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USA > US Constitution > Discrimination Between Domestic and Imported Products

Discrimination Between Domestic and Imported Products

Scope of Regulatory Power Conferred upon the States

Discrimination Between Domestic and Imported Products. — In a series of interpretive decisions rendered shortly after ratification of the Twenty-first Amendment, the Court established the proposition that States are competent to adopt legislation discriminating against imported intoxicating liquors in favor of those of domestic origin and that such discrimination offends neither the commerce clause of Article I nor the equal protection and due process clauses of the Fourteenth Amendment. Thus, in State Board of Equalization v. Young's Market Co.,1 a California statute was upheld which exacted a $500 annual license fee for the privilege of importing beer from other States and a $750 fee for the privilege of manufacturing beer; and in Mahoney v. Triner Corp.,2 a Minnesota statute was sustained which prohibited a licensed manufacturer or wholesaler from importing any brand of intoxicating liquor containing more than 25 percent alcohol by volume and ready for sale without further processing, unless such brand was registered in the United States Patent Office. Also validated in Brewing Co. v. Liquor Comm'n3 and Finch & Co. v. McKittrick4 were retaliation laws enacted by Michigan and Missouri, respectively, by the terms of which sales in each of these States of beer manufactured in a State already discriminating against beer produced in Michigan or Missouri were rendered unlawful.

1 299 U.S. 59 (1936).

2 304 U.S. 401 (1938).

3 305 U.S. 391 (1939).

Conceding, in State Board of Equalization v. Young's Market Co.,5 that ''prior to the Twenty-first Amendment it would obviously have been unconstitutional to have imposed any fee for . . . the privilege of importation . . . even if the State had exacted an equal fee for the privilege of transporting domestic beer from its place of manufacture to the [seller's] place of business,'' the Court proclaimed that this Amendment ''abrogated the right to import free, so far as concerns intoxicating liquors.'' Inasmuch as the Amendment was viewed as conferring on states an unconditioned authority to prohibit totally the importation of intoxicating beverages, it logically followed that any discriminatory restriction falling short of total exclusion was equally valid, notwithstanding the absence of any connection between such restriction and public health, safety or morals. As to the contention that the unequal treatment of imported beer would contravene the equal protection clause, the Court succinctly observed that a ''classification recognized by the Twenty-first Amendment cannot be deemed forbidden by the Fourteenth.''6

In Seagram & Sons v. Hostetter7 the Court upheld a state statute regulating the price of intoxicating liquors, asserting that the Twenty-first Amendment bestowed upon the States broad regulatory power over the liquor sales within their territories.8 It was also noted that States are not totally bound by traditional commerce clause limitations when they restrict the importation of toxicants destined for use, distribution, or consumption within their borders.9 In such a situation the Twenty-first Amendment demands wide latitude for regulation by the State.10 The Court added that there was nothing in the Twenty-first Amendment or any other part of the Constitution that required state laws regulating the liquor business to be motivated exclusively by a desire to promote temperance.11chanroblesvirtuallawlibrary

4 305 U.S. 395 (1939).

5 299 U.S. 59, 62 (1936).

6 299 U.S. at 63-64. In the three decisions rendered subsequently, the Court merely restated these conclusions. The contention that discriminatory regulation of imported liquors violated the due process clause was summarily rejected in Brewing Co. v. Liquor Comm'n, 305 U.S. 391, 394 (1939).

7 384 U.S. 35 (1966).

8 384 U.S. at 42. See United States v. Frankfort Distilleries, 324 U.S. 293, 299 (1945) and Nippert v. Richmond, 327 U.S. 416, 425 (1946).

9 384 U.S. at 35. See, e.g., Hostetter v. Idlewild Liquor Corp., 377 U.S. 324, 330 (1964) and State Bd. of Equalization v. Young's Market Co., 299 U.S. 59 (1936).

10 384 U.S. at 35. The Court went on to assert that it was not deciding then whether the mode of liquor regulation chosen by a State in such circumstances could ever constitute so grave an interference with a company's operations elsewhere as to make the regulation invalid under the commerce clause. Id. at 42-43.

11 384 U.S. at 47.

Recent cases have undercut the expansive interpretation of state powers in the Young's Market and Triner Corp. cases. Twenty-first Amendment and Commerce Clause principles are to be harmonized where possible. The Court now phrases the question in terms of ''whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express federal policies.''12 ''[T]he central power reserved by 2 of the Twenty-first Amendment [is] that of exercising 'control over whether to permit importation or sale of liquor and how to structure the liquor distribution system.'''13 Because ''[t]he central purpose of the [Amendment] was not to empower States to favor local liquor industries by erecting barriers to competition,'' the ''central tenet'' of the Commerce Clause will control to invalidate ''mere economic protectionism,'' at least where the state cannot justify its tax or regulation as ''designed to promote temperance or to carry out any other purpose of the . . . Amendment.''14chanroblesvirtuallawlibrary

12 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714 (1984).

13 467 U.S. at 715 (quoting California Retail Liquor Dealers Ass'n. v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980)).

14 Bacchus Imports, Ltd., v. Dias, 468 U.S. 263, 276 (1984). See also Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573 (1986) (attempt to regulate prices of out-of-state sales); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) (state's limited interest in banning wine commercials carried on cable TV while permitting various other forms of liquor advertisement is outweighed by federal interest in promoting access to cable TV); and 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) (retail price maintenance in violation of Sherman Act).

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