Amicus Curiae Brief — Michigan Beer & Wine Wholesalers Assn. v. Heald

- -

_

—— 4 sale tial

Nos. 03-1116 & 03-1120~ Suprame Court 1S

FILED

' SEP 23 2004 |

In The

Supreme Court of the Anited States"

JENNIFER M. GRANHOLM, et al.,

Petitioners,

V.

ELEANOR HEALD, et al.,

Respondents.

¢

MICHIGAN BEER &

WINE WHOLESALERS ASSOCIATION,

Petitioner,

Vv.

ELEANOR HEALD, et al.,

Respondents.

¢

On Writs Of Certiorari To The

United States Court Of Appeals

For The Sixth Circuit

6

BRIEF OF THE GOLDWATER

INSTITUTE AS AMICUS CURIAE

IN SUPPORT OF RESPONDENTS

¢

GOLDWATER INSTITUTE

MARK BRNOVICH

500 E. Coronado Road

Phoenix, AZ 85004

(602) 462-5000

COCKLE LAW BRIEF PRINTING CO (aod) 225-0904

OR CALL COLLECT (402) 442 2841

TABLE OF CONTENTS

Page

Interests of the Amicus Curiae................cccceeceeeeeeeeees 1

Summary of the Argument..................cccccccccscssssesseees 1

Argument:

Be, aT cicdnssinesitenisharenesiepacedmetienepenmmnmentiammietn 2

II. State Liquor Distribution Schemes That

Favor In-State Over Out-of-State Interests

Violate the Commerce Clause......................05:

III. State Regulatory Schemes Prohibiting the

Direct Shipment of Wine Do Not Narrowly

Address State Concerns and Create Unrea-

sonable Barriers to Consumer Choice ............

a

il

TABLE OF AUTHORITIES

Page

CASES:

Bacchus Imports v. Dias, 468 U.S. 263 (1984)................ 6, 7

Brown-Forman Distillers v. N.Y. Liquor Auth., 476

Es GPE CED vnistcrenntesscesssscssscomnsteseieseamabesmenmiaaaana 6

C&A Carbone v. Town of Clarkstown, 511 U.S. 383

RII indiansichtectncesscssenniacesibessistindsenmensenemmaeaaanee 9

Capital Cities Cable v. Crisp, 467 U.S. 691 (1984)............. 7

Dennis v. Higgins, 498 U.S. 439 (1991)... ee eeeeeeee es 4

Dickerson v. Bailey, 212 F.Supp.2d 673 (S.D.Tex.

SETI wecsiscndibnnnasnveccdiieninenssmesinandmmucieenenmsneeidmaaanaeee 8

General Motors v. Tracy, 519 U.S. 278 (1997)... 5

Giddens v. Capden, SB UB. 1 (RBBE)..ccescosescsccsccrcsssescesesssosece 4

Healy v. Beer Institute, 491 U.S. 324 (1989)........... eee. 6

Hostetter v. Idlewild Bon Voyage Liquor Corp., 377

Eee Ge CIGD vececcoccsccnccissnstscousssensenssnencsseesassiemmeaaae 5

Hughes v. Oklahoma, 441 U.S. 322 (1979)... 4,5

New Energy Co. of Indiana v. Limbach, 486 US.

SEP LEIP ccencecisccsnesnsicsiscescsssintniiéamenimeinenmenmnmmiaaaae 4

North Dakota v. United States, 495 U.S. 423 (1990).......... 6

Oregon Waste Systems v. Dep't of Environmental

Goalie, SEE UE. BE (IBD E) cccoccccscccscessoscssssinssanenniunitinaunia 4

Philadelphia v. New Jersey, 437 U.S. 617 (1978)............... 5

Raymond Motor Transp. v. Rice, 434 U.S. 429

[ED visnainvescnccnsceentesconsoonncunsesdesconsnuacensounesieieeipneniaiaiuaianl 5

South-Central Timber Dev. v. Wunnicke, 467 U.S.

TIED CIID csicicosnndnncsdecsatdonccndssnnnidicicdéadeniminiemietendiaeaaaeen 5

ill

TABLE OF AUTHORITIES — Continued

Page

West Lynn Creamery v. Healy, 512 U.S. 186 (1994)............ 7

Wilson v. Black Bird Creek Marsh, 27 U.S. 245

(RBBB) .....ccccccecesenerenesennsnssennnesenetiseanmndiiiaisnlianinnnnannnannnnn 4

STATUTES AND RULE:

19 Ariz. Admin. Code (A.C.C.) R1-202 — 1-204 .0........cccc. 2

Asia. Rav. Ghat. GO GG cccccssesssessssenseenseintesiinaaane 2

Agia, Raw. Ghat. 6G GIG nccccssstessensinetesnientiesnaneaanee 2

Asia. Rov. Bhat. BOGS ccccicsstsscceneeneaieaeee 2

Agia. Rav. Ghat. GGG wccnssccsssnssniniee 2

Agis. Rav. Ghat. BG GOG ccccscsiniscsincsnmentiiemeniainaanee 2

Ga. Code Asm. § OGGe ncesssssicsesssscsneteniniieeneesiianene 7

Lm. Rov. Bhat. Aa, © Bi ccccssssccncsietinttienieiaaaen 7

La. Rev. Bhat. Aa, © Ge cccccssccccscniieesmeitibieenmnann 10

Nev. Rev. Stat. Ann. § 369.462 ..........cccccccccccceccccsscccceecceeees 10

N.H. Rev. Stat. Ann. § 178:14a(V)..............cccccccccccecceeeeeeees 10

U.S. Comet. aut. B BG, Gb G ccccstsiniieneseinenteennieasieaaneee 3

Oh Be FO 8 Se ee 1, 5,6

Va. Code Amm. § 6. BREED ccssssssassssissensnesesindaiieeniniaiaaen 7

MISCELLANEOUS:

A bill to allow direct shipment of out-of-state wines

received heavy opposition from lobbyists for wine

distributors and retailers, East Valley Tribune,

p. AG lags. 15, Bp cocsssnssessscenisnnentionniiiinsabiianmadnaniaaana 9

iv

TABLE OF AUTHORITIES -— Continued

Alix M. Freedman & John R. Emshwiller, Vintage

System: Big Liquor Wholesaler Finds Change

Stalking Its Very Private World, Wall Street Jour-

i, Bi es is SED cerentcccecncctascccsmnsenccnncnssscsscesens

Brian Sullivan, FTC says states’ e-commerce laws

hurt consumers, ComputerWorld (July 18, 2002)...

Federal Trade Commission, Possible Anticompeti-

tive Barriers to E-Commerce: Wine (July 3, 2003) ...

Free the Grapes, Issue Summary (at <http://www.

freethegrapes.org>) (accessed, Sept. 20, 2004)........

James Madison, The Federalist Papers No. 42

ae

Jennifer Wright, Stomping Grapes: How Arizona

Tramples Consumer Choice in Wine, Goldwater

Institute (September 22, 2004) ..0............ccceeeeeeeseeeees

Peter Jaret, medically reviewed by Gary D. Vogin,

MD, Bottoms Up: To Your Health, WebMD Feature

Archive 2001 (at <http://my.webmd.com/content/

article/14/1671_51501.htm?lastselectedguid=|5FE

84E90-BC77-4056-A91C-9531713CA348}>) (accessed,

EA LTR

Robert D. Atkinson, Revenge of the Disinter-

mediated: How the Middleman is Fighting

E-Commerce and Hurting Consumers, Progres-

sive Policy Institute (Jan. 26, 2001)...............cceceeeees

Ted Cruz, Prepared Statement of the Fed. Trade

Comm'n: Before the Subcomm. On Commerce,

Trade, and Consumer Prot. Comm. on Energy

and Commerce, U.S. House of Representatives,

107th Cong. (September 22, 2002) ...0.........ccceeeeeeeees

TABLE OF AUTHORITIES - Continued

Page

U.S. Department of Commerce, U.S. Department of

Commerce News, 2nd Quarter 2002 release (Aug.

Ses MUTI witinetsiniiditneniaenniiinaiaptnimianianenenedinenicensiininnineneiatiene 10

Wall Street Journal Editorial Board, A Vintage

Ruling, Wall Street Journal, p. A8 (Apr. 5, 2002)........... G

Wine Institute, Industry Background and Statistics

(at <http://www.wineinstitute.org>) (accessed,

Unni: SEE EET ioctanicniciandebdemincsiemenemiimenengennanetannnnapepetenss 3, 11

1

INTERESTS OF THE AMICUS CURIAE’

The Goldwater Institute, established in 1988, is a

nonprofit, independent, nonpartisan, research and educa-

tional organization dedicated to the study of public policy.

Through its resverch papers, editorials, policy briefings

and forums, the [nstitute advocates public policies founded

upon the principles of limited government, economic

freedom and individual responsibility. One of the central

missions of the Goldwater Institute is studying and

promoting the elimination of government burdens on

commerce and trade.

+

SUMMARY OF THE ARGUMENT

The U.S. Constitution does not permit states to

interfere with interstate commerce by enacting invidious

and partial restraints on the flow of goods. The Commerce

Clause also prevents differential treatment of in-state and

out-of-state interests. Although Sec. 2 of the Twenty-first

Amendment provides a means for state regulation of

alcoholic beverages, it doesn’t allow for discrimination

against out-of-state interests. Accordingly, the Court

should strictly scrutinize any state restrictions.

State schemes such as those in Arizona and Michigan

do not narrowly address core concerns and are mostly

designed to protect in-state liquor interests. A recent

Goldwater Institute study confirmed that regulatory

’ This brief is filed with the consent of the parties. No counsel to

any of the parties to this matter authored this Brief in whole or in part.

No person or entity other than the amicus curiae made a monetary

contribution to the preparation and submission of this brief.

schemes such as those in Arizona greatly reduce con-

sumer choice. Wines that are readily available on the

internet are not otherwise available for purchase by

Arizona consumers. Removing such state barriers will

provide greater consumer choice and encourage continued

e-commerce.

e

ARGUMENT

I. INTRODUCTION

Arizona is one of two dozen states that prohibit the

direct shipment of out-of-state wine to consumers. Al-

though the number of nationwide wineries and available

wines has grown dramatically over the past thirty years,

wholesalers continue to dictate the availability of out-of-

state wines to Arizona consumers. This is done through a

three-tiered distribution system.

The three-tiered distribution system requires that

out-of-state producers sell their products to licensed

wholesalers (tier 1), who then sell to retailers (tier 2), who

make a selection of beverages available for sale to con-

sumers (tier 3). Under Arizona law, an out-of-state pro-

ducer’s failure to use a licensed wholesaler is illegal. Ariz.

Rev. Stat. § 4-243.01.* Domestic wineries, however, are not

prohibited from directly selling and shipping to consum-

ers. Ariz. Rev. Stat. § 4-205.04.° Because of Arizona’s

current prohibition on direct shipping, however, visitors

* See also Ariz. Rev. Stat. § 4-244; 19 Ariz. Admin. Code (A.C.C.)

R1-202 - 1-204.

* See also Ariz. Rev. Stat. §§ 4-203.03, 4-203.04.

3

from several states cannot order directly from Arizona

wineries. Specifically, California, Colorado, Hawaii, Idaho,

lilinois, Iowa, Minnesota, Missouri, New Mexico, Oregon,

Washington, West Virginia and Wisconsin are all “reciproc-

ity” states. As a result of Arizona law prohibiting the direct

shipment by out-of-state wineries, those states will not

allow consumers located in their jurisdictions to order and

directly purchase Arizona wine.”

A 2003 report by the Federal Trade Commission

concluded that such bans on interstate direct shipping

represent the single largest barrier to expanded

e-commerce in wine.’ The report also concludes that

consumers would reap significant benefits if they had the

option of purchasing wines online from out-of-state

sources.” The benefits include a much greater variety of

wine, lower costs, and the convenience of home delivery.’

Il. STATE LIQUOR DISTRIBUTION SCHEMES

THAT FAVOR IN-STATE OVER OUT-OF-STATE

INTERESTS VIOLATE THE COMMERCE

CLAUSE

The United States Constitution grants Congress the

power to. “regulate commerce with foreign Nations and

among the several States and with the Indian Tribes.”

U.S. Const. art. I, § 8, cl. 4. James Madison explained that

* See Wine Institute, Industry Background and Statistics (at

<http://www.wineinstitute.org>) (accessed, Sept. 20, 2004).

* Staff of the Federal Trade Commission., “Possible Anticompetitive

Barriers to E-Commerce: Wine,” F.T.C. Report., July 3, 2003.

* Id.

" Id.

such a provision is necessary to ensure that states do not

impose levies on imports and exports passing through

their jurisdictions.* In other words, the Commerce Clause

is intended to avoid the tendency toward economic Bal-

kanization. Hughes v. Oklahoma, 441 U.S. 322, 325 (1979).

It does this by keeping commercial intercourse among the

States free from “invidious and partial restraints.” Gib-

bons v. Ogden, 22 U.S. 1, 231 (1824). Chief Justice Mar-

shall elaborates in Gibbons that, “[if] there was any one

object riding over every other in the adoption of the Con-

stitution, it was to keep the commercial intercourse among

the States free from all invidious and partial restraints.”

In addition to the affirmative authority conferred

upon Congress, the Commerce Clause also provides an

implied limitation on state regulation affecting interstate

commerce. Early on, the Supreme Court recognized the

notion of a “dormant” Commerce Clause. Wilson v. Black

Bird Creek Marsh, 27 U.S. 245 (1829) (a state law may be

invalid if it is “repugnant to the power to regulate com-

merce in its dormant state”). The dormant Commerce

Clause prevents differential treatment of in-state and out-

of-state interests. Dennis v. Higgins, 498 U.S. 439, 447

(1991); see also, New Energy Co. of Indiana v. Limbach,

486 U.S. 269, 273 (1988) (“the Commerce Clause not only

grants Congress the authority to regulate commerce

among the States, but also directly limits the power of

the States to discriminate against interstate commerce”).

Thus, any state laws that are intended or actually benefit

in-state economic interests at the expense of out-of-

state interests are prohibited. Oregon Waste Systems v.

* James Madison, The Federalist Papers No. 42 (Clinton Rossiter

ed., 1961).

5

Dep't of Environmental Quality, 511 U.S. 93, 99 (1994);

see also, South-Central Timber Dev. v. Wunnicke, 467

U.S. 82, 87 (1984) (“the [Commerce] Clause has long been

recognized as a self-executing limitation on the power of

the States to enact laws imposing substantial burdens on

such commerce”). The Supreme Court has held that the

fundamental purpose of the dormant Commerce Clause is

to eliminate economic protectionism by preventing states

from providing advantages for its residents at the expense

of non-residents in matters of interstate commerce. Gen-

eral Motors v. Tracy, 519 U.S. 278, 299 (1997).

The Twenty-first Amendment, U.S. Const. amend.

XXI, and the Commerce Clause both are parts of the

United States Constitution. Accordingly, each should be

read or interpreted in light of the other. As the Court noted

in Hostetter v. Idlewild Bon Voyage Liquor Corp., the

Twenty-first Amendment did not “repeal” the Commerce

Clause’s relevance to state regulation of intoxicating

liquors. Hostetter v. Idlewild Bon Voyage Liquor Corp., 377

U.S. 324, 331-32 (1964) (holding that such a result “would

be patently bizarre and is demonstrably incorrect”).

Clearly, if the commodity at issue were grain or lumber,

rather than liquor, there would be no dispute that regula-

tions imposed by states are unconstitutional. Jd. at 329.

For example, state laws limiting the length of trucks on

roadways, Raymond Motor Transp. v. Rice, 434 U.S. 429

(1978), the importation of waste, Philadelphia v. New

Jersey, 437 U.S. 617, 620 (1978), and the transportation of

fish, Hughes v. Oklahoma, 441 U.S. 322 (1979), have all

been invalidated as impeding the free flow of commerce

between the states.

In one of the most important cases decided after

Hostetter, this Court was confronted with the issue of a

6

Hawaii tax exemption for locally produced alcoholic

beverages. Bacchus Imports v. Dias, 468 U.S. 263 (1984).°

In striking down that statute, this Court determined that

Hawaii's tax exemption expressly reflected a discrimina-

tory intent and was thus incapable of withstanding strict

scrutiny review. Id. at 273. The Court also expressed that

whatever the scope of the Twenty-first Amendment, its

purpose was not to allow states to favor local liquor indus-

tries by erecting competitive barriers. Jd. at 276.

The Supreme Court did recognize that temperance or

other core concerns may be used to justify a state statute

that interferes with interstate commerce. Jd. This test,

normally referred to as the “core concerns” analysis,

examines state liquor statutes in light of recognized

concerns such as temperance, prevention of monopolies,

Healy v. Beer Institute, 491 U.S. 324, 342-43 (1989), and

the collection of state taxes, North Dakota v. United

States, 495 U.S. 423, 432 (1990). The existence of core

concerns, however, does not eliminate the burden a state

has in establishing that its discriminatory laws are the

only means available to advance or protect those core

concerns. The statutory schemes in both Arizona and

Michigan fail to meet this test.

* See Brown-Forman Distillers v. N.Y. Liquor Auth., 476 U.S. 573

(1986) at 584, citing Bacchus Imports v. Dias, supra, for the proposition

that state regulation of alcohol is reviewable under the Commerce

Clause.

7

Ill. STATE REGULATORY SCHEMES PROHIBIT-

ING THE DIRECT SHIPMENT OF WINE DO

NOT NARROWLY ADDRESS STATE CON-

CERNS AND CREATE UNREASONABLE BAR-

RIERS TO CONSUMER CHOICE

Because distribution systems such as those in Arizona

and Michigan are discriminatory on their face, courts

should apply a strict scrutiny standard when evaluating

whether those statutes offend the Commerce Clause. Only

narrowly tailored statutes that directly address legitimate

state core concerns will be upheld. See Capital Cities

Cable v. Crisp, 467 U.S. 691 (1984); accord Bacchus

Imports v. Dias, supra; accord West Lynn Creamery uv.

Healy, 512 U.S. 186 (1994) (holding that “preservation of

local industry by protecting it from the rigors of interstate

competition is the hallmark of the economic protectionism

that the Commerce Clause prohibits”). Arizona’s statutes

do not address the core concerns of temperance, preven-

tion of consumption by minors, orderly market conditions

or tax collection. The existing Arizona statutory scheme is

designed to favor domestic wine products.

Reasonable measures can be added to state statutes to

address core concerns and ensure alcoholic beverages are

not delivered to minors. For example, other jurisdictions

have implemented safeguards requiring the purchaser to

provide a driver license number and credit card at the

time of purchase or requiring the shipping agent to obtain

proof upon delivery that the recipient is at least twenty-

one years of age.” Moreover, there are no records to

* Va. Code Ann. § 4.1-112.1. Virginia law is similar to laws in other

jurisdictions (e.g., Ga. Code Ann. § 3-6-31, La. Rev. Stat. Ann. § 26:359),

(Continued on following page)

8

suggest that temperance is even a concern or issue in

Arizona." Additionally, a recent report published by the

Federal Trade Commission concluded that states with

direct shipping have experienced few or no problems with

shipments to minors.” Also, minors can already order

(theoretically) on the Internet from wineries, thus, this is

not a “new” or unique concern.

Another recognized core concern potentially justifying

potential discrimination is the pursuit of “orderly market

conditions.” After the repeal of Prohibition, there was a

concern that organized crime would continue to control the

distribution of alcoholic beverages. Dickerson v. Bailey,

212 F.Supp.2d 673, 679-80 (S.D.Tex. 2002). Thus, many

states adopted a three-tiered system to ensure “orderly

market conditions.”

Such concerns are of little relevance today and the

phrase now is a euphemism for “wholesaler protection.”

The three-tiered system has created an environment

where fewer and fewer wholesalers control more and more

product.” For instance, one Arizona wholesaler, Southern

and demonstrates that reasonable methods exist to address the

potential for minors to receive shipped wine.

* On September 19, 2003, the Arizona Department of Liquor

responded to a Goldwater Institute public records request by stating

that, “The Department of Liquor Licenses and Control does not

maintain records of citations or prosecutions concerning the importa-

tion of liquor into the state by minors. We have no historica) record

available on this subject matter.”

* Federal Trade Commission, Possible Anticompetitive Barriers to

E-Commerce: Wine (July 3, 2003). According to the report, states

allowing for the direct sale and shipment of wine have not experienced

any significant problems with underage consumption.

* The number of “wholesalers” of alcoholic beverages has de-

creased by over 75 percent over the past thirty years. At the same time,

(Continued on following page)

9

Wine & Spirits, has benefited from the continuing consoli-

dation. Its eight-state operation brings in over $2 billion in

annual revenue and Southern controls about 11 percent of

all domestic wine and liquor consumption.“ Not surpris-

ingly, wholesalers have been the leading opponents of any

change to the three-tiered distribution system.”

The last core concern that a state may invoke to

justify curtailing the direct shipment of wine by out-of-

state producers is that the shipment across state lines

may impair revenue or tax collection. By itself, revenue

generation is not a local interest that can justify discrimi-

nation against interstate commerce. C&A Carbone v. Town

of Clarkstown, 511 U.S. 383 (1984). Moreover, the basis for

such a concern is mostly speculative. For instance, if

Arizona can collect taxes on shipments from in-state

wineries, there is no reason why it cannot collect taxes on

shipments from out-of-state wineries. For tax purposes,

alcoholic beverages should be treated the same way as any

other catalog, telephone, or Internet purchase. If the state

can collect taxes on shipments of clothes or furniture from

the number of wineries has increased over 500 percent. Thus, less than

17 percent of wineries are represented by distributors in all fifty states.

Free the Grapes, Issue Summary (at <http://www.freethegrapes.org>)

(accessed, Sept. 2C, 2004).

“ See, Alix M. Freedman & John R. Emshwiller, Vintage System:

Big Liquor Wholesaler Finds Change Stalking its Very Private World,

Wall Street Journal, p. Al (Oct. 4, 1999).

* Wall Street Journal Editorial Board, A Vintage Ruling, Wall

Street Journal, p. A8 (Apr. 5, 2002); see also, A bill to allow direct

shipment of out-of-state wines received heavy opposition from lobbyists

for wine distributors and retailers, East Valley Tribune, p. A6 (Sept. 17,

2003).

10

out-of-state, there is no reason why it cannot do the same

with wine.”

Although e-commerce sales have continued to rise,

traditional brick-and-mortar retailers and wholesalers

have opposed increased Internet transactions.” In testi-

mony concerning state impediments to e-commerce before

the U.S. House of Representatives, Ted Cruz, Director of

the Office of Policy and Planning of the Federal Trade

Commission, stated that existing businesses may be

seeking to use government authority to impede new

entrants from competing.” Thus, American consumers are

paying at least $15 billion more for goods and services as a

result of e-commerce protectionism. ™®

Wine, unlike many other consumer goods, is unique.

Wines are distinguished not only by color and region, but

by the soil used to grow the grapes and the barrels in

which they are stored or aged. Accordingly, every bottle of

* Arizona could condition a direct shipping permit upon the

collection of taxes. Several states have enacted similar legislation to

ensure out-of-state wineries pay taxes on shipments to in-state

consumers. See La. Rev. Stat. Ann. § 26:359(B); N.H. Rev. Stat. Ann.

§ 178:14a(V); Nev. Rev. Stat. Ann. § 369.462.

* U.S. Department of Commerce, U.S. Department of Commerce

News, 2nd Quarter 2002 release (Aug. 22, 2002) E-commerce sales

increased almost ten times greater than retail sales over a comparable

quarter.

* Ted Cruz, Prepared Statement of the Fed. Trade Comm'n: Before

the Subcomm. On Commerce, Trade, and Consumer Prot. Comm. on

Energy and Commerce, U.S. House of Representatives, 107th Cong.

(September 22, 2002).

* Robert D. Atkinson, Revenge of the Disintermediated: How the

Middleman is Fighting E-Commerce and Hurting Consumers, Progres-

sive Policy Institute (Jan. 26, 2001); see also, Brian Sullivan, FTC says

states’ e-commerce laws hurt consumers, ComputerWorld (July 18, 2002).

11

wine truly is distinct. Given the wide variety available, as

well as recent studies suggesting the health benefits of

wine,” it should not be surprising that Americans are

drinking more wine than ever before.”

Distribution systems such as those in Arizona and

Michigan whereby retailers must buy wines from a

limited number of licensed wholesalers limit retailers to

* Peter Jaret, medically reviewed by Gary D. Vogin, MD, Bottoms

Up: To Your Health, WebMD Feature Archive 2001 (at <http://my.

webmd.com/content/article/14/1671_51501.htm?lastselectedguid=(5FE8

4E90-BC77-4056-A91C-9531713CA348}>) (accessed, Sept. 20, 2004),

cites numerous studies that report the health benefits of wine, includ-

ing: Annals of Internal Medicine, September 2000, reporting that light

drinkers of wine cut risks of dying prematurely by one year; the

European Heart Journal, January 2000, found that drinking wine

appears to dilate arteries and increase blood flow reducing the risk of

heart problems; scientists published in the journal Pharmacology,

Biochemistry, and Behavior, May 2000, found that men and women

around the age of 32 who had a glass or two of wine each day had

significantly higher levels of “good” cholesterol because they remove the

“bad” artery-clogging cholesterol before they can choke blood vessels;

the Journal of Nutrition and Biochemistry, November 2000, reported

similar findings, and found that the reduction of artery-clogging

cholesterol reduced the likelihood of cardiovascular disease, such as

heart disease and stroke; the Journal of Cellular Biochemistry, June

2000, reported that drinking wine in moderation may slow the growth

of breast and prostate cancer cells; Oncology Reports, July-August 2000,

similarly found that wine consumption can slow down the growth of

liver cancer cells; additionally, the Journal of the American Dental

Association, June 2000, found that wine consumption may inhibit the

growth of oral cancer cells; a report in the American Journal of

Epidemiology, April 2000, showed that women who drank one to three

glasses of wine had greater bone mineral density; similarly, Osteoporo-

sis International, November 2000, found that men, age 54-63, who

drank a glass or two of wine a day also showed signs of greater bone

mineral density.

* Wine Institute, Industry Background and Statistics (at <http://

www. wineinstitute.org>) (accessed, Sept. 20, 2004).

12

essentially the same selection of wine. This restricts

consumers’ freedom of choice. While the opportunities are

ample, the actual freedom to purchase wine from the vast

Internet marketplace is extinguished under regulatory

schemes such as those in Arizona and Michigan.

The Goldwater Institute recently conducted a study of

the availability of a broad cross-section of wines.” A

random variety of wines was selected. Some wines were

regional selections, while others were from popular winer-

ies with special vintages. All of the wines, absent Arizona

regulations, were available for online purchase and direct

delivery to the consumer. However, in a sampling of 15

specialty wines readily available for sale on the Internet,

only two could be obtained from Arizona retailers, and one

was available as to brand and variety, but not vintage. The

other 12 could not be obtained at all. Clearly, consumer

options are greatly diminished with state regulations that

impede the direct shipment of out-of-state wines.

Prohibitions on the direct shipment of out-of-state

wines not only leaves consumers with fewer choices, but

the system also hurts local wineries by limiting their

ability to ship wines to numerous jurisdictions. Large

wholesalers, who benefit the most from the three-tiered

distribution system, continue to oppose any changes.

Because distribution schemes such as those in

Michigan unnecessarily discriminate against out-of-state

producers, they should be struck down as contrary to the

U.S. Constitution. Such a result will provide wine con-

sumers with the benefit of a free market: more choice,

* Jennifer Wright, Stomping Grapes: How Arizona Tramples

Consumer Chowe in Wine, Goldwater Institute (September 22, 2004).

13

greater convenience and lower prices. It will serve as a

model for e-commerce trade as well.

¢

CONCLUSION

For the foregoing reasons, the decision of the Court of

Appeals for the Sixth Circuit should be affirmed.

Respectfully submitted,

GOLDWATER INSTITUTE

MARK BRNOVICH

500 East Coronado

Phoenix, AZ 85004

(602) 462-5000