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Arkansas winemakers say Supreme Court ruling will boost business

LITTLE ROCK – A U.S. Supreme Court ruling that strikes down state laws prohibiting wineries from shipping directly to customers could stimulate the state’s wine industry, two Northwest Arkansas wine makers said Monday.

Al Wiederkehr of Wiederkehr Wine Cellars, about an hour east of Fort Smith, said that he believes the high court ruling will open up new markets for small wineries like the one his family owns.

“We will be able to ship to more states now,” Wiederkehr said in phone interview Monday. “Tourists and visitors from all over the country will now be able to buy wine here and ship it home.”

The 5-4 Supreme Court decision overturns laws in New York and Michigan that make it a felony to buy wine directly from vineyards in another state. Arkansas is among 24 states that have laws prohibiting shipments of wine, which the high court cited as discriminatory and anti-competitive.

Justice Anthony Kennedy writes in the court’s majority opinion that states have broad power to regulate liquor under the 21st Amendment.

“This power, however, does not allow states to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers,” Kennedy wrote in an opinion joined by Justices Antonin Scalia, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer. “If a state chooses to allow direct shipment of wine, it must do so on evenhanded terms.”

Kennedy also argues that the three-tier systems in several states, which require separate licenses for producers, wholesalers and retailers, hurts small wineries like those in Arkansas.

“These schemes allow in-state, but not out-of-state, wineries to make direct sales to consumers,” Kennedy wrote, saying there are more than 3,000 wineries in the U.S.

John Post of Post Familie Vineyards of Altus, agreed with Kennedy’s view, but said he was still trying to digest the ruling. He said Post Familie Vineyards, the state’s largest wine producer with 150,000 gallons in annual production, could see mixed benefits.

“The immediately effect is that our wineries could see markets outside of Arkansas,” Post said. Wiederkehr and Post, both established in the 1880s, are the state’s largest wineries.

The close decision by the high court affirms an earlier judgment of the 6th Circuit Court of Appeals, which invalidated the Michigan laws. It also reversed a judgment by the 2nd Circuit Court of Appeals, which upheld the New York laws.

The ruling means that legislatures in states barring out-of-state shipments will have to review their laws to make sure in-state and out-of-state wineries are treated equally. As a result, states could choose to allow wineries to sell to consumers directly, but could also bar all wineries from doing so.

Matt DeCample, spokesman for Arkansas Attorney General Mike Beebe, said the Supreme Court ruling would have no immediate impact on current Arkansas law because Arkansas was not part of the appeal to the high court.

However, DeCample said, the Legislature could retool the current law in the future, someone could challenge it in court or nothing could change.

In the recent 85th General Assembly, legislation was passed allowing Arkansas wineries to ship within the state. Senate Bill 762, now Act 1806, opens the door for winemakers to sell up to three cases of wine and ship it to residents within the state.

The act, which was signed by Gov. Mike Huckabee on April 7, also stipulates that wine shipped by Arkansas wineries can only be delivered to a residence when a person 21 or older is there to accept the merchandise. Taxes would be collected at the time of the purchase.

Sen. Ruth Whitaker, R-Cedarville, said she decided to run the bill during the session knowing that the Supreme Court case was pending. Her bill was overwhelming approved in the House and Senate by votes of 73-18 and 35-0, respectively

“It was costing our local wineries and hurting local businesses,” Whitaker said Monday. “I guess now we are going to be faced with getting a bill through that will let out-of-state wineries sell wine here.”

During the legislative session, opponents of Whitaker’s bill said it would encourage underage drinking. “The UPS guy or the FedEx guy is not going to wait around forever to make sure that someone 21 years old is there to sign for this,” said Rep. Bob Mathis, D-Hot Springs, who argued against the measure on the House floor.

Justice Clarence Thomas makes a similar argument in the high court’s dissent, arguing that the ruling needlessly overturns long-established regulations aimed partly at protecting minors. State regulators under the 21st Amendment have clear authority to regulate alcohol as they see fit, he wrote.

“The court does this nation no service by ignoring the textual commands of the Constitution and acts of Congress,” Thomas wrote. He was joined by Chief Justice William H. Rehnquist and Justices Sandra Day O’Connor and John Paul Stevens.

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