The Supreme Court heard arguments Wednesday over a Tennessee law requiring liquor store owners to reside in the state for at least two years, prompting one justice to ask a big box store challenging the law if it aims to become the “Amazon of liquor.”
Two alcohol retailers — a Memphis liquor store owned by a family who recently had moved from Utah and Maryland-based Total Wine & More — sought licenses from the Tennessee Alcoholic Beverage Commission in 2016. But a trade association representing 500 liquor store owners in Tennessee objected, citing a rule requiring sellers to be in-state residents for two years.
Wednesday’s arguments focused on how far can a state go in regulating alcohol within its borders. A federal judge and an appeals court struck down the two-year rule, which they said violated the Constitution’s interstate commerce clause and discriminated against Total Wine and the Ketchum family, who owns the Memphis store.
On Wednesday, the retail association — along with 35 states and the District of Columbia — sought to persuade the justices that Tennessee’s tough requirements for selling alcohol is constitutional under the 21st Amendment, which repealed Prohibition in 1933.
“All along the way, this court recognized the states’ power to do so as part of their virtually complete control over how to structure the liquor distraction system,” said Shay Doretzky, a D.C. lawyer representing the trade association.
But Carter Phillips, an attorney for Total Wine and the Ketchum family, said: “All we are seeking is the opportunity to compete in this market.”
Historically, the court has allowed states to regulate liquor markets to protect the health and safety of communities, but some justices questioned just how much latitude a state could have in imposing peculiar, even protectionist regulations.
“Suppose any liquor store has to use paint made in Tennessee. Asphalt made in Tennessee for the parking lot? Neon — you know, I can go on,” Justice Stephen G. Breyer said, evoking laughter in the gallery.
“I suppose at some point, if we’re talking about the use of paint, then we’re really getting pretty far afield from the state’s structuring in-state distribution and sale,” said Illinois Solicitor General David Franklin, who argued on behalf of 35 states and the District, who are joining the Tennessee liquor retailers in asking the court to uphold the two-year residency requirement.
The case harkened back to the court’s decision last summer in South Dakota v. Wayfair, in which the justices ruled that states can tax purchases from out-of-state businesses.
“But isn’t the next business model just to try and operate as the Amazon of liquor?” Justice Neil M. Gorsuch asked Mr. Phillips, whose client, Total Wine, is a $3 billion operation with 200 stores across the country.
“No, Amazon wants to operate as the Amazon of liquor, or may, at some point,” Mr. Phillips said. “My client operates [as] a more brick-and-mortar business that says, ’We’re perfectly comfortable operating within the sphere of regulation that the state imposes on every in-state operator.’”
Justice Gorsuch wasn’t satisfied and returned to his question later in the oral arguments.
“Why isn’t this just the camel’s nose under the tent?” he asked.
“Well, if only because under these circumstances, as the camel at least, or I guess I’m the nose of the camel, that’s not what I’m looking for,” Mr. Phillips replied.
Both liquor stores currently are operating in Tennessee. Total Wine opened a 30,000-square-foot store in Knoxville, Tennessee, which is the largest in the state, according to a court brief.
• Christopher Vondracek can be reached at cvondracek@washingtontimes.com.
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