While the First-Amendment gets a lot of the constitutional attention in craft beer law in terms of advertising restrictions, another constitutional issue has been stealing some of that focus recently.  More specifically, the Dormant Commerce Clause has been the subject of several high-profile litigation matters across the country. To be transparent, the Dormant Commerce Clause is the subject of a new law review article that I am working on for the summer, but I digress.

So what is the Dormant Commerce Clause? In fact, it is no clause at all. Rather, the Dormant Commerce Clause has been inferred by the Supreme Court as a restriction on states’ ability to favor in-state commerce over out-of-state competitors. The Commerce Clause grants Congress the power to regulate interstate commerce; but the Dormant Commerce Clause acts conversely and prohibits states from favoring their own at the expense of out-of-state actors through either prohibitions or unduly burdening interstate commerce. Boiled down and simplified, any state law that affects interstate commerce must not (1) discriminate against out-of-state competition or favor in-state actors, and (2) must not “unduly burden” interstate commerce. There are a few notable exceptions for important local interests like health and safety.

How does the Dormant Commerce Clause impact craft beer? Most, if not all, states prohibit beer manufacturers from shipping beer out of state and prohibit importing alcoholic beverages without going through a licensed wholesaler/importer. This obviously impacts interstate commerce by favoring in-state manufacturers over out-of-state manufacturers. As one example, California Business & Professions Code section 23661 prohibits direct shipments of alcoholic beverages from manufacturers outside of California into California without much procedural morass and licensing.  See also Bus. & Prof. Code § 23661.3 (allowing direct shipments of wine only if the manufacturer complies with wine shipment permitting requirements). But California breweries cannot directly ship beer to consumers outside of California, and breweries outside of California cannot directly ship their beer to California consumers.  Does that seem fair? Does it seem like favoring one group over another?  It should.

Several lawsuits have popped up recently concerning the direct shipping conundrum, and each of them have raised the Dormant Commerce Clause to argue that such laws disfavor out-of-state manufacturers or that they unduly burden interstate commerce. The United States Supreme Court recently denied certiorari in Lebamoff Enterprises, Inc. v. Whitmer which argued the Dormant Commerce Clause prohibited Michigan’s restrictive import/export laws that allows in-state retailers to sell wine online but prohibits out-of-state retailers from doing so.  See Mich. Comp. L. § 436.1203(3)(15); see also Lebamoff Enterp., Inc. v. Whitmer, — U.S. –, 2021 WL 78088 (denying certiorari).  In addition, the Ninth Circuit just this week upheld California’s Section 23661 that requires retailers to source their alcohol from in-state wholesalers by affirming a District Court’s dismissal of the Dormant Commerce Clause challenge.  See Orion Imports LLC v. Appelsmith, 2021 WL 733286.

There is at least a circuit split regarding whether the Dormant Commerce Clause prohibits such regulations, and the Supreme Court has written in the past that such conduct at least arguably violates the Dormant Commerce Clause.  See Granholm v. Heald, 544 U.S. 460, 487 (2005).  It is important to note that the precedents all concern wine. Why is it that wineries can ship between states (at least sometimes) but breweries cannot? Stay tuned for a forthcoming law review article this summer that explores this topic in-depth and argues that such laws do in fact violate the Dormant Commerce Clause.

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