May 17, 2005, 12:00 AM

Supreme Court says states can’t discriminate against online wine retailers

The U.S. Supreme Court’s 5-4 ruling forces 21 states to rewrite laws on interstate wine sales, to assure equal treatment among retailers, attorney Sarah Hewitt says.

The U.S. Supreme Court’s 5-4 ruling yesterday against partial wine sale bans in New York and Michigan will force 21 states to rewrite laws on interstate wine sales to assure equal treatment among retailers, attorney Sarah Hewitt tells Internet Retailer. “A key reason behind the Court’s decision is the Commerce Clause of the U.S. Constitution, which does not allow states to discriminate between in-state and out-of-state companies with protectionist policies,” she says.

 

Direct-to-consumer sales now account for only 1-2% of wine sales, according to the Wine Institute, a California wine industry trade group. One of the reasons that percentage is so low, experts say, is because only 13 states have no restrictions on direct-to-consumer sales. The others either prohibit all d2c sales or restrict them. Sixteen states prohibit all d2c wine sales; 8 states, including New York and Michigan, allow d2c sales only by in-state retailers; and 13 states allow cross-border wine sales only from retailers in other states that offer a reciprocal arrangement, according to Hewitt, who specializes in legal issues for online retailers and is a partner with the New York law firm Brown Raysman Millstein Felder & Steiner LLP.

 

The Court ruling is expected to open the door to interstate sales for thousands of wine retailers in states that will be forced to implement consistent policies for in-state and out-of-state retailers, experts say. "What this decision does is enable wineries, especially smaller ones, to ship direct to consumers in more situations than they could before," said George Garrick, president and CEO of Wine.com.

"This is a major victory in the 20-year battle to end discrimination against America`s small, family wineries that want to provide consumers with access to the wines of their choice," added Robert P. Koch, president and CEO of the Wine Institute.

The Supreme Court ruling doesn’t force the 16 states that prohibit all d2c wine sales to begin to allow such sales. And though it remains to be seen how the 21 states with inconsistent laws will amend them, some of the largest states appear likely to allow interstate sales. Gov. George Pataki of New York, for instance, has said he’s in favor of allowing d2c sales by both in-state and out-of-state wine retailers and that such a move would reap the state significant tax revenue.

 

 

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