All stakeholders agree that regulation is needed to prevent sales to minors, reduce alcohol abuse, and create orderly systems of importation and distribution of alcohol
Contents Under Pressure n 73 and collect revenue. The vibrancy of current laws and regulations is under pressure from changing times and changing guards in the industry. Will the state power fade as a new generation of regulators, business owners, and consumers examine the rules without the vivid memory of the excesses that led to Prohibition? Will global businesses and consolidating tiers put sufficient pressure to bear on the system to force a more homogenized set of rules? Ultimately, will alcohol be marketed and sold like other commodities? The debate over direct shipment showed that pro- found change is not at hand, but that pressures are changing the contours of the trade in alcohol.
References
1. Linda Spath, librarian, contributed significantly to this effort. Additional support was provided by Karen Valter.
2. “Alcohol” will be used to generally refer to beer, wine, and spirits and beverages defined by federal and state law as intoxicating liquor in lieu of the more awkward expressions “beverage alcohol” or “alcoholic beverages.”
3. Alcohol also is the cause or a contributing factor to significant harm to individuals, families, and society. The scope of this chapter does not include an analysis of such harm.
4. Beverage Dynamics (March 2005).
5. Gomberg, Frederickson, & Assoc. “2005 Report to Unified Symposium” (January 2005).
6. Motto, Kryler, and Fisher. “Report to California Association of Winegrape Growers and the Wine Institute” (2002).
7. “Brewer’s Almanac.” Beer Institute. http://www.beerinstitute.org.pdfs/production _of_ malt_beverages_ in _US.pdf (October 5, 2004). Production dropped signifi- cantly in the late 1980s. Id.
8. U.S. Dept. of Commerce, Bureau of Foreign & Domestic Commerce.
9. Calculated from data reported in Supermarket News (July 19, 2004) and U.S. 2002 Census population numbers. Note: This figure should be higher for imbibers because the average was not adjusted for the number of teetotalers.
10. 2004 revenues for Brown-Forman, Allied Domecq, PLC, and Constellation Brands, Inc., exceeded $2.5 billion, $5.8 billion, and $3.5 billion, respectively. DCA, Febru- ary 28, 2005, Allied Domecq Plc; Hoover’s Online Report Builder-Constellation Brands, Inc. (2004).
11. See e.g., Wal-Mart with 3,600 stores worldwide as of 2004 and 7-Eleven with 5,800 stores worldwide. Wal-Mart reported revenues of 258,681,000 in fiscal year 2004.
Available online at: http://walmartstores.com (April 6, 2005); http://www.7_eleven.
com (April 27, 2005).
12. “Top U.S. Wholesalers Keep Expanding as Big Changes Loom.” Impact April 15, 2004 at 1, cited in Petitioner’s Brief at 6, Swedenberg v. Kelly No. 03-1274.
13. Federal Excise Tax Reported to or Collected by the IRS, Fiscal Years 1996-2004.”
Available online at: http://www.taxpolicy center.org/TaxFacts/TFDB/Content/GIF/
excise_type_2004.gif (June 16, 2005).
14. Based on data reported for Alaska, Arizona, Arkansas, California, Colorado, Con- necticut, Delaware, the District of Columbia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Missouri, Montana, Nevada, New Hampshire, New York, Ohio, Pennsylvania, South Dakota, Texas, Utah, Vermont, Washington, and Wyoming.
15. Stryhorn, C. “Window on State Government.”
16. Available online at: http://www.ca.gov. (June 14, 2005).
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ILtax.com (June 14, 2005). New York State Department of Taxation and Finance,
“Annual Statistical Report—2003-2004 New York state Tax Collections” (March 2005).
18. USDA, 2007. ERS/USDA Data: Food Consumption (per capita) data system. Last updates Feb. 15, 2007.
19. Id.
20. Id.
21. Kobler, J. Ardent Sprits: The Rise and Fall of Prohibition. New York: G.P. Putnam’s Sons, 1973: p. 350–1.
22. The FDA has concurrent jurisdiction over alcohol labeling. In a November 30, 1987, Memorandum of Understanding, the agencies clarified their roles. 52 Fed. Reg. 45502.
The memorandum described the jurisdictional overlap between the FDA’s authority to prevent adulteration in the food supply under the FDCA and the [TTB’s] more general broadly worded mandate under the FAA Act. [TTB] agreed to promulgate labeling regulations “when FDA has determined that the presence of an ingredient in food products, including alcoholic beverages, poses a recognized public health problem.” The agencies also agreed to “consult on a regular basis concerning the pro- priety of promulgating regulations concerning the labeling of other ingredients and substances for alcoholic beverages.”
23. Congress was not in session when the states ratified the Twenty-first Amendment.
President Roosevelt acted by executive order to create Federal Alcohol Control Admin- istration pursuant to the National Recovery Act. Exec. Order No. 6474, December 4, 1933. This Act was declared unconstitutional by the Supreme Court. Schechter Bros.
Poultry Corp. v. U.S. 295 U.S. 495 (1935).
24. In 1936, the Liquor Administration Act was passed creating an independent agency, but the Act never took effect because the triggering event—appointment of agency members by the President—never occurred. In 1940, the Agency was abolished and its functions transferred back to Treasury. From that time until 1972, the unit was within the Internal Revenue Service of the Department. 37 Fed. Reg. 11696 (June 10, 1972).
25. Available online at http://www.ttb.gov. (June 14, 2005).
26. 26 U.S.C.§§ 5001–5691 (1970).
27. 27 U.S.C. §§ 201-211 (1970).
28. 27 U.S.C. § 122 (1970).
Contents Under Pressure n 75
29. Oregon Liquor Control Commission (OLCC) Administrative Overview, http://arcweb.
sos.state.or.us/recmgmt/sched/special/state/overview/20010010olccadov.pdf accessed 7/31/2007.
30. Id.
31. Id.
32. Id.
33. Department of Revenue. “Learn About Liquor Distribution in Montana.” Available online at http://mt.gov/revenue/forbusinesses/liquordistribution/learnaboutliquor distribution.asp accessed 7/31/2007.
34. Kansas Department of Revenue. “Alcoholic Beverage Control History of Alcoholic Beverages in Kansas.” Available online at http://www.ksrevenue.org/abchistory.htm.
accessed 7/31/2007.
35. Id.
36. Id.
37. Id.
38. Id.
39. Adams Beverage Group. “Control States Executive Forum.” Available online at http://www.beveragenet.net/sw/2004/0409/0409exf.asp. (May 31, 2005).
40. See, e.g. 9 N.Y.Comp. Codes R & Regs. § 48.7 (CCH 2002).
41. See, e.g. Florida: 17 Fla. Stat. Ann. § 561.24 (1997) (prohibiting out of state manu- facturers from obtaining a wholesale license); Massachusetts: 4B Ann. Laws of Mass., ch. 138 §§18, 18A (2003) (residency requirements).
42. Nelson, B. “A Model Winery Law” (2002). Available online at http://www.american wineries.org/issues/modellaw.descrip.pdf. (June 15, 2005).
43. In addition to licensing requirements and trade practice regulation, federal and state laws govern alcohol labeling and advertising. The FAA Act makes it unlawful to sell, ship, or receive any distilled spirits or wine unless such products are bottled, packaged, and labeled in strict conformity with the federal labeling regulations.27 U.S.C. § 205 (e). A supplier must obtain prior approval of labels. Under federal laws, advertising of alcoholic beverages is unlawful unless the advertising meets regulatory standards for labeling and furthermore does not contain any statement inconsistent with the product labels. 27 U.S.C. § 205(f). Prior approval of advertisements is not required at the federal level. A supplier or wholesaler cannot stop at federal com- pliance. Thirty states require a supplier to register its labels. The majority of states require suppliers to file monthly reports or tax returns.
44. 27 U.S. C. 205 (b) (1970); 27 C.F.R. § 6.21-6.72 (1995).
45. 27 C.F.R.§ 6.81-6.102 (1995).
46. La. Reg. Title 55 Chapt, 3. § 317(B)(4)(5) (2002).
47. Cal. Bus. & Prof. Code §§ 25502-25503.37 (2001).
48. Cal. Code Regs. Tit. 4, Art. 16, Rule 106 (1998).
49. Tex. Alco. Bev. Code § 102.07(c) (1999).
50. La. Reg. Title 55 Chapt, 3. § 317 (2002).
51. Id.
52. See, e.g. Wash. Rev. Code § 66.28.180(1) (2004).
53. California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc. 445 U.S. 97 (1980).
54. See, Wash. Admin. Code §§ 314-24-190(2004); 314-20-100 (2004). Wash. Rev.
Code § 66.28.180 (2004).
55. Costco Wholesale Corp. v. Maleng. Case No. CV04-0360. Trial is scheduled for spring of 2006.
56. See, “Brief for the Wine and Spirits Wholesalers of America et al.” filed in Granholm v. Heald.
57. Dual distributor appointments are prohibited in Alabama, Arkansas, Connecticut, Georgia, Idaho, Kansas, Maine, Maryland, Nevada, New Hampshire, North Caro- lina, Ohio, Tennessee, Vermont, and Virginia.
58. Conn. Gen. Stat § 30-17 (2004).
59. Id.
60. N.J Admin. Code tit. 13, § 13:2-18:1-18.8 (1995).
61. Id.
62. N.C. Gen. Stat. § 18 B-1201 (1983) (applies to wineries with more than 1,000 cases per year in local sales).
63. Id.
64. Mt. Hood Beverage Co. v. Constellation Brands, Inc., 63 P.3d 779 (2003); Kendall- Jackson Wine Estates, Ltd. v. Branson, et al. 212 F. 3d 995 (7th Cir. 2000).
65. N.Y. Alco. Bev. Cont. Law §3(37) (2004).
66. Wine Institute. Available online at http://www.wineinstitute.org/californiawineimpact.
pdf (last accessed August 31, 2007).
67. See, http://www.freethegrapes.org. (June 10, 2005).
68. See, http://www.wineisntute.org and http://www.family winemakers.org. (June 10, 2005).
69. See, http://www.wswa.org. (June 10, 2005)
70. See, e.g. Dickerson v. Bailey, 336 F. 3d 388 (5th Cir. 2003); Bainbridge v. Bush, 48 F.
Supp. 2d (1306 (M.D. Fla. 2001), vacated and remanded sub nom by Bainbridge v.
Turner, 311 F. 3d 1104 (11th Cir. 2002); Bridenbaugh v. Freeman-Wilson, 227 F. 3d 848 (7th Cir. 2000); Beskind v. Easley, 325 F. 3d 506 (4th Cir. 2003).
71. Hargrave, L. “Let It Flow.” The New York Times, June 5, 2005.
72. Granholm v. Heald, 125 C. Ct. 1885, 1902 (2005).
73. Id., at 1897 quoting Halliburton Oil Well Cementing Co. v. Reily, 373 U.S. 64, 72 (1963).
74. Id., at 1902 quoting Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978).
75. Id., at 1897.
76. Id., at 1904. The Court described State Bd. Of Equalization of Cal. v. Young’s Market Co., 299 U.S. 59 (1936) as “inconsistent” with the view that the 21st Amendment did not authorize discrimination.
77. Id., at 1904. See 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) (First Amendment); Larking v. Grendel’s Den, Inc., 459 U.S. 116 (1982) (Establishment Clause); Craig v. Boren, 429 U.S. 190 (1972); (Equal Protection) Wisconsin v. Con- stantineau, 400 U.S. 433 (1971) (Due Process); and Department of Revenue v. James B. Beam Distilling Co., 377 U.S. 341 (1964) (Import-Export).
78. Id., citing Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324 (1964).
Contents Under Pressure n 77
79. Id., citing Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984) (Bacchus held that a Hawaiian excise tax on out of state producers that exempted local pineapple wine was discriminatory and unconstitutional).
80. Id. at 1897.
81. Id. at 1896.
82. Available online at http://www.wswa.org/public/media/20050516.html (May 16, 2005).
83. “Supreme Court Issues Favorable Decision on Direct-to Consumer Wine Shipping.”
Available online at http://www.wineamerica.org (May 16, 2005).
84. Granholm v. Heald. (J. Thomas dissenting), 125 S. Ct at 1918.
85. Costco Wholesale Corp. v. Hoen, et al. Case No. C04-360P (U.S.D.C. W.D. Wash.
April 21, 2006).
86. Wine Country Gift Baskets.com et al. v. Steen. Case NO. 4:06-CV-232-A (U.S.D.C N.D. Tex. May 22, 2006).
79