US Supreme Court ruling should boost digital wine sales

A U.S. Supreme Court ruling issued Wednesday has the potential to open digital wine sales to more states across the country.

The court in a 7-to-2 decision struck down a Tennessee law that required wine retailers to live in the state for two years before they could apply for a permit to sell alcohol, finding it violated the Commerce Clause of the U.S. Constitution.

While noting the 21st Amendment provides individual states with leeway over how they regulate alcohol sales within their borders, Justice Samuel Alito writing for the majority found that it “is not a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages.”

The case concerned wine retailers such as Total Wine rather than wineries, which gained greater access to sell across state lines as a result of a 2005 Supreme Court decision. That earlier decision has resulted in a booming online direct-to-consumer wine business, with ?45 states now allowing shipments from out-of-state wineries. That pipeline has been crucial for local smaller and mid-size wineries as the direct-to-consumer wine market resulted in $3 billion in sales last year.

The ramifications from Wednesday’s ruling will not be immediate but could be significant in future years, said Tom Wark, executive director for the National Association of Wine Retailers. Those beneficiaries could be local wine stores such as Bottle Barn in Santa Rosa, along with Total Wine.

“It’s a big decision,” Wark said. “It’s also a big win for consumers.”

Only 13 states and the District of Columbia now allow out-of-state retailers to ship wine directly. California allows such sales with certain conditions.

The Wine & Spirits Wholesalers of America said in a statement that it disagreed with the court’s decision.

“The vast majority of state alcohol laws are not impacted by this ruling,” said Michelle Korsmo, president and CEO of the group.

Wark said the battle will play out in state legislatures. They will either have to allow all retail competitors to compete or restrict online sales entirely. One obstacle is that wholesalers - who backed the Tennessee law - traditionally have had significant influence at the state level and are likely to fight any expansion.

Yet Wark said he’s optimistic consumers will work to open the wine market for all sellers.

“Don’t discount the power of the consumer,” he said. “They have the ability to send thousands of emails.”

You can reach Staff Writer Bill Swindell at 707-521-5223.