Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 7

Most wine in the United States is distributed through a three-tier network that developed after the repeal of Prohibition. First, the winery obtains a permit to sell wine. Next, the winery sells its wine to a licensed wholesaler, who pays excise taxes and delivers the wine to a retailer. The retailer then sells the wine to consumers. As demand for wine has increased over the last two decades, the number of wineries has grown to more than 2,000, including many small wineries. Meanwhile, the number of wholesalers has declined from several thousand to a few hundred. As a result, many small wineries are unable to find wholesalers to carry their wine and are trying to market their wine directly to consumers.
Juanita Swedenburg runs the Swedenburg Estate Vineyard in Middleburg, Virginia. People from all over the United States visit her winery and purchase wine to take home with them. Once they get home, many call the winery or use its website to order more bottles. However, the laws in twenty-six states prohibit the direct shipment of wine to consumers across state lines. The states claim that the Twenty-first Amendment, which repealed Prohibition, gives them the authority to regulate the importation of alcohol. Their claim is based on Section 2 of the amendment, which states that "[t]he transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." Swedenburg, other winery owners, and wine lovers challenged the directshipment laws. Are these direct-shipment laws constitutional? Explain why or why not. [ Granholm v. Heald , 544 U.S. 460 (2005).]