DECISION HANDED DOWN ON WINE SHIPPING
A federal appeals court has ruled that a Massachusetts law restricting out-of-state winemakers from shipping their products directly to consumers in the state is unconstitutional. The decision by the 1st Circuit Court of Appeals to uphold a lower court ruling could open the door for residents in Massachusetts to purchase more wines online or by mail order from domestic producers. The law, approved by the Legislature in 2OO6 over the veto of then-Governor Mitt Romney, created a multi-tiered system in which wineries that produce more than 3O,OOO gallons a year must decide whether to sell retail in Massachusetts through an in-state wholesaler or apply for a license to ship wines directly to consumers. They cannot, however, do both. The cap does not affect any of the nearly three dozen wineries based in Massachusetts, all of which are small and produce under the 3O,OOO-gallon limit. “We hold that (the law) violates the Commerce Clause because the effect of its particular gallonage cap is to change the competitive balance between in-state and out-of-state wineries in a way that benefits Massachusetts’s wineries and significantly burdens out-of-state competitors,” the appellate court wrote in its decision. Family Winemakers of California, a Sacramento-based group representing about 65O producers, argued the law was “protectionist” and effectively kept 98 percent of domestic wine out of direct reach of Bay State consumers. Attorney General Martha Coakley’s office had appealed the earlier ruling by a federal district court judge on behalf of the Massachusetts Alcoholic Beverages Control Commission. In an earlier brief submitted to the appeals court, a state attorney argued that the production caps “represent a rational and well-reasoned solution to the acknowledged difficulties experienced by small wineries.” Massachusetts also contended that its system was more flexible than other states with caps because it provided wineries with a choice of contracting with a wholesaler or shipping directly to consumers. Both the Wine and Spirits Wholesalers Association (WSWA) and the National Beer Wholesalers Association (NBWA) released statements finding fault with the decision.
It should be noted that both FedEx and UPS have chosen not to ship out-of-state wine to Massachusetts residents because of the delivery vehicle permit system. It is not anticipated that either company will change their practices following this decision.