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A federal judge in Manhattan has ruled unconstitutional a state law prohibiting the direct shipment of out-of-state wines to consumers in New York. Southern District Judge Richard M. Berman ruled that New York’s ban on direct shipment of wine, which did not apply to in-state wineries, discriminated against out-of-state wineries in violation of the U.S. Constitution’s Commerce Clause, which reserves to Congress the power to regulate interstate commerce. “That the New York direct shipping ban on out-of-state wine burdens interstate commerce and is discriminatory (on its face) is clear from the very wording (let alone the impact) of exemptions favoring in-state wineries,” Berman wrote in Swedenburg v. Kelly, 00-0778. New York’s Alcoholic Beverage Control (ABC) laws, like those of several other states, require that all alcoholic beverages shipped into the state be consigned to licensed distributors. Licensed wineries within the state are not subject to the direct shipment ban. The ban also contains an exception allowing New York residents to buy small quantities of wine while traveling overseas and ship their purchases home. The plaintiffs, two small wineries in Virginia and California and three New York wine consumers who had tried to order wine from out-of-state wineries, claimed in their complaint that one of the primary purposes of the alcoholic beverage laws’ ban on direct shipment was economic protectionism. Berman agreed, holding that “the exceptions to the ABC law provide an impermissible economic benefit and (protection) to only in-state interests.” The two plaintiff wineries also alleged that, owing to their small size, their labels were not carried by New York licensed wine wholesalers, and the laws therefore deprived them of all opportunities to sell to New York consumers by the mail and increasingly through the Internet. The defendants, the chairman and commissioners of the New York State Liquor Authority, later joined by several major liquor distributors, argued that out-of-state wineries could obtain New York licenses as wholesalers and wineries and maintain offices in the state. “It appears unreasonable to this Court to require that an out-of-state winemaker ‘become a resident in order to compete on equal terms,’” Berman wrote, citing the U.S. Supreme Court’s ruling in Halliburton Oil Well Cementing Co. v. Reily, 373 U.S. 64, 72 (1963). The judge also rejected the state’s arguments that the direct shipping ban was justified under the 21st Amendment — which repealed Prohibition and granted states authority to regulate the transport and sale of liquors — as a narrowly tailored exercise of state power to control access to alcoholic beverages in the interests of public health, welfare and safety. Berman concluded that “it is doubtful whether the ABC Laws — and particularly the exceptions — are grounded in the promotion of temperance but that, in any event, viable (socially conscious) alternatives to discrimination against out-of-state wineries are available.” Judge Berman’s decision, which follows similar rulings in district courts in North Carolina and Virginia, though other district courts and the 7th U.S. Circuit Court of Appeals have ruled that states’ powers to regulate alcohol under the 21st Amendment override Commerce Clause concerns. Clint Bolick, vice president of the Washington, D.C.-based Institute for Justice, which represented plaintiffs in the case, said in a press release that the decision “is a decisive victory against the monopolists who would stand between consumers and their wine.” Bolick also said the ruling would have “widespread implications” for Internet commerce. The New York attorney general’s office, which defended the statute, said through a spokesman that they are reviewing the ruling and had not decided whether to appeal.

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