Supreme Court hears wine retailer challenge to Tennessee liquor law

Since the end of Prohibition, the sale of alcohol in the United States has been regulated almost exclusively by state and local governments. But when do those regulations go too far?

The Supreme Court on Wednesday will consider whether strict residency requirements for retailers of beer, wine and liquor in Tennessee are constitutional or must be struck down.

"It's the first time in over a decade that the Supreme Court has taken a case that could permanently alter the way alcohol is regulated," said Ilya Shapiro, director of constitutional studies at the Cato Institute.

By law in Tennessee, an individual must reside in the state for at least two years in order to obtain a one-year sales license from the Tennessee Alcoholic Beverage Commission. To renew, the retailer must have lived in the state for at least 10 consecutive years. The rules also apply to corporations and their "officers, directors and stockholders."

"It comes down to, ultimately, whether the 21st Amendment, which ended Prohibition and gave the states a lot of power -- virtually limitless power -- over alcohol regulation, whether that allows this kind of requirement," Shapiro said.

Critics say the law -- and dozens of similar measures in other states -- erects an impossible barrier to outsiders seeking to do business in Tennessee. They argue that the regulation violates the Constitution's commerce clause which limits state discrimination against out-of-state business interests.

National retail chain Total Wine and More is challenging the law along with Doug and Mary Ketchum, small business owners who moved to Tennessee from Utah in 2016 and wanted to open a wine store to help support their daughter, Stacie, who has cerebral palsy.

"The bizarre durational residency requirements enacted by Tennessee are blatantly protectionist, have no legitimate regulatory purpose, and cannot be squared with decades of this Court's Commerce Clause jurisprudence," they wrote in court documents.

A federal district court sided with Total Wine and the Ketchums. The Court of Appeals affirmed that decision. And the state of Tennessee did not appeal the ruling.

The Tennessee Wine and Spirits Retailers Association, backed by 35 states, asked the justices for a review. They argue residency requirements are permissible under the 21st Amendment and are essential to maintaining public safety, welfare and accountability in liquor markets.

They also contend local sellers know the community best and have its interests at heart.

"The longtime resident who attends football games on Fridays is less likely to be duped by the drum major's fake ID on Saturdays," the Wine and Spirits Wholesalers of Tennessee writes in its brief to the court. "She is also less likely to do business with the town drunk if she knows he will drive around on the same streets that her family and friends use."

The Supreme Court has imposed some limits on state power to regulate alcohol sales. In a 2005 case, it struck down Michigan and New York laws banning out-of-state wine shipments. The ruling resulted in an expansion of direct winery-to-consumer shipments in dozens of states.

The outcome in the Tennessee case could affect the number of retail options available to consumers, the price of products on the shelves and the amount of competition facing local liquor retailers.

"Any erosion of 21st Amendment legal protections is likely to lead to further nationalization and commodification of the alcoholic beverage trade," said Christopher Riano, lecturer in constitutional law and government at Columbia University and general counsel to the New York State Liquor Authority.

"This could lead both to some benefits and also some detriments to consumers and retailers -- but, most significantly, it will make it increasingly difficult for the states to promote temperance in order to protect the public welfare, which is a core value of the 21st Amendment following the failed experiment of federal prohibition," Riano said.