The Dormant Commerce Clause, Wine & You
October 25, 2007 – 4:16 pm
Inevitably, the term “Dormant Commerce Clause” arises with any substantive discussion of direct wine shipping laws and discrimination against out of state wine shippers. The important 2005 Supreme Court decision Granholm v. Heald was in fact a case that turned on the scope of the Dormant Commerce Clause when apparently contradicted by another part of the same U.S. Constitution from which the Dormant Commerce Clause originates.
Here’s what you need to know about the Dormant Commerce Clause.
The word “Dormant” is not actually found in the Constitution. Rather, the concept is derived from the the implications of the Commerce Clause of the Constitution found in Article 1, Section 8:
“The Congress shall have power . . . To regulate commerce with foreign nations, and among the several states, and with the Indian tribes”
This part of the Constitution expressly gives the U.S. Congress the power to pass laws that affect interstate commerce. The important idea of the the Dormant Commerce Clause is that since it is the expressed power of the Congress to regulate Interstate Commerce, it follows that states are prohibited from passing their own laws that burden interstate commerce or discriminate against out-of-state commercial interests.
The term “Dormant” was coined by Chief Justice John Marshall in 1824.
Generally a state law is found to be unconstitutional under the Dormant Commerce Clause if on its face it discriminates against out-of-state businesses or if it appears neutral but has the effect of favoring in-state economic interests. The former is usually determined unconstitutional. The latter cases tend to be examined by courts to determine if the burden on commerce outweighs the benefits it brings to the state. If they determine it does, then the law is deemed unconstitutional.
A state may see its facially discriminatory law deemed constitutional, but it must show that no other means exist to pursue a compelling and legitimate state or local interest. This has found to be the case only one time.
However, it turns out that the Dormant Commerce Clause appears to be in conflict with another part of the U.S. Constitution: The 21st Amendment’s second section:
“The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”
While the Dormant Commerce Clause prohibits states from enacting legislation that discriminates against out-of-state economic interests, the 21st Amendment appears to allow it. In Granholm v. Heald the Supreme Court had to balance these two parts of the constitution.
In the Granholm case New York and Michigan both had laws that allowed their in-state wineries to ship to consumers in the state but prohibited out-of-state retailers from doing the same. It was a case of an explicitly discriminatory law burdening interstate commerce. However, the states claimed that the language of the 21st Amendment gave them the expressed right to do this.
The Supreme Court said “No”.
The Court said that with the 21st Amendment and the repeal of the 18th Amendment (Prohibition), states were now able to regulate the distribution of alcohol, but they were not able, just as they were not able before Prohibition, to violate the Commerce Clause by burdening interstate Commerce. From here the Supreme Court applied the various balancing and judicial tests to determine if the interests of the States in promoting temperance, creating an orderly market and collecting taxes could be pursued in non-discriminatory ways. They found these goals and interests could be pursued by non-discriminatory means and found the laws of Michigan and New York to be unconstitutional.
The principle of the Dormant Commerce Clause is that states may not burden interstate commerce; they may not discriminate against business in other states for the benefit of their own state’s business interests. This intent is consistent with the Founders’ experience under the Articles of Confederation of economic efficiency across the nation being nearly impossible because each state regulated interstate commerce concerns by erecting barriers to trade. The idea behind the commerce clause was to insure the creation of one, single economic union.
Today, 220 years after the writing of the U.S. Constitution and after numerous Commerce Clause cases, there remain a number of states where laws prevents wine lovers from purchasing and having shipped to them wine from out-of-state retailers while allowing their in-state retailers to do so. Every lawyer and every legislator knows this kind of law violates the U.S. Constitution’s Dormant Commerce Clause. Yet, they will claim that the 21st Amendment saves them because the Granholm decision, which examined and nullified this same claim but with regard to another group of retailers—wineries, does not apply to retailers.
This unconstitutional claim too will be nullified in time.
Tom Wark, Executive Director
Specialty Wine Retailers Association