Scope of Regulatory Power Conferred upon the States

SECTIONS 1 - 3. The eighteenth article of amendment to the Constitution of the United States is hereby repealed. 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. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several States, as provided in the Constitution, within seven years from the date of the submission hereof to the States by the Congress.


Discrimination Between Domestic and Imported Products.-In a series of decisions rendered shortly after ratification of the Twenty-first Amendment, the Court established the proposition that states are competent to adopt legislation discriminating against imported intoxicating liquors in favor of those of domestic origin and that such discrimination offends neither the Commerce Clause of Article I nor the Equal Protection and Due Process Clauses of the Fourteenth Amendment. Modern cases, however, have recognized that "state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause."1

Initially, the Court upheld a California statute that exacted a $500 annual license fee for the privilege of importing beer from other states and a $750 fee for the privilege of manufacturing beer,2 and a Minnesota statute that prohibited a licensed manufacturer or wholesaler from importing any brand of intoxicating liquor containing more than 25 percent alcohol by volume and ready for sale without further processing, unless such brand was registered in the United States Patent Office.3 Also validated were retaliation laws prohibiting sale of beer from states that discriminated against sale of beer from the enacting state.4

Conceding, in State Board of Equalization v. Young's Market Co.,5 that, "[p]rior to the Twenty-first Amendment it would obviously have been unconstitutional to have imposed any fee for [the privilege of importation] . . . even if the State had exacted an equal fee for the privilege of transporting domestic beer from its place of manufacture to the [seller's] place of business," the Court proclaimed that this Amendment "abrogated the right to import free, so far as concerns intoxicating liquors." Because the Amendment was viewed as conferring on states an unconditioned authority to prohibit totally the importation of intoxicating beverages, it followed that any discriminatory restriction falling short of total exclusion was equally valid, notwithstanding the absence of any connection between such restriction and public health, safety, or morals. As to the contention that the unequal treatment of imported beer would contravene the Equal Protection Clause, the Court succinctly observed that "[a] classification recognized by the Twenty-first Amendment cannot be deemed forbidden by the Fourteenth."6

In Seagram & Sons v. Hostetter7 the Court upheld a state statute regulating the price of intoxicating liquors, asserting that the Twenty-first Amendment bestowed upon the states broad regulatory power over the liquor sales within their territories.8 The Court also noted that states are not totally bound by traditional Commerce Clause limitations when they restrict the importation of intoxicants destined for use, distribution-r consumption within their borders.9 In such a situation the Twenty-first Amendment demands wide latitude for regulation by the state.10 The Court added that there was nothing in the Twenty-first Amendment or any other part of the Constitution that required state laws regulating the liquor business to be motivated exclusively by a desire to promote temperance.11

More recent cases undercut the expansive interpretation of state powers in Young's Market and the other early cases. The first step was to harmonize Twenty-first Amendment and Commerce Clause principles where possible by asking "whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies."12 Because "[t]he central purpose of the [Amendment] was not to empower States to favor local liquor industries by erecting barriers to competition," the "central tenet" of the Commerce Clause will control to invalidate "mere economic protectionism," at least where the state cannot justify its tax or regulation as "designed to promote temperance or to carry out any other purpose of the . . . Amendment."13 But the Court eventually came to view the Twenty-first Amendment as not creating an exception to the commerce power. "[S]tate regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause," the Court stated in 2005. Discrimination in favor of local products can be upheld only if the state "advances a legitimate local purpose that cannot be adequately served by reason-e nondiscriminatory alternatives."14 This interpretation stemmed from the Court's conclusion that the Twenty-first Amendment restored to states the powers that they had possessed prior to Prohibition "to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use" in a manner that did not discriminate against out-of-state goods.15

1 Granholm v. Heald, 544 U.S. 460, 487 (2005).

2 State Board of Equalization v. Young's Market Co., 299 U.S. 59 (1936).

3 Mahoney v. Triner Corp., 304 U.S. 401 (1938).

4 Brewing Co. v. Liquor Comm'n, 305 U.S. 391 (1939) (Michigan law); Finch & Co. v. McKittrick, 305 U.S. 395 (1939) (Missouri law).

5 299 U.S. 59, 62 (1936).

6 299 U.S. at 64. In the three decisions rendered subsequently, the Court merely restated these conclusions. The contention that discriminatory regulation of imported liquors violated the Due Process Clause was summarily rejected in Brewing Co. v. Liquor Comm'n, 305 U.S. 391, 394 (1939).

7 384 U.S. 35 (1966).

8 384 U.S. at 42. See United States v. Frankfort Distilleries, 324 U.S. 293, 299 (1945) and Nippert v. City of Richmond, 327 U.S. 416 (1946).

9 384 U.S. at 35. See,e.g., Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 330 (1964) and State Bd. of Equalization v. Young's Market Co., 299 U.S. 59 (1936).

10 384 U.S. at 35. The Court added that it was not deciding then whether the mode of liquor regulation chosen by a state in such circumstances could ever constitute so grave an interference with a company's operations elsewhere as to make the regulation invalid under the Commerce Clause. Id. at 42-43.

11 384 U.S. at 47.

12 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714 (1984). "[T]he central power reserved by § 2 of the Twenty-first Amendment [is] that of exercising ‘control over whether to permit importation or sale of liquor and how to structure the liquor distribution system.'" 467 U.S. at 715 (quoting California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97 (1980)).

13 Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 276 (1984). See also Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573 (1986) (attempt to regulate prices of out-of-state sales); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) (state's limited interest in banning wine commercials carried on cable TV while permitting various other forms of liquor advertisement is outweighed by federal interest in promoting access to cable TV); and 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) (retail price maintenance in violation of Sherman Act).

14 Granholm v. Heald, 544 U.S. 460, 487, 489 (2005) (invalidating Michigan and New York laws allowing in-state but not out-of-state wineries to make direct sales to consumers). This is the same test the Court applies outside the context of alcoholic beverages. See Maine v. Taylor, 477 U.S. 131, 138 (1986) (once discrimination against interstate commerce is established, "the burden falls on the State to demonstrate both that the statute ‘serves a legitimate local purpose,' and that this purpose could not be served as well by available nondiscriminatory means") (quoting Hughes v. Oklahoma, 441 U.S. 322, 336 (1979)).

15 460 U.S. at 484. According to Justice Kennedy's opinion for the Court, these pre-Prohibition state powers were framed by the Wilson and Webb-Kenyon Acts, and the Twenty-first Amendment evidenced a "clear intention of constitutionalizing the Commerce Clause framework established under those statutes." Id.

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