May 18, 2005
Economist Says Decision on How to Respond Now Goes to the States
The Supreme Court ruled on Monday that states must permit in-state and out-of-state wineries to ship their products directly to consumers. The ruling overturns direct-shipping bans in 30 states that currently prohibit shipping wine directly from an out-of-state winery to the consumer.
“This is a victory for consumers but likely a temporary one,” says economist Glen Whitman. “State legislatures might respond by extending their shipping bans to cover all winemakers, regardless of geography. Although local vintners would no longer be protected, local distributors and retailers would still have guaranteed markets. Indeed, the distributors’ lobbying efforts will probably underwrite the campaign to expand the scope of the bans instead of ending them. Without a constitutional argument on their side, wine lovers will have no option but to petition their state legislators to say ‘no’ to special interests.”
“The U.S. Supreme Court ruling will force states to treat wine just like the thousands of other products shipped to consumers across state lines every day,” says Whitman, Research Fellow at the Independent Institute and author of the study, Strange Brew: Alcohol and Government Monopoly (The Independent Institute). The case pitted the 21st Amendment, which ended Prohibition, but allowed states broad authority to regulate and even ban alcohol sales, against consumers and independent wineries.
“The 21st Amendment to the U.S. Constitution ended Prohibition, but set the stage for state and federal regulations that protect wholesalers from competition,” says Whitman, an assistant professor of economics at California State University, Northridge. “This boils down to special interests: unnecessary middlemen get a legally guaranteed role in the market, then pass their costs and markups on to wine drinkers,” he points out. In Strange Brew, he examines the laws regulating the alcoholic beverage industrythe Franchise Termination Lawswhich give wholesalers monopoly-like powers to raise prices. “These regulations are a form of corporate welfare, justified under the guise of concerns about taxation and protecting minors from buying alcohol,” says Whitman.
For information on "Strange Brew: Alcohol and Government Monopoly," please
Glen Whitman is currently available to discuss this recent Supreme Court ruling. For an interview, please contact: Pat Rose at (510) 632-1366 x116.