Politics, Economics, and the Regulation of Direct Interstate Shipping in the Wine Industry

35 Pages Posted: 30 Dec 2003

See all articles by Gina Riekhof

Gina Riekhof

Gilmore & Bell, P.C.

Michael E. Sykuta

University of Missouri at Columbia - Division of Applied Social Sciences

Multiple version iconThere are 3 versions of this paper

Date Written: April 2004

Abstract

In 1986, the State of California passed legislation restricting the direct importation of wine from another state by California residents unless the originating state allowed the reciprocal privilege of direct shipment from California wineries to residents in that state. This proved to be the opening salvo in a series of legislative and judicial battles across the country. State direct shipment regulations that were uniform across 47 of the 50 states prior to 1986 now constitute a patchwork of regulations. This raises unique interstate trade questions due to the special treatment of alcohol in the U.S. Constitution. While the Commerce Clause forbids states from discriminating against interstate commerce, the 21st Amendment affords states the right to regulate alcohol within their borders. Courts are divided in their opinions on direct shipment regulation; some find that prohibiting direct shipment unconstitutionally restricts interstate commerce while others find the regulations consistent with the public interest rationale of the 21st Amendment. This paper attempts to shed light on the motivations for the various forms of regulation adopted across states in response to California's adoption of reciprocity. Using a competing risks hazard model, we examine how various economic and public interest factors affect the likelihood that a state adopts a change in its direct shipment regulation and that nature of that change. Our results suggest that private and public sector economic considerations lie at the root of direct shipment regulations in the wine industry.

Keywords: Wine, direct shipping, interstate commerce, political economy

JEL Classification: K2, L51, L66

Suggested Citation

Riekhof, Gina and Sykuta, Michael E., Politics, Economics, and the Regulation of Direct Interstate Shipping in the Wine Industry (April 2004). Available at SSRN: https://ssrn.com/abstract=481947 or http://dx.doi.org/10.2139/ssrn.481947

Gina Riekhof

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