The Supreme Court’s wine-shipping decision last week reveals some seemingly shocking divisions within the conservative movement. At issue were laws in Michigan and New York that let in-state wineries ship directly to consumers but prevented out-of-state wineries from doing so. Small wineries and consumers sued, arguing that the “dormant” Commerce Clause prevents states from discriminating against out-of-state sellers. The states claimed they could discriminate against out-of-state wineries because the 21st Amendment lets them regulate alcohol sales.
The Court’s ultimate decision left its most conservative voices on opposite sides of the issue. Justice Scalia sided with the majority, which held that states cannot ban direct shipment from out of state if they permit it in-state. Justices Thomas and Rehnquist found themselves in the minority.
Much has been made of the fact that conservative legal superstars Ken Starr and C. Boyden Gray headed opposing litigation teams. But that’s just one level of the conflict.
The case challenging New York’s law was filed by the Institute for Justice, a public-interest legal firm that defends economic liberties. IJ’s co-founders, Clint Bolick and Chip Mellor, are veterans of both the Reagan administration and the Mountain States Legal Foundation. Bolick became aware of discriminatory wine-shipping laws when visiting a Virginia winery owned by Juanita Swedenburg, who became a plaintiff in the New York suit.
The wine and spirits wholesalers jumped into the case to defend the states’ restrictions. Juanita Duggan, president and CEO of the Wine & Spirits Wholesalers of America, held key public-liaison and domestic-policy posts in both the Reagan and Bush I White Houses. Other conservative legal heavyweights on the wholesalers’ team included Robert Bork, Miguel Estrada, and Viet Dinh.
Wholesalers and states found willing allies in Gary Bauer’s American Values, Phyllis Schlafly’s Eagle Forum, Concerned Women for America, and other evangelical and social-conservative groups. The wholesalers even hired a public-relations firm headed by Ralph Reed, former executive director of the Christian Coalition, to help press their case.
Some might think this means the conservative movement has lost its philosophical grounding. Public-choice economics offer a simpler explanation. Clemson University economist Bruce Yandle observed long ago that social regulation is often supported by coalitions of “bootleggers” (who profit from social regulations that reduce competition, such as bans on Sunday liquor sales or direct wine shipping) and “Baptists” (who support restrictions on individual choice for moral reasons). Yandle’s theory provides an apt metaphor for the wine wars.
An amicus brief from evangelical and public-health groups characterized commerce in alcohol as “trafficking,” a term normally reserved for commerce in illegal drugs, prostitution, and similarly shady enterprises. The wholesalers are the alcohol “traffickers” most likely to prosper from direct-shipment bans. Direct-shipment bans help wholesalers enjoy a protected market, because most states require that alcohol pass through a wholesaler before a retailer can sell it to a consumer.
Bootlegger-Baptist coalitions are often highly effective in dealing with elected leaders, who depend on them for campaign contributions, volunteers, and votes. They’re less effective in the courtroom, where issues of fact sometimes matter.
In the wine cases, the Bootlegger-Baptist coalition apparently succeeded in persuading the White House to quash a U.S. government brief that would likely have opposed their position. A Washington Post article published in July 2004 gives evangelicals credit for persuading the White House to put the kibosh on a brief–with nary a mention of the politically powerful wholesalers, whose president recently boasted that they’ve become a million-dollar-per-election-cycle PAC.
The absence of a U.S. government brief was especially surprising given the extensive record developed by the Federal Trade Commission. A July 2003 FTC staff study, cited heavily in Justice Kennedy’s majority opinion, found that direct-shipment bans constrain consumer choice and deprive consumers of access to lower prices. Perhaps more important, the FTC staff addressed concerns about underage drinking by surveying states that allow direct shipment from out of state. Enforcement officials in these states reported few or no problems with direct shipment to minors. Similarly, states that chose to tax direct shipments from out of state reported that they had instituted permit procedures that facilitate tax collection. Even the price data suggest that direct shipping is unlikely to promote underage drinking. Direct shipment lets consumers get bargains on higher-priced wines over the Internet, but shipping costs impose a hefty price premium on the cheaper wines that minors are more likely to seek. (See <a href=also.)
The FTC’s facts–and the states’ lack of evidence–clearly carried the day with the Court’s majority. Justice Kennedy noted, “The States provide little concrete evidence for the sweeping assertion that they cannot police direct shipments by out-of-state wineries. Our Commerce Clause cases demand more than mere speculation to support discrimination against out-of-state goods.” In other words, banning direct wine shipment to combat underage drinking is a faith-based initiative.
Don’t predict the demise of conservatism over this case; there’s less philosophical disagreement than meets the eye. Though vigorously defending states’ rights (or wrongs), the wholesalers’ attorneys repeatedly argued that the purported loophole in the Commerce Clause exists only for alcohol, due to the 21st Amendment. On other issues of economic freedom, both sides in the wine wars can still, like Toby Keith and Willie Nelson, “raise up our glasses against evil forces.”
–Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University. Between 2001 and 2003, he served as deputy director of the Federal Trade Commission’s Office of Policy Planning and coauthored the FTC staff study on direct wine shipment.