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Issn 1933-8147 !""#$%&''()%*+ %9:4;<:1:4(=3>?@49:(,A(!>94B *(C><:,;D(,A(*E7,3,E(F4G><E1:>,9 19H(>:<(%@?17:(,9(:34(!>94(%9HI<:;D 012345(*-(647842 J,(7,?DK(1L<:;17:K(?,<:(,9(<4;M4;<K(,;(,:34;5><4(;4H><:;>LI:4(>< 9,:(:,(L4(H,94(5>:3,I:(:34(4N?;4<<(?4;@><<>,9(,A(:34(1I:3,;O<P- !"#$%&'()*)+#(&,-(./ "! ! The ratification of the 21st Amendment and the associated confusion of its meaning have lead to a perplexing and elaborate system of regulating interstate commerce of alcoholic beverages. A system of laws intended to give local governments the power to police alcohol within their own borders without affecting the federal government’s control over interstate commerce has now become a bureaucratic and expensive system of alcohol distribution. This system erects barriers to competition and market entry, limits consumer surplus, and threatens the economic viability of the wine industry as a whole. Until regulation of interstate commerce of alcohol is universalized under federal control, wine producers and consumers will suffer at the benefit of state governments and seemingly unnecessary wholesaler distributors. Section 1: The History of Alcohol Regulation Alcohol Jurisprudence in the Nineteenth Century In order to understand the current system of alcohol distribution, it is important to look at its history and development. The dormant commerce clause of the constitution, which states that no state or territory may pass a law that “improperly burdens or discriminates against interstate commerce,” is an integral part of this history. During the nineteenth century, it was widely acknowledged that state and local governments could exercise their police powers to regulate alcoholic beverages within their borders including prohibiting the manufacture and sale of alcohol (Zywicki 2004). The states could not, however, exercise these police powers in a manner that discriminated against the producers of alcoholic beverages from other states. In the ! #! case of Walling v. Michigan, the Supreme Court ruled that banning consumption and sale of out- of-state liquors violated the dormant commerce clause. Chief Justice Taney wrote, “The single question, therefore, is whether the statute of 1875 is repugnant to the constitution of the United States. Taken by itself, and without having reference to the act of 1881, it is very difficult to find a plausible reason for holding that it is not repugnant to the constitution. It certainly does impose a tax or duty on persons who, not having their principal place of business within the state, engage in the business of selling, or of soliciting the sale of, certain described liquors, to be shipped into the state. If this is not a discriminating tax leveled against persons for selling goods brought into the state from other states or countries, it is difficult to conceive of a tax that would be discriminating” (Zywicki 2004 p. 9). Thus, the states could monitor the local manufacture and sale of alcohol, but could not regulate alcoholic beverages produced out-of-state. This effectively destroyed the states’ ability to prohibit alcohol within their own borders. States that wished to ban alcoholic beverages in their territory were unable to do so because the dormant commerce clause undermined their police power. These laws led to the passage of the Wilson Act, a piece of legislation intended to aid the states in their quest to regulate both in-state and out-of-state liquors within their own borders. The Wilson Act Alcohol jurisprudence of the 19th century effectively discriminated in favor of out-of- state producers and undermined the police power of local authorities. Numerous Supreme Court rulings had created an anomaly in which the states were left powerless to become a “dry” state and prohibit alcohol consumption, manufacture, and sale within their boundaries. To correct this anomaly, Congress passed the Wilson Act in 1890. The Wilson Act “provides that intoxicating liquors or liquids transported into any State or remaining therein for use, consumption, sale, or storage shall, upon arrival, be subject to the laws of the state enacted in the exercise of its police $! ! power to the same extent and in the same manner as though such liquids or liquors had been produced in such State” (Zywicki 2004 p. 10). The language of the Wilson Act effectively eliminated the privileged status of out-of-state sellers while still maintaining the long-term ban on state discrimination against interstate commerce (Zywicki 2004). Even the Supreme Court observed that, “[The Wilson Act] was not intended to confer upon any state the power to discriminate injuriously against the products of other states in articles whose manufacture and use are not forbidden, and which are, therefore, the subjects of legitimate commerce” (Zywicki 2004 p. 11). Essentially, the Wilson Act’s purpose was non-discrimination of goods. All alcoholic beverages (both those produced in-state and those produced out-of-state) would be subject to the same laws upon their entry into the state. The Wilson Act was effective in principle, but in practice it was widely ignored. A series of Supreme Court rulings undermined the effectiveness of the Wilson Act by barring dry states from prohibiting direct shipment of alcoholic beverages to consumers provided that the alcohol was still in its original packaging. These rulings still allowed the citizens of “dry” states to get their hands on alcoholic beverages and weakened the capacity of local governments to exercise their police powers. The inability of the Wilson Act to completely enable state governments to ban alcohol led to another act that was much more effective. The Webb-Kenyon Act At this point in history, states had essential plenary power to regulate the manufacture and consumption of alcohol pursuant to its police power, but could not discriminate against alcohol produced out-of-state and sold in its original packaging. The frustration of the states and ! %! local communities at their inability to prohibit all forms of alcohol was becoming much more apparent. In 1913, the Webb-Kenyon Act was passed to address the frustrations and concerns of governments who desired unilateral bans on alcohol. The act’s purpose was to strengthen the Wilson Act and prohibited “the shipment or transportation of alcohol into a State of intoxicating liquor that is intended by any person therein, to be received, possessed, sold, or in any manner used, either in the original package or otherwise, in violation of any law of such State” (Zywicki 2004 p. 12) as a matter of federal edict. Senator Kenyon stated that his act was intended to better enable the states to utilize their police powers by eliminating discrimination in favor of out-of- state producers (Zywicki 2004). The law was highly effective: Webb-Kenyon did not permit discrimination against interstate commerce, but did allow states to unilaterally eradicate the production and sale of liquor within their borders. “Dry” states could finally become dry. The result of this act was a universally accepted and practiced balance of power between state and federal authorities. The federal government controlled interstate commerce, and the states utilized their police powers to regulate alcohol within their territory without violating the dormant commerce clause. Dry states could be dry, wet states remained wet, and everyone was happy. This is where the country stood at the enactment of nationwide prohibition brought on by the 18th Amendment. The 18th Amendment – Its Goals and Failures The 18th Amendment to the Constitution, also known as Prohibition, was ratified in 1919 and expressly banned the production and consumption of all alcoholic beverages not intended for religious purposes throughout the nation. Prohibition’s goal was to promote temperance and &! ! morality, but its enforcement was an enormous failure (Zywicki 2004). The problem that Prohibition faced was that it upset the balance of powers established in prior nineteenth century jurisprudence. The federal government was left in charge of enforcing the Amendment without the help of local and state authorities. “In the era before the 18th Amendment, the state and federal governments had thus reached a general accommodation on the balance of authority between the state police power and national commerce power. The states had the authority to regulate purely local affairs such as rules governing the manufacture and consumption of alcohol, especially with respect to bars and saloons, where alcohol was sold and consumed on the premises. The federal government retained complete control over matters involving interstate commerce […] The ratification of the 18th Amendment and the enactment of National Prohibition upset this balance” (Zywicki 2004 p. 16-17). Due to the Supremacy Clause of the constitution and the language of the 18th Amendment, federal authorities were left with the entire burden of enforcing Prohibition. The federal government’s encroachment into the realm of state police powers quickly became problematic. Federal authorities, unlike local officials, were unequipped to handle the divergence of views on alcohol from community to community, and federal efforts to enforce Prohibition where it was not wanted led to violence, corruption, bloodshed, and the eventual failure of the amendment (Zywicki 2004). Secretary of the Treasury Andrew Mellon saw these failures first hand and wrote, “The Treasury felt with respect to local law enforcement that too much responsibility had been placed upon the federal government. Even in those states which already had satisfactory state laws, and in which local machinery for enforcement had been provided, citizens and officials were looking to the federal forces for the performance of police duties which were purely local” (Zywicki 2004 p. 18). Alcohol regulation and jurisprudence of the nineteenth century, the 18thAmendment, and its failures all led to the passage of the 21st Amendment. Nothing in the legislation or history of ! '! alcohol regulation suggests that states needed complete control of interstate commerce powers of alcohol in order to effectively enforce local laws.
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