When I moderated a panel at the Notre Dame Wine, Beer, and Spirits Symposium on DTC shipping and 21st Amendment challenges, a debate sprung up from pro-shipping advocates on the proper standard for judging a discriminatory state liquor law. On one side of the argument was the believe that discriminatory state liquor laws are subject to a strict scrutiny Commerce Clause analysis. On the other side was the believe that because of the 21st Amendment, discriminatory state liquor laws are subject to a lower intermediate scrutiny Commerce Clause analysis.

The latter opinion was based off the Supreme Court’s acknowledgement that when liquor laws are involved a different inquiry takes place. [1]

The Supreme Court while indicating a different inquiry applies to liquor cases does not specify the exact standard for scrutiny, so essentially there is some speculation involved on the proper standard to apply.

What is the different inquiry?

What is the different inquiry which the Court alludes to, and does it mean the Court applies a lower form of scrutiny in judging discriminatory shipping laws? The answer to the latter question is no. The answer to the former is explicitly provided by the Supreme Court in Tennessee Wine.

“But because of § 2, we engage in a different inquiry. Recognizing that § 2 was adopted to give each State the authority to address alcohol-related public health and safety issues in accordance with the preferences of its citizens, we ask whether the challenged requirement can be justified as a public health or safety measure or on some other legitimate nonprotectionist ground. Unlike other consumer goods, there is a health and safety aspect of dealing with liquor.”[2]

The decision of whether to ban a whole class of consumer goods  (we will use shoes), from the interstate DTC market, would violate the Commerce Clause. Unlike liquor discrimination, making a decision to ban shoes is not subject to a health and safety analysis. The only analysis a discriminatory anti-shipping shoe law would undergo was whether there were some legitimate non-protectionist grounds. In other words, the inquiry is limited and would not include liquor’s public health and safety analysis.

In Maine v. Taylor, the Supreme Court ruled that there was an exception to the rule that facially discriminatory state laws are impermissible and will be struck down. Maine prohibited the importation of out-of-state fish bait, because the state could not guarantee that the imported fish would be free of parasites and nonnative species, which could cause harm to the local environment.

In upholding the facially discriminatory law, the Court held that the law serves a legitimate local purpose, and that this purpose cannot be served as well by available nondiscriminatory means.

Unlike a liquor analysis, the Court looked solely to the legitimate local purpose and did not look into public health and safety concerns.

In the Court’s history, I know of no other analysis where the Court looks at any other consumer good through the lens of health and safety, as it does for liquor.

When the Court discusses a different inquiry, it is alluding to an additional step in the process and not to a lower level of scrutiny. It affords discriminatory liquor laws an additional consideration that it does afford shoes or another consumer good.

Past Supreme Court precedent

The Supreme Court precedent is clear that strict scrutiny is the only recognized standard for adjudicating Commerce Clause cases.

In Maine v. Taylor the Court stated:

“In determining whether a State has overstepped its role in regulating interstate commerce, this Court has distinguished between state statutes that burden interstate transactions only incidentally, and those that affirmatively discriminate against such transactions. While statutes in the first group violate the Commerce Clause only if the burdens they impose on interstate trade are “clearly excessive in relation to the putative local benefits,” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), statutes in the second group are subject to more demanding scrutiny.”[3]

So, what is that “more demanding scrutiny”, all we know from this passage is the standard is above the Pike test?

Although not providing the concise answer in this passage, the Court made itself clearer in later passages.

“The District Court and the Court of Appeals both reasoned correctly that, since Maine’s import ban discriminates on its face against interstate trade, it should be subject to the strict requirements of Hughes v. Oklahoma…”[4]

The Court relying on its test set forth in Hughes v. Oklahoma, held that “the proffered justification for any local discrimination against interstate commerce must be subjected to “the strictest scrutiny” .[5]

In the Hughes decision which Maine v. Taylor relies on, the Court indicated that:

“At a minimum such facial discrimination invokes the strictest scrutiny of any purported legitimate local purpose and of the absence of nondiscriminatory alternatives.”

The Supreme Court leaves no doubt through numerous precedents that discriminatory laws are subject to a strict scrutiny analysis.

Since the Maine v. Taylor and the Hughes v. Oklahoma decision, the Court has decided Granholm and Tennessee Wine cases. The Court has not depleted the scrutiny standard in these cases. Absent an express desire to do so, strict scrutiny remains the exacting standard

Conclusion

Issues of discriminatory DTC shipping laws will play out through the court system, but one issue to watch is the scrutiny standard, depending on how this issue is decided may decide the fate of maintaining discriminatory shipping laws or opening up markets!

[1] Tennessee Wine and Spirits Retailers Assn. v. Thomas, 139 S. Ct. 2449, 2474 (2019)

[2] Tennessee Wine and Spirits Retailers Assn. v. Thomas, 139 S. Ct. 2449, 2474 (2019)

 

[3] Maine v. Taylor, 477 U.S. 131, 138 (1986)

[4] Maine v. Taylor, 477 U.S. 131, 138 (1986)

[5] Maine v. Taylor, 477 U.S. 131, 144-45 (1986)