SW Legal studies in Business

State Scheme Regulating Wine Sales Not Discriminatory
Description

Federal appeals court upheld Arizona's alcohol regulation scheme, including an exception that applied to small-volume wine producers. The scheme was neutral in impact, as it did not favor Arizona wine producers or retailers over non-Arizona producers and sellers.

Topic Constitutional Law
Key Words

Commerce Clause; Interstate Commerce; Wine

C A S E   S U M M A R Y
Facts

Arizona regulates the sale of alcoholic beverages through a three-tier distribution system: suppliers, wholesalers, and retailers. Suppliers sell to wholesalers. Wholesalers sell to retailers. Retailers sell to the public. There is an exception for small wineries that produce no more than 20,000 gallons of wine annually; they may sell directly to anyone. A winery also may sell to a customer in a winery who requests that wine be sent to an address. Those exceptions apply to wineries in Arizona and in other states. Black Star, a Michigan winery, produced 35,000 gallons of wine in 2006, so did not qualify for an exception and would have to sell to a wholesaler to get wine into the state. It sued, contending that the regulatory scheme interfered with interstate commerce in violation of the Commerce Clause. The district court held for the State of Arizona; Black Star appealed.

Decision

Affirmed. The regulatory scheme does not violate the Commerce Clause. The scheme applies to all suppliers of alcoholic beverages, whether in Arizona or not. Small wineries outside of Arizona may ship directly to buyers in Arizona and in-person sales applied to all sellers in and out of the state. Since the regulatory scheme is facially neutral-not designed to favor Arizona wine producers over non-Arizona producers-it is not discriminatory.

Citation

Black Star Farms v. Oliver, ---F.3d--- (2010 WL 1443284, 9th Cir., 2010)

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