Tag Archives: Supreme Court

Ask the WC 25: Three-tier reform, wine prices, wine scores

three-tierThis edition of Ask the WC:  Is the Supreme Court going to take a three-tier system case? Plus, what’s happening with wine prices and why does the WC dislike scores?

Because the customers always have questions, and the Wine Curmudgeon has answers in this irregular feature. You can Ask the Wine Curmudgeon a wine-related question by clicking here.

Hi, Wine Curmudgeon:
I really liked your post about buying wine illegally. Is there any chance we can get rid of all these stupid laws and buy wine like normal people?
On-line wine buyer

Dear On-line:
A variety of cases are wending their way through the legal system that could make it possible for us to buy wine from out-of-state retailers and on-line. They include my favorite, Walmart’s attempt to overturn a Texas law that says publicly-held companies can’t get a state retail liquor license. Talk about foolish. However, another case is attracting more legal attention — Lebamoff v. Michigan. Lebamoff, an Indiana retailer, sued to be allowed to sell wine in Michigan. In this, it directly addresses out-of-state retailer sales. Tom Wark, who follows these things in his role as executive director of the National Association of Wine Retailers, told me he thinks there’s a good chance the Supreme Court accepts Lebamoff. If so, it should decide once and for all whether Internet and out-of-state retail sales are constitutional. Having said that, there’s no guarantee the court rules in favor of direct retail shipping if it takes the case.

Dear Wine Curmudgeon:
What’s going to happen with wine prices? I thought they were supposed to go down, but all I see is $15 wine in the grocery store.
Cheap wine buyer

Dear Cheap:
Your guess is as good as mine. The grape glut is real, here and in Europe, and I’m working on a post about that for next week. But I agree — prices don’t seem to have responded to an excess of wine on store shelves. The tariff, of course, is one reason. I also wonder if supply chain problems caused by the pandemic are limiting the supply. A limited supply means prices won’t fall, even if demand has decreased during the pandemic. So we will just have to wait and see.

Greetings, Charmingly Grumpy:
I’m new to the blog.. How come you don’t use wine scores like everyone else?
Inquiring mind

Dear Inquiring:
Scores are one of the three or four worst things about the wine business (the others being corks instead of screwcaps, premiumization, and three-tier). They’re biased in favor of expensive wines, regardless of quality; they don’t give enough credit to “lesser” grape varieties or to white wine; and they reflect the critic’s taste and not necessarily whether the wine is any good. In this, they are a crutch for retailers, who can post 88 points and figure that’s customer service. I explain what the wine tastes like so you can make up your own mind.

Photo: “Dallas Food Truck Truck Festival – August 2011” by BetterBizIdeas is licensed under CC BY-SA 2.0

Tennessee residency law: Did the three-tier system come crashing down yesterday?

tennessee residency lawSupreme Court overturns Tennessee residency law – does that mean all of three-tier is in trouble?

Did the Fourth of July come a week early for wine drinkers yesterday? That’s when the Supreme Court struck down a Tennessee residency law that limited who could open a liquor store in the state. As such, a host of legal and alcohol experts from around the country have predicted the beginning of the end of the three-tier system – the series of laws that restricts how we buy alcohol in the U.S. – if the court did just that.

I talked to a couple of attorneys who practice liquor law and they weren’t quite ready to pronounce three-tier dead. Said Lou Bright, the former executive counsel of the Texas Alcoholic Beverage Commission, the state’s liquor cops: “There will be lots and lots and lots of screaming and arguing about this in the coming weeks and months and years. You might consider just reporting the facts of the case with a ‘stand by for further screaming.’  ”

Still, the 7-2 decision seemed unequivocal: Since the residency requirement “has little relationship to public health and safety, it is unconstitutional,” Justice Samuel Alito wrote in the majority opinion.

The key phrase in the decision is “relationship to public health and safety,” which has been the bedrock of three-tier since the end of Prohibition. Every part of three-tier rests on the assumption that each state can regulate alcohol as it sees fit, since it’s protecting the public health and safety. Hence, every restriction in how we buy wine, beer, and spirits in the U.S., no matter how foolish or outdated or left over from the days when Al Capone controlled the liquor business, has been defended in court.

Because public health and safety

• Can’t buy wine on the Internet? That’s the various states protecting our health and safety.

• Can’t buy discounted wine where you live? That’s the various states protecting our health and safety.

• Can’t buy wine in a grocery store where you live? That’s the various state’s protecting our health and safety.

• Can’t buy wine directly from the winery where you live? That’s the various states protecting our health and safety.

• Can’t by a wine where you live even though it’s sold in a neighboring state? That’s the various states protecting our health and safely,

And Justice Alito’s majority opinion seems to turn all of that on its head. He invoked the Commerce Clause of the Constitution, which says states can’t favor their residents ahead of anyone else. That has been the law for more than 200 years, though exceptions had often been made for alcohol laws.

In fact, that was the defendant’s argument in asking the court to uphold the residency law, which made it all but impossible for anyone not from Tennessee to open a liquor store. The defendants said that the state, by essentially outlawing out-of-state chains like Total Wine, was protecting the public health and safety. Resident owners, because they were residents, would sell alcohol more responsibly than anyone else.

The court said phooey to that

But did it say phooey to all of three-tier? Robert Lewis, a partner in the Spiritus law firm in Coral Gables, Fla., told me that many analysts may see the beginning of the end of three-tier in the decision. But he is more circumspect. He remembers hearing the same sort of optimism in 2005, when the Supreme Court allowed direct shipping in its landmark Granholm decision. Many, myself included, expected three-tier to come tumbling down 14 years ago. It never did.

“I think the decision made it more difficult for states to use residency laws to regulate alcohol sales as part of three-tier,” Lewis said Wednesday afternoon. “But I’m not so sure it will affect more than residency laws. The idea that it may change other parts of three-tier, I just don’t see that.”

So the Tennessee decision may make it possible for supermarkets to sell spirits in Texas, which they can ‘t do currently because state law says only residents can get a license to sell whiskey, gin, and so forth. But it probably won’t help consumers in Michigan and Connecticut, where state law mandates minimum wine prices and forbids discounts, 20 percent off sales, and the like. And it won’t help consumers in New York, who can’t buy potato chips in a liquor store (perhaps my favorite part of three-tier’s vast and bizarre grip on the country).

And it almost certainly won’t do anything to loosen the stranglehold that distributors have over the wine, beer, and spirits supply chain. That’s the most fundamental tenet of three-tier, that consumers must buy directly from the retailer and restaurant, and that the retailer and restaurant must buy from a distributor. Only the distributor can buy from the producer (with minor exceptions like direct shipping), something that exists in almost no other consumer goods category. And if a wine doesn’t have a distributor in your state, you can’t buy it – something that will become even more common now that the top three distributors control 60 percent of the market.

Imagine not buying being able to buy a computer from Dell because the state is protecting the public health and safety – and then wonder why we have to endure that in wine.