Craft distilleries and the Commerce Clause

A new law in Oregon will allow the state’s distilleries to open additional tasting rooms and retail sales centers:

The bill allows distillers to offer tastings and sell their products at their distillery and five other locations. Current law allows distillers to perform tastings and sell their spirits one other location in addition to the distillery.

Distillers still must purchase their liquor from the Oregon Liquor Control Commission, the same way liquor store owners do now. And distillers must enter into a contract with the OLCC to sell bottles of their craft spirits.

The goal is to help the increasing number of craft distilleries continue to grow, though as it currently stands only two of them (McMenamin’s and Rogue) have enough locations to take advantage of the new opportunities. Spirits produced in Oregon now account for about 12% of the state’s liquor sales. That’s really impressive, and some of the spirits made in Oregon are fantastic. I hope this trend continues.

However this new law might not be the best way to help craft distillers. It may be nice in the short-run, but is it constitutional? I think that it’s vulnerable to legal challenge by out-of-state producers as a violation of the Commerce Clause, following the arguments that allowed wine producers to strike down discriminatory direct shipping laws in Granholm v. Heald. (I have no formal legal training, so take this as a layman’s reading. The case isn’t too complicated.)

Granholm explicitly addressed the balancing of the Twenty-first Amendment, which gives states broad authority to regulate alcohol, and the Commerce Clause, which generally forbids states from discriminating against out-of-state producers.

The Twenty-first Amendment reads in part:

The 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.

This has been interpreted to allow states great flexibility in deciding how to regulate alcohol, including the power of outright prohibition. The Court’s ruling in Granholm made clear, however, that these regulations must treat in-state and out-of-state producers evenly, not giving undue favor to the former. As Justice Kennedy wrote in his majority opinion:

The mere fact of nonresidence should not foreclose a producer in one State from access to markets in other States. [...] States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.

The Twenty-first Amendment does not exempt states from this requirement:

The aim of the Twenty-first Amendment was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use. The Amendment did not give States the authority to pass nonuniform laws in order to discriminate against out-of-state goods, a privilege they had not enjoyed at any earlier time.

In Granholm, the question at issue was whether states could allow their own wineries to ship directly to consumers while denying the privilege to wineries from other states. The Court ruled that they cannot. States can choose whether to ban or to allow direct shipping of wine, but they must treat in- and out-of-state wineries consistently.

The case doesn’t address liquor directly, but it’s easy to extend to the logic. Oregon’s new law allows in-state distilleries to open up to five retail stores, a privilege denied completely to distilleries from anywhere else. The law’s supporters say explicitly that its purpose is to promote local businesses:

“It takes advantage of Oregon agricultural products, it promotes tourism and it promotes small business development,” said Sen. Elizabeth Steiner Hayward, D-Beaverton, who is one of the bill’s sponsors.

The law clearly discriminates in favor of Oregon distilleries. For this to be permissible under the Commerce Clause, the discrimination must be necessary to achieve some other legitimate purpose. In Granholm, the states argued unsuccessfully that their laws were necessary for the collection of taxes and to keep alcohol out of the hands of minors.

It’s difficult to imagine either of these arguments faring any better for Oregon. All of the spirits sold in Oregon, including those in the new tasting rooms, retail at a set price through the Oregon Liquor Control Commission (OLCC). The state has no sales tax. Collection of revenue, then, is not a concern.

As for sales to minors, it would be hard to argue with a straight face that local distilleries are uniquely qualified to sell only to adults.

So if Oregon distilleries can open tasting rooms and retail centers anywhere in the state, why not distilleries from across the river in Washington? Or from Kentucky? Or anywhere else, for that matter? It’s easy to imagine an out-of-state distillery suing for access to Oregon’s market on equal terms,

This hypothetical case may be strengthened by the fact that through its monopoly on liquor distribution, the OLCC can grant de facto preferential treatment to Oregon producers. Though the agency doesn’t explicitly do this, there’s good reason to believe that it has this effect. From a recent article about the state’s craft distillery boom:

OLCC officials stopped short of saying the agency shows a preference for stocking Oregon-made products at its warehouse — but it hasn’t created many obstacles for start-up distilleries.

“We make it easy. They get a listing,” said Brian Flemming, director of retail services for the OLCC.

The makeup of the Court seems favorable to extending the Granholm interpretation. As Garrett Peck notes in his book The Prohibition Hangover, dissent in the case was associated with age, with all of the justices who were alive during Prohibition siding with the states. Dissenters Rehnquist, O’Connor, and Stevens have all since retired. If a new case involving distillers does reach the Court, they may get a sympathetic hearing.

That’s a big “if.” Even if a case is brought, it may never go that far. And lower courts may decide that since Oregon’s law presents a different set of facts, the ruling in Granholm doesn’t apply.

Nonetheless, promoting craft distilleries through laws that discriminate in favor of local producers is a risky strategy that may backfire when and if they are challenged in court. There are other ways to open up the market for craft distillers that would rest on more secure legal footing.

[Photo: Still at Grand Traverse Distillery in Michigan, 2008.]

[Disclosure: I do contract work in the spirits industry, often with brands not based in Oregon.]


  1. The guaranty is good until the corporation that guarantees
    it declares bankruptcy. Midnight and Ranch Hand Rescue are the
    key ingredients for this great feel-good story.
    ‘ What milestones have been crossed in the realization of this dream project.
    This paragraph supersedes all other conflicting language.
    For many investors, property investments are personally very rewarding as they
    allow entrepreneurs help others find homes and properties.
    Smart business owners are well aware that customers, clients, and vendors need to have the ability to
    find them to be able to do business with them and because
    of this, prefer to keep their business in exactly the
    same location whenever possible as opposed to reestablishing themselves
    in several locations year after year. Sometimes life is real tough and it doesn’t make
    sense. Besides economic failure, the reasons for restaurants closing include divorce,
    poor health, and unwillingness to commit immense time toward
    operation of the business. Ahead of anything at all else, to evaluate what
    your requirements and develop a checklist. Choose
    cost-free news letters which have high information content and
    also low hype; as well as simple and easy-to-understand commentaries about developments of real estate in your town or the whole

  2. One thing is certain: perhaps Samson’s strength was in the hair,
    but remember it is a myth. LEIMO’s natural ingredients are of the purest
    and highest grade essential oils to deliver the cost effective results our clients demand.
    It activates the hair follicles stimulating hair growth.

  3. Water is your organic cleaner so you should always be effectively moisturized.
    Interestingly enough, pictures of her as a younger woman show that she’s adorable, and post surgery she is just
    beautiful. There is one error: the sentence “The heir who wins the windfall will be the one who finds the.

  4. heidi montag says:

    Advanced Plastic Surgery is here to celebrate beauty with
    its state of the art facilities and innovative services such as dermabrasion, BOTOX Cosmetic, body
    surgeries, and the latest Vi – Peel. This means that you
    can have layers of images one over the other,
    and each level can have its own set of rules and effects applied to it.
    Women are more likely to undergo plastic surgery but some males also undergo this medical procedure if they think they need to have some major
    changes in their body.

  5. Nice response in return of this difficulty with firm arguments andd explaining the whole thing concerning

  6. The proficient team working here has great and immense knowledge in the
    field. Instead try a nice pair of wool or cotton chino dress trousers with a button down shirt, sweater
    vest, tie, and sport jacket. Perhaps you are
    a model who wants to expand your portfolio with a range of startling shots that show off your versatility and individual flair.

  7. The beginning of the end came the day Nia’s boyfriend
    didn’t take up her offer of caring for him when he was ill.
    While some causes of hair loss might be associated with how you eat and
    what your physical health is, not all of them involve good diet and healthy habits.
    These products work the best in younger men who have only begun to lose their
    hair, and in those whose androgenetic alopecia is still in the early stages where
    hair is thinning but continuing to grow.

  8. Hi to all, for the reason that I am really keen off reading this webpage’s post
    to be updated daily. It consists of fastidious information.

  9. A fascinating discussion is worth comment. I believe that you ought to write more about this
    subject, it might not be a taboo matter but typically folks don’t talk
    about such subjects. To the next! Best wishes!!

  10. Miles says:

    There are also add-ons that can extend the functionality of a dog pen; you may find these useful, depending on your situation. You can save a ton of money on boarding fees and sitters, and best of all you do not have to leave them behind.
    Choosing a dog pen that lays flat when folded is ideal for when you want to take your dog camping or traveling with you.

  11. Patrick law says:

    Never waver to get some information about any piece of the charges you don’t get it.
    There are numerous individuals that have issues with the charges they
    are charged by a lawyer, yet a hefty portion of them don’t say anything.
    There is a risk that you can do a percentage of the work yourself and spare a bit, so
    make a point to get some information about that. It
    is vital to consider the claim to fame of an attorney your are contracting.
    You need to verify you procure the legal advisor you require.
    You would prefer not to contract an attorney that has practical experience in criminal law to do
    your domain arranging. Picking a legal advisor that represents considerable authority in whatever region of law you need, will ensure you get somebody who has a ton of experience around there and can benefit work.

  12. Hurrah! Finally I got a weblog from where I be capable of really get useful facts concerning my study
    and knowledge.

  13. I think the admin of this site is actually working hard for his site,
    for the reason that here every data is quality based data.

  14. roofing says:

    Great goods from you, man. I’ve remember your stuff prior to and you are simply extremely wonderful.
    I actually like what you have obtained here, certainly like what you are saying
    and the way in which in which you say it. You are making
    it entertaining and you still care for to keep it
    sensible. I cant wait to read much more from you. That is actually a great web site.

  15. I loved as much as you will receive carried out right here.

    The sketch is attractive, your authored subject matter stylish.
    nonetheless, you command get got an edginess over that
    you wish be delivering the following. unwell unquestionably come further formerly again since exactly the same nearly very often inside
    case you shield this increase.

  16. Uwe says:

    Nearly all of the designs are created from tough components that will stand
    the wear and tear of time as well as the habitual assault of the
    dog if he feels like it. You may choose to build one inside, however, it will surely block the view.
    Face it, we love our pets and the last thing we want to do is leave
    them behind, leave them with strangers, or put them up in a kennel.


  1. [...] Craft distillery shops and the Commerce Clause. Well, it’s really about the 21st Amendment, which actually contains a number of nastinesses in it. Spread the Word: Pin ItMoreDiggTechnoratiDeliciousPrintEmail Prior Post: SideBlog: The Favored Cocktails of Film and Lit Characters You can leave a response, or trackback from your own site. [...]

  2. recommended you read…

    Craft distilleries and the Commerce Clause…

Leave a Comment