the opposition’s public health and safety rationale was not enough, though, so Juanita and David’s attorneys demonstrated how the original three-tier system was adopted and protected at the behest of liquor distributors. One of the examples they cited was the New York legislature’s overwhelming passage of legislation allowing direct shipping in the 1990s; something that the liquor distributors urged Governor George Pataki to veto, and he did.66
For years, certain scholars had argued that post-Prohibition alcohol regulations had little to do with public health and safety but were instead about economic protection.67 In candid moments, even the distributors acknowledged what was truly at the heart of their fight. Bob Archer, a distributor in Virginia, admitted, “People we represent all over the world might just decide they want to sell directly to big retailers—Wal-Mart, Sam’s Club, and Costco—without us.”68 And when then chief executive of the WSWA Juanita Duggan criticized Juanita and David for their lawsuit, her accusations revealed that her primary concern was not public safety—it was that Juanita and David allegedly wanted to “legitimize the growing black market in illegal alcohol sales, sell direct to consumers, pocket outrageous profits and avoid state taxes.”69
The public health and safety assertions of the distributors were further undermined by the alcohol regulations themselves. As small wineries began to bloom in the 1970s, more states began to create exceptions to the three-tier system, allowing wineries to market and sell their wines directly to consumers. Direct sales further exploded with the expansion of the Internet in the 1990s.70 At this point, exceptions were granted to microbreweries to sell directly to consumers, reciprocity arrangements were set up between states that allowed the direct shipment of wine to consumers, and, as usual, not all fifty states prohibited direct inter- or intrastate shipment of alcohol or required a physical presence in the state.71 If alcohol distribution not involving distributors truly posed a threat to public health and safety, these exceptions would have been seen as too dangerous to allow.
More than two years after Juanita and David filed their lawsuit, Judge Richard Berman declared New York’s law unconstitutional. Simply put, Berman did not accept the distributors’ arguments, finding that “the direct shipping ban was designed to protect New York State businesses from out-of-state competition.”72 He also reasoned that the state had “not established that its goals [could not] be accomplished in a nondiscriminatory manner.”73
Not surprisingly, the bottleneckers quickly appealed, and on February 12, 2004, the Second US Circuit Court of Appeals sided with the distributors, on the basis that “all wineries, whether in-state or out-of-state, are permitted to obtain a license as long as the winery establishes a physical presence in the state.”74 Although this was consistent with the text of the law, the actual effect of upholding the direct sales ban was to discriminate against out-of-state businesses—particularly smaller ones—in favor of in-state distributors. Juanita and David would have had to open and fully staff a warehouse just to sell a small number of cases of wine in New York—an economic impossibility.75 Their next step was the US Supreme Court.
As attorneys for both sides prepared their briefs for the hearing, the bottleneckers and their allies continued their drumbeat about protecting public safety, particularly the dangers of underage drinking that would take place if the three-tier system were to be disrupted. John Fitzpatrick, a spokesman for the WSWA, warned, “As a society we need to be thinking about ways to make it harder for children to get alcohol, not easier.”76 His organization called Juanita an “elite” member of a “special interest” trying to facilitate underage drinking for financial gain.77 The attorneys general of some states even launched high-profile sting operations, ostensibly designed to demonstrate how easy it was for underage buyers to access alcohol. Revealingly, the sting artists never successfully ordered from wineries; they did, however, manage to order from retailers, which were licensed by the three-tier system.78
In the end, the bottleneckers’ efforts were for naught. On May 16, 2005, the Supreme Court decided 5–4 to strike down the laws on grounds of discrimination. Justice Anthony Kennedy, writing for the majority, held that the laws’ effect was to “allow in-state wineries to sell wine directly to consumers in that state but to prohibit out-of-state wineries from doing so, or, at the least, to make direct sales impractical from an economic standpoint.”79 The court ruled that laws such as New York’s “depriv[ed] citizens of their right to have access to the markets of other States on equal terms.”80 The court also dismissed the assertions about underage access to alcohol, finding that less onerous alternatives were available to serve legitimate state interests. Indeed, a state official in Georgia, which at the time already allowed shipments from out-of-state wineries, added that the Peach State had regulations in place to discourage purchases by minors.81
A key element in the court’s decision was the fact that the bottleneckers were unable to demonstrate compelling reasons for the law to stay in place, even after they had been asked to give specific examples of such reasons. Moreover, Justice Antonin Scalia pointed out that the fact that twenty-six states currently allowed direct shipment from out-of-state wineries “certainly suggests that what [the state] is arguing is not essential to the state’s enforcement of its alcohol laws.”82
THE BOTTLENECKERS STRIKE BACK
The Supreme Court’s decision was called “landmark”83 and a “pivotal moment in the long history of alcohol.”84 Although the court did not speak directly to the efficacy of the three-tier system, the ruling had a significant-enough effect on bottleneckers that they initiated efforts in state legislatures and the US Congress to nullify the high court’s decision and protect their position.
One approach taken by the bottleneckers was to lobby states to limit all direct shipping, from both in-state and out-of-state producers.85 This would apply in cases such as that of Michigan, whose variation on a total ban had been to prohibit commercial carriers such as FedEx and UPS from shipping wine. This meant that wine retailers must use their own vehicles to deliver product to Michigan residents, effectively closing Michigan to out-of-state retailers.86 Another approach of the bottleneckers was to seek onerous permitting systems with expensive fees to ship into the state in order to discourage out-of-state producers, particularly small ones, from shipping directly to consumers.87
At the federal level, distributors’ lobbyists responded to the 2005 Supreme Court decision by turning to Congress for a ban on direct shipping of wine and other forms of alcohol. Their effort was embodied in a bill put forth by Utah representative Jason Chaffetz titled the Community Alcohol Regulatory Effectiveness Act of 2011, or CARE, which was similar to legislation previously proposed by Massachusetts representative William Delahunt.88 Support for the act came primarily from alcohol distributors, which, through their PACs, had donated generously to those assisting their cause.89 In the decade since the Supreme Court decision, CARE’s nine sponsors have accepted more than $312,500 from the NBWA and $181,735 from the WSWA.90 And those nine lawmakers are not alone. According to an analysis by the National Association of Wine Retailers, wholesalers spent more than $80 million in contributions to state and federal legislators and on federal lobbying between 2005 and 2010.91
The bottleneckers also continue to defend their economic advantage against possible threats. In 2006, Costco sued Washington State for the right to stock its shelves with alcohol without going through distributors. As in similar cases throughout the country,92 distributors intervened in support of the law, and the court ultimately rejected Costco’s claims. Rather than appealing to the Supreme Court, Costco took its battle to the people with two ballot initiatives in 2010.93 Voters rejected both initiatives after being bombarded by advertising campaigns funded mostly by distributors. Whereas the campaign supporting the ballot initiatives collected donations from Costco, supermarkets, and others, amounting to a total of $2.28 million, opponents of the initiatives outspent supporters by almost a three-to-one
