21st Amendment Litigation 2013: Commerce Clause, Antitrust, and More

Deborah A. Skakel, Esq. Dickstein Shapiro LLPSteve Gross Wine InstituteWalter A. Marston, Jr., Esq. Marston & McNally, P.C.NABCA 20th Annual

Legal Symposium on Alcohol Beverage Law & Regulation March 12, 2013

A very brief refresher on Granholm….

“Pure” Granholm

• Producer to consumer direct shipping

• Facially discriminatory statutes

Facially Neutral Statutes

• Gallonage caps

• On premise/In person requirement

Retail to Consumer (“Retail Direct”)

• Applicability of Granholm

• Second vs. Fifth Circuits

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Residency Requirement Challenge

Prior Cases in Texas and Kansas

Missouri: SWS Litigation Plus

• Applicability of Granholm

• Amici include Missouri Beverage and State AGs

• “Related” litigation: Pernod v. Major Brands & Glazer’s

• Recent legislation: S365 (community of interest concept)

Indiana: SWS Litigation Plus

• SWS litigation leads to AG Opinion and ATC change of position

• Recent legislation: H1259 (increase duration from 5 to 6 years)

Tennessee AG Opinion No. 12-59 (6/16/2012)

3

Sales in Grocery & Convenience Stores

Maxwell’s Pic-Pac Kentucky Litigation

• Equal Protection, not Granholm/Commerce Clause

Legislative Initiatives

• Kentucky H310 (separate package store license; separate entrance for premises required; grandfathering)

• Tennessee S837/H610 (allows towns to hold referendums)

• Oklahoma (2012’s Initiative Petition No. 396 withdrawn; petition to be refiled in Fall 2013 for Fall 2014 General Election)

• Kansas, Colorado, New York, Maryland, and New Jersey Legislation

4

Developments in Third-Party Provider Area

California’s 2011 Industry Advisory: Status

Virginia Fulfillment Warehouse Regs

Legislative Initiatives

• North Dakota – S 2147 (allows use of fulfillment houses in wine direct shipping law)

• Maryland – H 1420 & S 990 (“prohibiting an order to be transmitted to the permit holder by a retailer, a wholesaler, or any other third party, including a marketplace site on the Internet in which sellers offer products to customers”)

• Nebraska – L 230 (limit sales to manufacturers (“person”) attempting to block some portal programs)

New York SLA 1/17/2013 Hearing

Amazon: Business model now used in 15 States and DC

5

Post and Hold/Quantity Discount Summary of Cases

• Battipaglia (2d Cir. 1984)

• Costco (9th Cir. 2008)

• TFWS (4th Cir. 2009)

• District Court decisions in Massachusetts (1998) and Pennsylvania (1999)

Legislative Initiatives

• Connecticut – S749 (elimination of 10% minimum markup)

Interplay Between Quantity Discounts & Cooperative Buying

• Washington

• New York

Enforcement

• NY SLA December 2012 historic wholesaler license suspension

6

Unorthodox Use of Preemption Argument

Miller Coors v. Chesbay Dist. litigation: Short-lived, but results in legislation in Virginia

Recent SCOTUS preemption cases (non-21st Amendment): Court appears reluctant to expand Commerce Clause

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On The Horizon Developments re: craft brewers and artisan distillers

• New York’s first “Wine, Beer and Spirits Summit”: “Regulatory reforms”

• VA Winery Distribution Co.

Use of gallonage cap concept outside direct shipping (tax structure (NM), franchise law applicability (MI), and grocery store sale privilege (AR))

Further consolidation

• A-B In Bev merger, DOJ action, and proposed resolution

Direct shipment data: Lessons learned

• MD Comptroller December 2012 “Study on the Impact of Direct Wine Shipment”

• VA direct shipment data

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VIRGINIA DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROLDATA ON WINE IMPORTERS AND WINE SHIPPERS

LICENSE TYPES Number Issued

Active In-State Wine Shippers Permits Issued 155 Active Out-of-State Wine Shippers Permits Issued 928 Inactive Wine Shippers In-State Permits Issued 33 Inactive Wine Shippers Out-of-State Permits Issued 299 Total Wine Shippers Issued 1415 FISCAL YEAR 2012 Number

Shipped Wine Liters Shipped by Out-of-State Shippers 1,066,329.225 Wine Liters Shipped by In-State Shippers 55,425.188 Total Wine Liters Shipped (In- & Out-of-State Shippers) 1,121,754.413 Wine Tax Collected by Out-of-State Shippers $426,531.69 OUT OF STATE WINE SHIPMENTS TO VIRGINIA DISTRIBUTORS – FISCAL YEAR 2012

Number Shipped

Wine Liters Shipped to Virginia Distributors 99,717,900.535 Number of Out-of-State Vendors Shipping Wine to Virginia Distributors

2,338

Percentage of Out-of-State Vendors Shipping Less Than 3,000 Cases to Virginia Distributors

89.4%

Percentage of Out-of-State Vendors Shipping Less Than 100 Cases to Virginia Distributors

33.l%

Estimated Number of Wine Labels Approved for Sale in Virginia 65,979