormant Commerce Clause, a court would almost certainly strike down a state law that prohibited the importation of an out-of-state product.7 Direct shipment laws, however, attempt to do just this with respect to alcoholic beverages. Proponents of the laws argue that because the Twenty-first Amendment grants the states wide authority to regulate intoxicating liquors, the otherwise-unconstitutional direct shipment laws survive dormant Commerce Clause scrutiny.8
[*PG661] This Note argues that direct shipment laws are unconstitutional, and that the proposed Enforcement Act cannot enable states to enforce these unconstitutional state laws.9 Part I of this Note discusses the background behind direct shipment laws,10 the Supreme Court’s framework of analysis under the dormant Commerce Clause,11 and the current state of the law regarding the Twenty-first Amendment’s affect on the dormant Commerce Clause.12 Part II of this Note analyzes the constitutionality of direct shipment laws under both the dormant Commerce Clause and the Twenty-first Amendment.13 Further, at the end of Part II, this Note considers what affect, if any, the pending Enforcement Act will have on the constitutionality of direct shipment laws.14 Ultimately, this Note concludes that direct shipment laws are unconstitutional, and that the Enforcement Act is unable to help states enforce these unconstitutional laws.
Unlike most articles of commerce, which tend to be regulated at the federal level, alcohol is regulated by the states.15 With the adoption of the Twenty-first Amendment, which repealed national prohibition, the federal government turned over the authority to regulate “intoxicating liquors” to the states.16 The result has been a virtual patchwork of local and state laws that restrict, regulate and tax the importation and transportation of alcoholic beverages.17 “Direct shipment” laws, which restrict or prohibit the shipment of wines directly from the producer to the consumer, are an example of state [*PG662]regulation unique to the field of alcoholic beverages.18 These direct shipment laws and their enforceability are currently the subject of pending Congressional legislation entitled the Twenty-first Amendment Enforcement Act (“Enforcement Act”).19
The substance of the Enforcement Act is best understood when considered against the backdrop of the unique history of the distribution of state and federal power in the field of alcoholic beverage law.20 Over the past 150 years, the authority to regulate alcohol has oscillated wildly between the federal government and the states.21 As early as 1847, in the License Cases, the Supreme Court recognized that in the absence of a conflicting federal statute, states had the authority to regulate intoxicating liquor.22 Less than forty-five years later in Leisy v. Hardin, however, the Court invalidated an Iowa law regulating alcohol shipped into Iowa from Illinois on Commerce Clause grounds.23 Chief Justice Fuller’s opinion in Leisy held that because alcohol was an arti[*PG663]cle of commerce it could not be regulated by the state in the absence of express congressional authorization.24 Later that same year, in 1890, Congress responded by passing the Wilson Act, which provided that alcohol shipped from one state into another was subject to the laws of the receiving state regardless of packaging.25 Although the Court soon ruled that the Wilson Act was constitutional,26 it later held that the Act did not authorize states to prohibit individuals from ordering alcoholic beverages from out-of-state sources for personal consumption.27 In 1898, in Vance v. W.A. Vandercook Co., the Court even stated that “the right of persons in one State to ship liquor into another State to a resident for his own use is derived from the Constitution of the United States.”28 The alcohol industry used the Court’s strong language in Vance to justify their burgeoning mail-order business, and the prohibitionists recognized the need for some way around the Constitution in order to achieve their temperance goals.29
Responding to the difficulties in achieving their temperance goals, prohibition groups, such as the Women’s Christian Temperance Union and the Anti-Saloon League, appealed to Congress, who responded in 1913 with a bill known as the Webb-Kenyon Act.30 The Webb-Kenyon Act, originally entitled “[a]n Act divesting intoxicating [*PG664]liquors of their interstate character in certain cases” intended to place the power to regulate the transportation and sale of alcohol back into the hands of the states.31 President Taft recognized the constitutional dubiousness of an act that exempted an entire field of commerce from the federal control of Article 1, § 8, and vetoed the Webb-Kenyon Act as unconstitutional.32 Congress overturned the President’s veto, however, and on March 1, 1913, the Webb-Kenyon Act became law.33 The Supreme Court subsequently upheld the constitutionality of this Act.34
In late 1917, Congress proposed the Eighteenth Amendment and by January of 1919, the Amendment was law.35 That same year, Congress gave teeth to the Eighteenth Amendment by passing a national prohibition code called the Volstead Act over the veto of President [*PG665]Woodrow Wilson.36 For fourteen years, the production, sale, transportation and purchase of alcoholic beverages for consumption was illegal in the United States.37 In 1932, Franklin Roosevelt won the presidency on a platform promising the repeal of prohibition.38 Following the inauguration of President Roosevelt in 1933, Congress passed the Twenty-first Amendment to the Constitution.39 The Amendment was ratified by the states and made law in December of that year.40 Section 1 of the Twenty-first Amendment repealed the Eighteenth Amendment, while section 2 constitutionalized the substance of the Webb-Kenyon Act by stipulating that “the transportation or importation [of intoxicating liquors] into any state . . . in violation of the laws thereof, is hereby prohibited.”41 Thus, the power to regulate alcohol was—at least ostensibly—back in the hands of the states.42
After the repeal of prohibition, states began enacting alcoholic beverage laws under the authority of the Twenty-first Amendment and the Webb-Kenyon Act.43 Armed with the experience of both the prohibition and pre-prohibition eras, the states sought to find legislative means by which to minimize the abuse of state law that had been so prevalent at the turn of the century.44 Specifically, the states wanted to ensure that those localities that desired to remain dry after the repeal of national prohibition would be free from the infiltration of mail-order booze.45 Moreover, even wet states were interested in legislation [*PG666]that would help curtail the prevalence of the saloon and saloon-life that had been so common at the end of the nineteenth century.46
Thus, the states passed “Tied-House Laws” that prohibited vertical integration between retailers and producers by holding that alcohol had to be distributed via a state-authorized wholesaler.47 Some states chose to establish a state-run monopoly to control the distribution, whereby the state government acts as the wholesaler, distributor and retailer of alcoholic beverages.48 Most states, however, chose the “three-tier system,” which requires alcohol to be distributed to an authorized wholesaler, who may sell to an authorized retailer, who may then sell to a consumer.49 In order to protect the integrity of the three-tier system, states enacted “direct-shipment laws” that prohibit or restrict the ability of a producer or a wholesaler from selling directly to a consumer.50 Direct shipment laws affect the seller or carrier of the wine instead of the consumer.51 Generally, states that have enacted direct shipment legislation tend to fall within one of three categories52: express prohibition states specifically deny the direct sale and [*PG667]shipment of wine to a consumer via a common carrier53; limited personal importation states allow the limited sale and shipment of wine—usually by allotment based on volume—to a consumer for personal use54; and reciprocity states allow the direct shipment of wine from those states that grant one another a reciprocal privilege.55
[*PG668] Although most states have had direct shipment laws on the books since the repeal of prohibition, they only recently have begun actively to enforce them.56 In part, this is because the wine industry, which suffered a near-death experience during prohibition, was so insignificant in the four decades that followed that the direct shipping of wine was a non-issue.57 Between 1970 and 1990, however, the United States wine market more than doubled, and the number of bonded wineries increased from 441 to 1610.58 At the same time, the wholesaler industry became increasingly consolidated, and the resulting oligopoly dedicated itself almost exclusively to the promotion of the major wine brands that account for the vast majority of the market.59 In turn, small wineries looked toward mail-order and the Internet as a means of moving their product.60 Thus, wholesalers and retailers have responded with lobbying efforts aimed at the enforcement of direct shipment laws.61
Although there is an increased demand to enforce the direct shipment laws, the states are unable to respond effectively because they lack an adequate remedy.62 One problem is that the states may lack the personal jurisdiction over the wineries necessary to enforce [*PG669]their laws in a state court.63 Furthermore, a legitimate cause of action does not exist under current federal law.64 Neither the Twenty-first Amendment nor the Webb-Kenyon Act expressly created a federal cause of action for self-enforcement.65 Additionally, in 1997, the Court of Appeals for the Eleventh Circuit held that a federal cause of action for the violation of state liquor laws could not be implied out of either the Twenty-first Amendment or the Webb-Kenyon Act.66 Likewise, attempts by interested private parties, such as wholesalers, to enjoin direct shippers from violating state laws have been unsuccessful.67 Faced with political pressure from wholesalers and distributors to enforce laws that were unenforceable as written, the states turned to Congress.68
Introduced in 1999, the Twenty-first Amendment Enforcement Act would amend the Webb-Kenyon Act to authorize state attorneys general to use the federal courts as a forum for enforcing a state’s di[*PG670]rect shipping laws.69 Specifically, the Enforcement Act provides that a state attorney general, who has reasonable cause to believe that a person is shipping wine into a state in violation of direct shipping laws, may bring a civil action for injunctive relief in a federal district court.70 On August 3, 1999, the House of Representatives passed the Enforcement Act by a vote of 310 to 112, and subsequently referred it to the Senate Committee on the Judiciary.71 The proffered justification for the legislation is that it addresses the problem of underage access to alcohol over the internet.72 Proponents of the Enforcement Act claim that under current law minors may be able to order wine over the internet or telephone, and with the aid of a credit card, to have the contraband shipped directly to their home.73 They argue that the Enforcement Act will help alleviate this problem by providing states with a powerful tool for enforcing direct shipment laws.74
Dissenters to the Enforcement Act believe the proffered justification of reducing underage drinking to be purely pretextual.75 They claim that the problem of underage access to alcohol over the internet is unsubstantiated and overstated.76 They argue alternatively that even if such a problem did exist, it could be better addressed under current law, or—if necessary—by means less restrictive than the proposed legislation.77 The dissenters also point out that a bipartisan substitute to the Enforcement Act that was narrowly tailored to serve [*PG671]its purported ends of limiting underage access to alcohol over the internet was quickly defeated.78 Consequently, the opponents to the Enforcement Act believe the proffered justification is nothing more than a mere pretext under which to pass legislation intended to protect the oligopoly of liquor wholesalers.79 These arguments regarding the legitimacy of the government’s interests in the legislation are particularly important because they bear directly on the constitutionality of the Enforcement Act.80 Opponents of the legislation argue that direct shipment laws, and therefore, by association, the Enforcement Act are unconstitutional because they discriminate against interstate commerce in a way that violates the dormant Commerce Clause of the United States Constitution.81
Article I, section 8 of the Constitution grants Congress the power to regulate commerce among the several states.82 For more than 140 years, the Supreme Court has recognized that along with this positive grant of Congressional power, comes the negative implication that the states may not otherwise interfere with or burden interstate commerce.83 This principle, known generally as the dormant Commerce Clause, is premised on the notion that Congress’ power to regulate commerce is both plenary and exclusive.84 Furthermore, even where Congress has not yet occupied a field within their jurisdiction of interstate commerce, a state is prohibited from entering into that field unless expressly authorized by Congress.85 Thus, under the doctrine of [*PG672]the dormant Commerce Clause, states are prohibited from enacting legislation that would unreasonably interfere with interstate commerce.86
The theoretical underpinnings of the dormant Commerce Clause largely derive from concerns over the harms of interstate discrimination and economic balkanization.87 Scholars generally cite to three basic arguments against economic protectionism that justify the prohibitions of the dormant Commerce Clause.88 First, states should not be allowed to enact legislation that is protectionist in purpose because it can induce retaliation from fellow states and ultimately lead to balkanization. 89 Second, interference with interstate commerce obstructs free trade and may reduce national prosperity or the aggregate social welfare.90 Third, discriminatory state laws offend the concept of representation-reinforcement because they disproportionately impact the interests of persons who are not politically represented within the forum.91 The Court looks suspiciously on state legislation [*PG673]that primarily burdens out-of-state interests because the political process can not be trusted to protect adequately these underrepresented interests.92
There is much scholarly disagreement over the exact analysis the Supreme Court uses to evaluate a state regulation that burdens interstate commerce.93 Nevertheless, the Court’s current dormant Commerce Clause analysis first separates regulations that burden interstate commerce into two basic groups: regulations that discriminate against out-of-state interests and regulations that do not.94 A discriminatory regulation is one that primarily burdens out-of-state interests, while primarily benefiting in-state interests.95 The Court analyzes such discriminatory state laws under the strict-scrutiny standard of review, which—like its analog in Equal Protection analysis—is “strict in theory fatal in fact.”96 Non-discriminatory laws that have only an incidental [*PG674]burden on interstate commerce, however, receive a more deferential standard of review and are struck down “only if the burdens they impose on interstate trade are ‘clearly excessive in relation to the putative local benefits.’”97
When it engages in strict scrutiny review of discriminatory state laws, the Supreme Court upholds the laws only if they serve “‘a legitimate local purpose’ [that] could not be served as well by nondiscriminatory means.”98 This is no easy task since the legitimate local purposes must be something more than mere economic protectionism.99 Secondly, the legitimate state interests promoted by the law must be real and not simply illusory or hypothetical.100 Finally, even when the state successfully demonstrates that the legitimate interests outweigh the burden on interstate commerce, they still must show that the same benefits could not have been achieved by other less-discriminatory means.101 Thus, the Court strikes down any discrimina[*PG675]tory law that either fails to serve a legitimate local purpose, or serves a legitimate local purpose that could have been equally served by other nondiscriminatory means.102
Traditional dormant Commerce Clause doctrine holds that Congress has the authority to consent to what would otherwise amount to an impermissible burden on interstate commerce, for “Congress has undoubted power to redefine the distribution of power over interstate commerce” and may “permit the States to regulate the commerce in a manner which would otherwise not be permissible.” 103 This power of Congress to consent to a violation of the dormant Commerce Clause is based on the notion that the Constitution does not actually forbid states from regulating interstate commerce, but merely restrains them from doing so until authorized by Congress.104 There are, however, some limitations on the scope of Congress’ authority to authorize a state’s discrimination against interstate commerce.105 First, in order for it to be valid, congressional consent must be “expressly stated,” or “unmistakably clear.”106 In other words, the Court is unwilling to find [*PG676]consent unless Congress has been absolutely explicit in its intent to authorize state interference with interstate commerce, so that out-of-state interests burdened by the legislation will have been adequately represented in the political process.107 Second, even where consent is valid, the Court has found other constitutional means for striking down state laws that are repugnant to the principles protected by the dormant Commerce Clause.108 Thus, although Congress technically has the power to authorize discriminatory state legislation, the Court only rarely has relied on such consent to uphold legislation that violates the dormant Commerce Clause.109
[*PG677] Perhaps nowhere else is the scope of congressional authority to consent to discriminatory state laws more relevant than in the context of intoxicating liquors.110 In 1890, in Leisy v. Hardin, the Court struck down an Iowa law prohibiting the importation of intoxicating liquor from Illinois on dormant Commerce Clause grounds.111 Within a few months after the case was decided, Congress responded by passing the Wilson Act, which held that alcohol shipped from one state into another would be subject to the laws of the receiving state.112 The Court upheld the constitutionality of the Wilson Act in 1891, in In re Rarer, stating that Congress had “divested” liquor of its interstate character through the Act.113 Congress read Chief Justice Fuller’s language in In re Rahrer as a recognition of their authority to exempt certain articles of commerce from the application of the dormant Commerce Clause,114 and later passed the Webb-Kenyon Act.115 In 1995, in Clark Distilling Co. v. Western Maryland Railway Co., the Court upheld the constitutionality of the Webb-Kenyon Act as a valid use of congressional power to authorize state laws prohibiting the importation of alcohol into the state.116 Thus, by the Court’s holding in Clark, the [*PG678]Webb-Kenyon Act exempted the importation and transportation of intoxicating liquors from the reach of the dormant Commerce Clause.117 This is particularly important because the substance of the Webb-Kenyon Act was later constitutionalized into the text of the Twenty-first Amendment.118
In addition to repealing national prohibition, the Twenty-fist Amendment of the Constitution grants the states broad authority to regulate the subject of alcoholic beverages.119 The second section of the Amendment states, in its relevant part, that: “[t]he 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.”120 Determining just exactly what this language says can be frustratingly unrewarding.121 The legislative history of the Amendment fails to offer much insight into the purpose of section 2, and what little evidence does exist is contradictory.122 Senator Blain, the sponsor for the Amendment, once suggested that “[t]he purpose of section 2 is to restore to the states by constitutional amendment absolute control in effect over interstate commerce effecting intoxicating liquors.”123 The same Senator, however, also offered a contrary view on another occasion, stating: “[the purpose of the proposed amendment is] to assure the so-called dry States against the importation of intoxicating liquors into those States.”124 Although it seems likely that the purpose of section 2 was to allow the states to choose to continue to remain prohibitionist on an [*PG679]individual basis,125 the Amendment has not always been interpreted as such.126
Not long after the ratification of the Twenty-first Amendment, two major schools of interpretation emerged.127 One group took what might be called an “historical” approach to interpreting the Amendment—that is, interpreting it as it was apparently intended, despite its vague and overbroad language.128 This group took the narrow view that the Amendment granted the states a sort-of qualified exception to the Commerce Clause—qualified because it did not allow the states to place any restrictions on imported liquors that did not also apply to domestic liquors.129 The other group took a more “textual” interpretation of the Amendment, arguing that it granted the states complete constitutional immunity for laws regulating alcohol.130 For almost twenty years following the ratification of the Twenty-first Amendment, this broad textual interpretation prevailed.131
The Supreme Court’s early decisions interpreting the scope of the second section of the Twenty-first Amendment are characterized by their acceptance of the textual approach granting broad deference [*PG680]to state laws regulating alcohol.132 In 1936, in State Board of Equalization of California v. Young’s Market, Justice Brandeis, writing for the Court, upheld a discriminatory licensing statute against both a dormant Commerce Clause attack and an Equal Protection challenge.133 At issue was a California statute that imposed a $500 licensing fee for the privilege of importing beer into the state—a clear attempt to discourage out-of-state competition in the local liquor market.134 That the statute unreasonably burdened interstate commerce was a given, and the venerable Justice Brandeis acknowledged as much, stating that “[p]rior to the Twenty-first Amendment it would obviously have been unconstitutional to have imposed any fee for the privilege [of importing liquor].”135 Nevertheless, the Court upheld the statue, finding that the Twenty-first Amendment abrogated both the dormant Commerce Clause and the Equal Protection Clause when the subject matter of the regulation was alcoholic beverages.136 The Court expressly rejected the narrower “historical” interpretation of the Amendment, stating:
The words used are apt to confer upon the State the power to forbid all importations which do not comply with the conditions which it prescribes. The plaintiffs ask us to limit this broad command. They request us to construe the Amendment as saying, in effect: The State may prohibit the importation of intoxicating liquors provided it prohibits the manufacture and sale within its borders; but if it permits such manufacture and sale, it must let imported liquors compete with the domestic on equal terms. To say that, would involve not a construction of the amendment, but a rewriting of it.137
[*PG681]Cases decided by the Court throughout the 1930s and 1940s affirmed Justice Brandeis’ holding in various settings.138
This broad interpretation of the Twenty-first Amendment lasted only another thirty-five years.139 In 1964, in Hostetter v. Idlewild Bon Voyage Liquor Corp., the Court struck down a New York law that attempted to regulate the sale of alcohol to international travelers departing from John F. Kennedy Airport.140 The Court in Idlewild acknowledged the precedent of Young’s Market and its progeny, but expressly denounced the notion that the Twenty-first Amendment should be interpreted to grant the states such broad authority.141 Referring to the earlier cases, Justice Stewart stated:
To draw a conclusion from this line of cases that the Twenty-first Amendment has somehow operated to “repeal” the Commerce Clause whenever regulation of intoxicating liquors is concerned would, however, be an absurd over-simplification. If the Commerce Clause had been pro tanto “repealed,” then Congress would be left with no regulatory power of the interstate or foreign commerce in intoxicating liquor. Such a conclusion would be patently bizarre and demonstrably incorrect.”142
Thus, the Court determined that even where a state was enacting regulation under the power granted to it by the Twenty-first Amendment, it was still subject to the authority of the Commerce Clause.143
The threshold issue in Idlewild concerned whether the state alcohol regulation conflicted with federal law.144 After finding that such a conflict existed, the next step was to accommodate the state’s interest under the Twenty-first Amendment with the federal interest under [*PG682]the Commerce Clause.145 The Court suggested a balancing of the conflicting state and federal interests, stating: “Both the Twenty-first Amendment and the Commerce Clause are parts of the same Constitution. Like other provisions of the Constitution, each must be considered in light of the other, and in the context of the issues and interests at stake in any concrete case.”146 Applying this accommodation test, the Court found that because New York had not enacted the law to prevent the dissemination of alcohol into her territory, the state interests were easily outweighed by the federal interests in regulating commerce.147 Thus, Idlewild stands for the principle that where a state alcohol regulation unreasonably interferes with an expressed federal policy, that regulation can be stuck down for being outside the scope of the state’s constitutional authority.148
In the wake of Idlewild, the Supreme Court invalidated a series of unconstitutional state laws that purported to rest on the authority of the Twenty-first Amendment.149 The Court’s analysis of the effect of the Twenty-first Amendment on interstate commerce first began to take on its present form in the case of Bacchus Imports Ltd. v. Dias.150 In 1984, in Bacchus, the Court struck down a discriminatory Hawaiian alcohol tax law on dormant Commerce Clause grounds.151 Hawaiian law imposed an excise tax on all imported alcoholic beverages, but exempted from the tax locally produced okolehao and pineapple wine.152 Although this was a facially discriminatory law that would trigger “a virtual per se rule of invalidity”153 under traditional dormant Commerce Clause analysis, Hawaii argued that the otherwise unconstitutional law could be “saved by the Twenty-first Amendment.”154
[*PG683] The Bacchus Court ruled that the Hawaiian tax violated the Commerce Clause by discriminating against interstate commerce.155 Turning to whether the unconstitutional law could be saved by the Twenty-first Amendment, the Court expressly rejected the notion that the Amendment somehow served to remove state alcohol regulation from the ambit of the Commerce Clause.156 The Court reasoned that their proper role was to accommodate or balance the federal government’s interest in prohibiting discrimination against interstate commerce with any legitimate interest the state might have under the Twenty-first Amendment.157 Justice White, writing for the Court, stated:
The question in this case is thus whether the principles underlying the Twenty-first Amendment are sufficiently implicated by the exemption for okolehao and pineapple wine to outweigh the Commerce Clause principles that would otherwise be offended. Or as we recently asked in a slightly different way, “whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, not withstanding that its requirements directly conflict with express federal policies.”158
In other words, for a state to have a legitimate interest under the Twenty-first Amendment that justifies their discrimination against interstate commerce, the state must be acting to promote the ’s “central purpose.”159
The Court in Bacchus went on to hold that the Hawaiian regulation, which was admittedly intended only as a means to advantage local industry, was not designed to promote the central purpose of the Twenty-first Amendment.160 The Court stated:
[O]ne thing is certain: The central purpose of [section 2 of the Twenty-first Amendment] was not to empower States to favor local liquor industries by erecting barriers to competition. It is also beyond doubt that the Commerce Clause itself furthers strong federal interests in preventing economic Bal[*PG684]kanization. State laws that constitute mere economic protectionism are therefore not entitled to the same deference as laws enacted to combat the perceived evils of an unrestricted traffic in liquor.161
Although nowhere in Bacchus does the Court explicitly state what the central purpose or core power162 of the Amendment is, the language implies that the only legitimate purpose would be “temperance” or other means of controlling the “evils” of alcohol.163 There is even language in the opinion suggesting that had the law been designed to promote interests in temperance and not economic protectionism, it might have fallen within the ambit of the Twenty-first Amendment.164 Thus, state alcohol regulations that are not enacted under the core power of the Amendment, but are designed to favor local economic interests, cannot be justified by the Twenty-first Amendment.165
Two other cases decided not long before the Court’s decision in Bacchus, help shed light on the scope of the Twenty-first Amendment’s core section 2 powers.166 In 1980, in California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., the Court applied a balancing test to strike down a state alcohol regulation that interfered with the federal government’s interests under the Commerce Clause.167 The Court characterized this balancing approach as a “pragmatic effort to harmonize state and federal powers.”168 At issue in Midcal was a complicated wine pricing scheme, which the Court held violated portions of the federal anti-trust law—the Sherman Act.169 Applying the balancing test, the Court first considered whether the state had any legitimate interest under the core power of the Twenty-first Amend[*PG685]ment.170 Findings by the California Supreme Court indicated that there were two interests the law was designed to promote: “temperance” and “orderly market conditions.”171 The Court further considered findings by the California court that undermined the legitimacy of temperance as one of the law’s purposes by raising serious doubts about its ability to affect temperance.172 Thus, the Court held that the federal interests outweighed those of the state, while declining to consider what the outcome would have been had the state interests in temperance been legitimate.173
In 1984, in Capital Cities Cable, Inc. v. Crisp, the Supreme Court followed Midcal and struck down an Oklahoma prohibition against the broadcasting of advertisements for alcoholic beverages.174 Federal Communication Commission (“FCC”) regulations clearly pre-empted the Oklahoma law.175 Moving on to the balance of state and federal interests, the Court considered whether the “Twenty-first Amendment rescues the statute from pre-emption.”176 Although noting that the Oklahoma law was purportedly designed to promote temperance, the Court stressed the de minimus impact the law would have on achieving this otherwise laudable goal when compared to the obvious burden on out-of-state industries.177 For example, the ban was not directed at the advertisement of all alcoholic beverages on all fronts, but rather, was directed only at wine advertisements on television that occasionally appeared by way of out-of-state signals.178 The Court stated:
Although a state regulatory scheme obviously need not amount to a comprehensive attack on the problems of alcohol consumption in order to constitute a valid exercise of state power under the Twenty-first Amendment, the selective approach Oklahoma has taken toward liquor advertising suggests limits on the substantiality of the interests it asserts here.179
[*PG686]Because the state’s temperance goals were not seriously promoted by the advertisement ban, the Court found that it only indirectly engaged the core powers of the .180 Thus, the “balance between state and federal power tip[ped] decisively in favor of the federal law,” and the Court struck down the Oklahoma law.181
Since Bacchus, Midcal and Capital Cities, the Court has continued to invalidate state alcohol laws that interfere with express federal policies.182 The Court, however, has not been any more explicit in defining exactly what state interests are considered to fall within the scope of a state’s core power under the Twenty-first Amendment.183 In spite of the Court’s occasional broad language, their decisions indicate that the actual scope of the section 2 core powers is relatively narrow.184 Ultimately, the Court’s decisions in Idlewild, Midcal, Capital Cities and Bacchus can be distilled into two basic points regarding the [*PG687]substance of the Twenty-first Amendment’s core powers: first, temperance is the ’s sole central purpose; and second, the goal of temperance must be a serious and realistic one.185 Stated differently, for a state’s interest in regulating alcohol under the Twenty-first Amendment to outweigh conflicting federal interests, the state law must be designed to promote temperance, and it must be realistically designed to achieve that goal.186 Lower court decisions reflect such an interpretation of the Supreme Court’s decisions regarding the ability of the Twenty-first Amendment to save a state law that would otherwise amount to an invalid interference with federal policy.187 One Federal District Court stated that “[o]nly those state restrictions which directly promote temperance may now be said to be permissible under Section 2 of the Twenty-first Amendment,”188 while another claimed that “[t]his Court does not believe that a statute which ensures orderly market conditions but fails to promote temperance falls within core Twenty-first Amendment regulations.”189 Thus, unconstitutional state alcohol regulation only survive judicial scrutiny if the temperance [*PG688]goals promoted by the law sufficiently outweigh the burden on interstate commerce.190
In summary, the Supreme Court’s analysis of the constitutionality of a state alcohol law that affects interstate commerce has two basic parts.191 First, as a threshold matter, the Court applies a traditional dormant Commerce Clause analysis to determine whether the law would constitute an impermissible burden on interstate commerce if the subject were something other than alcohol.192 Second, the Court considers whether the otherwise unconstitutional state law nevertheless can be saved by the Twenty-first Amendment.193 Under this step of the analysis, the Court questions whether the law was designed to promote a legitimate state interest in temperance.194 Where the law was not designed to promote a legitimate temperance goal, but was designed to achieve mere economic protectionism, the law will be struck down as unconstitutional.195 Where the law was designed to promote temperance, however, the Court applies a balancing test to determine whether the state’s interest in temperance outweighs the burden on interstate commerce.196
The constitutional implications of the Twenty-first Amendment Enforcement Act cannot be divorced from the goals the proposed law was designed to affect.197 The purpose and effect of the Act would be to allow state attorneys general to sue in Federal District Court to enforce a state’s direct shipment laws.198 Because there is currently no federal cause-of-action for violating direct shipment laws, and because actions in state courts have largely been ineffectual, the Enforcement [*PG689]Act will provide the states with the necessary forum to prevent the on-line and mail-order sale of wine.199 To what extent the Act actually can achieve this purpose is entirely contingent on whether the state laws it seeks to help enforce are constitutionally permissible ends.200 Thus, to analyze the constitutional implications of the Twenty-first Amendment Enforcement Act, it is necessary to discuss first the constitutionality of state direct shipment regulations under current law.201
As with any state alcohol regulation, a court must first determine whether direct shipment laws would constitute an impermissible burden on interstate commerce if the subject of the laws were something other than intoxicating liquors.202 Under traditional dormant Commerce Clause analysis, a court would apply strict scrutiny because direct shipment laws discriminate against interstate commerce.203 This is because the burdens of the laws fall primarily on out-of-state interests such as small wineries, while in-state interests, such as local wholesalers and retailers, retain the benefits of the legislation.204 Small wineries, many of whom produce quantities too small for the large wholesalers to bother distributing, rely on direct sales via the internet or mail-order as the only realistic means of moving their product.205 By prohibiting wineries from shipping wine directly to out-of-state consumers, direct shipment laws seriously burden the wineries’ ability to compete on a national level. Furthermore, while direct shipment laws burden out-of-state interests, such as small wineries, they do not burden in-state interests.206
[*PG690] Additionally, in-state interests, such as local liquor wholesale suppliers and retailers, retain the benefits of the direct shipment legislation.207 The three-tier system of alcohol distribution protected by the direct shipment legislation promotes monopolistic conditions for the wholesalers and retailers by forcing each bottle of wine sold to pass directly through their channels.208 Finally, if there is any doubt at all that the liquor wholesalers and retailers are benefited by direct shipment legislation, this is dispelled by the fact that they are frequently the authors of and driving forces behind the legislation.209 Thus, the courts should consider direct shipment laws to be discriminatory laws that are subject to the strict-scrutiny standard of review.210
For a state direct shipment regulation to survive strict scrutiny, the state must prove that the law serves a legitimate local purpose that could not be served as well by non-discriminatory means.211 States generally offer two justifications for direct shipping legislation: the laws help prevent access to alcohol by minors, and they allow for more efficient tax collection.212 Although these justifications are facially legitimate local interests, the courts should question the reality of the benefits achieved through the legislation.213 First, the evidence suggesting there is a risk that minors will have greater access to alcohol via direct shipment is simply not that significant under the circumstances.214 In a day where almost every teenager has a friend with phony identification, there is little incentive for minors to order expensive wines over the internet and wait five business days to enjoy the fruits of their labor.215 The illegitimacy of the state’s interest in protecting minors may be evidenced by the fact that Mothers Against Drunk Driving (MADD), the nation’s preeminent crusader against underage drinking, had refused to endorse the legislation for having [*PG691]“implications far beyond [MADD’s] concerns [being] a battle between various elements within the alcohol beverages industry.”216 Regarding the taxation justification, there are no logical reasons why states are any more entitled to sales revenues on out-of-state purchases of wine than any other article of commerce.217 Furthermore, the Internet Tax Freedom Act currently prohibits multiple or discriminatory taxes on electronic commerce generally.218
Second, notwithstanding the legitimate state interests, there are other less restrictive means by which a state could more effectively advance their otherwise laudable goals.219 For one, states can require adult signatures upon delivery of the wine.220 Also, regulations could be implemented that require each purchaser to obtain pre-authorization by providing a drivers license number which could then be checked for consistency against the information on the credit card issuing payment. Similarly less restrictive means could be used to deal with the problem of lost sales tax.221 For example, states could require direct shippers to apply for permits under which they would be required to reimburse the state for the proper amount of sales tax.222 Indeed, many direct shippers already have expressed a willingness to conform with such requirements.223
After finding that direct shipment laws impermissibly burden interstate commerce, a court must then determine whether the otherwise unconstitutional legislation nevertheless can be saved by the Twenty-first Amendment.224 Under the Supreme Court’s current definition of core powers, direct shipment laws would not invoke the protection of the Twenty-first Amendment because they are not realis[*PG692]tically designed to promote temperance.225 Although state legislatures frequently justify direct shipment laws as intended to reduce access to alcohol by minors, the laws are simply not realistically designed to achieve this goal.226 First, there is evidence that direct shipping of wine does not pose a problem for enforcing laws against underage drinking.227 A recent letter from the Chief Deputy Director of the California Department of Alcoholic Beverage Control stated that although telephone and mail-ordered deliveries of wine have been legal in California since 1963, they have posed no additional problem for law enforcement.228
Second, even if minors’ access to fine wine via direct shipment were a serious concern, evidence shows that direct shipment laws do not realistically affect this goal.229 For example, notwithstanding the direct shipment laws, most states do allow for the mail-order purchase of wine—but only through the proper in-state channels.230 The evidence overwhelmingly suggests that the laws are designed not to further any temperance goals, but to protect in-state business interests favored by the three-tier system of distribution.231 On the role of economic protectionism, the Court has been exceptionally clear: “the central purpose of [the Twenty-first Amendment] was not to empower states to favor local liquor industries by erecting barriers to competition.”232 Thus, because direct shipment laws do not directly promote temperance, but are designed to protect a local industry, they fail to invoke the protection of the Twenty-first Amendment.
There is a possibility that a court would apply a broader definition of the Twenty-first Amendment’s core powers to yield a contrary result.233 By defining the Amendment’s core powers to include not only laws promoting temperance, but also “laws enacted to [*PG693]combat the perceived evils of an unrestricted traffic in liquor,” a court might find that the direct shipment laws invoke the protection of the Twenty-first Amendment.234 This would mean that even if the direct shipment laws were designed to do no more than protect the three-tier distribution system, they nevertheless would fall within the Amendment’s core powers.235 Such a broad construction of core powers, however, is entirely unprecedented and patently wrong.236 Moreover, even if this broad formulation could successfully invoke the Twenty-first Amendment, it is unlikely that these interests in regulation would carry as much weight in an accommodation test as a law designed to promote temperance.237
Finally, even if direct shipment legislation can successfully invoke the protection of the Twenty-fist Amendment, the states still must convince the court that its interests promoted by direct shipment legislation outweigh the strong federal constitutional interest in prohibiting discrimination against interstate commerce, and preventing the economic balkanization of the states.238 Interstate trade over the internet commonly is considered to be the most important economic avenue in the coming century.239 One can imagine that state laws inhibiting the progress of electronic trade will meet the same fate as laws inhibiting national transportation did earlier this century.240 Because of the strong federal interests involved, direct shipment laws must promote some hefty state interests under the Twenty-first Amendment to overcome this balance. In the unlikely event that a state could convince a court that its direct shipment laws were de[*PG694]signed to promote temperance, the state would have an easier time arguing that this legitimate interest outweighed the burden on interstate commerce.241 On the other hand, if the law only can be justified as a regulation designed to “combat the perceived evils of an unrestricted traffic in liquor,” it is unlikely to justify such a serious burden on federal interests.242
Although direct shipment laws violate the dormant commerce clause and cannot be saved by the Twenty-first Amendment, states might argue that the Enforcement Act equals congressional consented to the unconstitutional state laws.243 In other words, if the Enforcement Act is passed into law, proponents of direct shipping laws will likely argue that by authorizing state Attorneys General to use the federal courts to enforce their laws, Congress has consented to the discriminatory state legislation.244 This argument, however, is flawed because the Enforcement Act does not consent to direct shipment laws in a way that is “unmistakably clear.”245 First, the Enforcement Act does not expressly state anywhere in its text that it is intended to authorize states to discriminate against interstate commerce by prohibiting the direct shipment of wines.246 Second, there is nothing in the legislative history of the Enforcement Act “evincing ‘a congressional intent to alter the limits of state power otherwise imposed by the Commerce Clause.’”247 Third, the mere fact that the Enforcement Act appears to contemplate, and thus implicitly approve of, state direct shipment laws, does not make it an act of valid congressional consent.248 The Court consistently has struck down discriminatory state laws that were within the contemplation of Congress and consistent [*PG695]with federal policy.249 Finally, a court could not find that the Enforcement Act was valid congressional consent to discriminatory state alcohol regulation because the Supreme Court has failed to find the same under either the Webb-Kenyon Act or the Twenty-first Amendment.250 Both these federal laws are better examples of congressional intent to authorize discriminatory state alcohol regulation than is the Enforcement Act,251 yet the Court no longer holds that they are valid acts of congressional consent.252 The Court is unwilling to interpret either the Webb-Kenyon Act or the Twenty-first Amendment as having exempted discriminatory state alcohol regulations from the reach of the dormant Commerce Clause, and it is therefore unlikely to hold any differently under the vague language of the Enforcement Act.253
If the Enforcement Act does not authorize direct shipment laws, then what affect does the proposed legislation have on the unconstitutional state laws? The answer, it seems, is none at all. Short of granting unmistakably clear consent, there is nothing that Congress may do to affect the constitutionality of an unconstitutional state law.254 Thus, it is apodictic that the Enforcement Act may not be used to enforce [*PG696]state direct shipment laws, should they be found unconstitutional.255 This, however, should not affect the constitutionality of the Enforcement Act itself. Although an analysis of Congress’ constitutional authority to pass the Enforcement Act is beyond the scope of this Note, there is presumably nothing to prevent state Attorneys General from using the Act to enforce other legitimate restrictions on the importation or transportation of alcoholic beverages.256 Nevertheless, if direct shipment laws are unconstitutional, the Enforcement Act would be powerless to enforce the unconstitutional state laws.
State direct Shipment laws prohibit in-state citizens from purchasing wine over the internet directly from an out-of-state winery.257 The evidence clearly indicates that the purpose of these laws is to protect the economic interests of in-state liquor wholesalers and retailers from being bypassed by out-of-state wineries who have turned to the internet to sell their wines.258 This is precisely the kind of discriminatory state legislation that the dormant Commerce Clause was intended to prevent. First, direct shipment laws are likely to induce retaliation from the states burdened by the discriminatory legislation—ultimately posing a threat of economic balkanization.259 Second, direct shipment laws obstruct electronic commerce and the progress of free trade, and therefore unilaterally may affect national economic welfare.260 Finally, direct shipment laws are procedurally unjust in that they disproportionately harm out-of-state parties who are not represented in the local political process.261
Direct shipment laws must not be allowed to discriminate against interstate commerce simply because they regulate intoxicating liq[*PG697]uors.262 It is now clear that discriminatory alcohol laws not realistically designed to promote the goal of temperance must suffer the same fate as any other state law that severely burdens interstate commerce.263 Consequently, the courts must strike down the direct shipment laws for unconstitutionally burdening interstate commerce.264 Additionally, because direct shipment laws are unconstitutional, they cannot be enforced by the federal courts under the proposed Twenty-first Amendment Enforcement Act. Thus, although the Enforcement Act is not itself unconstitutional, it is impotent insomuch as it seeks to provide states with a forum by which to enforce their unconstitutional direct shipment laws.