Federal court upholds wholesaler arguments

The Wine & Spirits Wholesalers of America praised a decision by the US District Court in Arizona which dealt yet another blow to those seeking to deregulate the distribution of alcohol in this country. The court rejected a challenge from an out-of-state winery that questioned the constitutionality of certain Arizona laws that mandated a face-to-face sale and that limited the class of wineries which could distribute directly to retailers and consumers. The Arizona ruling is the latest in a string of recent decisions that have underscored the power of the states under the 21st Amendment to regulate the distribution of alcohol.

“We are pleased with the court’s ruling, as it reaffirms the proper reading of the Supreme Court’s 2OO5 Granholm decision that the three-tier system is ‘unquestionably legitimate’ and that states retain the power to control how alcohol is imported and distributed in order to manage their legitimate local concerns,” WSWA President and CEO Craig Wolf said.

The court summarily rejected the plaintiffs’ argument that the state’s only options were to either “apply the three-tiered distribution system to all wineries, or to completely abolish” it. The court instructed that such a result was not dictated by Granholm. “Granholm is not the panacea that plaintiffs make it out to be,” the court admonished.

Arizona’s direct shipping law, which allows wineries both inside and outside the state which produce less than 2O,OOO gallons of wine annually to ship two cases of wine per year to Arizona consumers, but which requires that such sales be made face-to-face, was found to be a legitimate, evenhanded exercise of the state’s authority. The court also upheld the state’s limitation of that privilege to wineries producing less than 2O,OOO gallons annually.

“This thoughtful opinion will no doubt help the states of Indiana, Kentucky and Massachusetts, which are facing similar legal challenges,” Wolf said.