Federal courts to decide future for home delivery of out-of-state alcohol

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By NICK KIPPER
Capital News Service

LANSING — A U.S. district judge in Detroit has ruled that a Michigan law banning out-of-state retailers from directly shipping wine to consumers is unconstitutional, a ruling which may soon be trumped by an upcoming U.S. Supreme Court case.

The day before the ruling in Detroit, the Supreme Court agreed to review a Tennessee case that may decide whether the 21st Amendment allows states to grant liquor licenses only to in-state retailers.

“Every federal court of appeals has looked at this issue and said that states can do this,” said Spencer Nevins, the president of the Michigan Beer and Wine Wholesalers Association. “The judge’s ruling, in our opinion, does not mirror the precedent that’s out there.”

The lawsuit was filed by three Michigan wine consumers, a wine merchant and an alcohol retailer based in Fort Wayne, Indiana, against Gov. Rick Snyder, Attorney Gen. Bill Schuette and Andy Deloney, the chair of the Liquor Control Commission.

The Wholesalers Association intervened in the case and joined the state in supporting Michigan’s liquor law. It is reevaluating the case with the attorney general’s office before deciding whether to appeal Judge Arthur Tarnow’s ruling.

“For several years now we’ve been looking at the way the wine market is changing and understand that with smartphones and delivery apps the consumer wants easier access,” Nevins said. “We’re trying to balance the desire of the consumer against the state’s ability to regulate all of these out-of-state wine retailers.”

The concerns about non-Michigan retailers directly shipping to consumers in the state isn’t related to increased competition, but to a lack of oversight on what products are shipped and who receives them, Nevins said.

“There have been stings done in Michigan where minors received alcohol at the door that came from direct shipping,” Nevins said. “There are a lot of retailers out there that may not share the concerns that a winery has in protecting their reputation and making sure their product is not counterfeit.”

Unlike retailers, out-of-state wineries have been allowed to ship directly to consumers since 2005. In-state wineries have long had that right, which was extended only recently to in-state retailers, said Karel Bush, the executive director of the Michigan Craft Beverage Council, a state-appointed group that promotes the growth of crops used in producing craft beverages.

Bush said only a small percentage of wine sales come from out-of-state.

“There were some worries at the time that Michigan wineries might take a bit of a hit, but that has not been the case at all,” Bush said. “The industry has continued to grow and thrive, and many of the wineries sell out of their products just about every year.”

The majority of Michigan wineries are in the Traverse City area or the southwestern region. An economic impact study in 2017 estimated that the grape and wine industry generated $5.4 billion a year for the state, largely through tourism, according to Bush.

Every state has different regulations for alcohol. Michigan has a ban on shipping alcohol-infused products. A retailer residing in a state where an energy drink spiked with alcohol is legal to ship might not be aware of the contradicting laws when they ship to Michigan, Nevins said.

“It’s a different type of sale and type of consumer that’s ordering wine from an out-of-state retailer,” Bush said. “Just because they buy wine from out-of-state doesn’t mean they’re not going to be visiting wineries in Michigan and purchasing local wines.”