United States: The Future Of Direct Shipping

In September 2018, the U.S. Supreme Court granted a petition for a writ of certiorari (i.e., the Court agreed to hear a case) brought before the Court by the Tennessee Wine and Spirits Retailers Association (Tennessee Retailers) in Tennessee Wine and Spirits Retailers Association v. Byrd. The petition requested that the Court review the lower court's decision upholding a finding that Tennessee's two-year residency requirement for retail license applicants is unconstitutional. Specifically, the question Tennessee retailers posed to the Court is whether the 21st Amendment of the U.S. Constitution gives states the authority to, consistent with the so-called "Dormant" Commerce Clause of the Constitution, regulate sales of alcohol beverages by imposing residency requirements on retail (or wholesale) license applicants. The court began hearing oral arguments on January 16.

As a bit of legal background, under the Dormant Commerce Clause, state statutes and regulations generally may not favor in-state interests or discriminate against out-of-state interests. The 21st Amendment of the U.S. Constitution, which gave states the authority to regulate sales of alcohol within their borders, acts as a partial limitation of Dormant Commerce Clause principles when the issue involves a state law regulating alcohol. In other words, when it comes to alcohol, the states can argue that their authority under the 21st Amendment limits the application of the Dormant Commerce Clause.

But the Dormant Commerce Clause is designed to prevent states from engaging in economic protectionism, and the 21st Amendment does not shield all state actions from Dormant Commerce Clause scrutiny. Although Supreme Court cases from the 1930s, shortly after the passage of the 21st Amendment, suggested that the exemption of state alcohol laws from Commerce Clause scrutiny was very broad, opinions since then have limited the protection the 21st Amendment gives to state alcohol laws.


A Tennessee alcohol beverage law requires an applicant for a retail license to have been a resident of the state for at least the two-year period immediately preceding the application. For corporate applicants, the requirement applies to any of the corporation's officers, directors, or stockholders. Moreover, to renew a license, the law requires Tennessee residency for at least 10 consecutive years.

After two prospective retail applicants who did not meet the residency requirement—including the Tennessee affiliate of Total Wine Spirits & Beer—sought licenses in Tennessee, the state's attorney general preemptively filed a declaratory judgment action in state court to attempt to have the court declare the residency requirements constitutional. The case was removed to federal court, and the district court found the requirements unconstitutional under the Dormant Commerce Clause. Tennessee Retailers then appealed to the U.S. Court of Appeals for the Sixth Circuit.


In February 2018, the Sixth Circuit reviewed the Tennessee law and, affirming the district court decision that invalidated Tennessee's residency requirements, held that "a three-tier system can still function" without the two-year durational residency restriction imposed by the state. The majority opinion provided an overview of Supreme Court guidance on the tension between the Dormant Commerce Clause and the 21st Amendment, focusing in particular on the Bacchus Imports v. Dias (1984) and Granholm v. Heald (2005) decisions.

The court concluded that the non-discrimination Commerce Clause principles articulated in those cases are not limited to alcohol beverage producers and their products. Accordingly, the court held that the 21st Amendment does not exempt state laws concerning wholesalers and retailers from scrutiny under the Commerce Clause. In terms of the Tennessee residency requirements in particular, the court found that the 21st Amendment did not protect the requirements from Commerce Clause scrutiny and, without the protection of the 21st Amendment, the court found the requirements unconstitutional.


In July 2018, Tennessee Retailers submitted a petition for a writ of certiorari to the Supreme Court. Although the Supreme Court grants only a small number of the petitions it receives each year, it accepts a 21st Amendment-related case for review roughly every decade or so. If the party seeking a petition for a writ of certiorari can demonstrate to the Court that a "circuit split" exists (i.e., that different U.S. Courts of Appeals disagree with one another on a particular legal issue), the Court is more likely to grant a petition so that it can restore uniformity of legal interpretations.

Tennessee Retailers was able to build a persuasive case for the Supreme Court to grant the petition, as over the last decade several cases have demonstrated a circuit split relating to the residency question. At the heart of the different appellate courts' split in this case is whether the non-discrimination principle of the Dormant Commerce Clause, which the Supreme Court clearly applied to wine producers and products in the 2005 Granholm v. Heald decision, also applies to state laws regulating the wholesale and retail tiers of the industry.

Two federal appellate courts (including Byrd) applied the non-discrimination rule to strike down state residency requirements for alcohol beverage licensees. One other appellate court has upheld residency restrictions, and two other appellate courts have taken a similar approach and upheld other kinds of restrictions on retailers, finding that the non-discrimination rule applies only to producers and products, and not to the two other tiers of the industry. This split in the circuit courts has created uncertainty for courts and regulators throughout the nation, and for the alcohol industry generally.


The Supreme Court's review of the Byrd case will address the constitutional validity of the Tennessee law imposing residency requirements on retail alcohol beverage license applicants. It remains to be seen whether the Court will go further to also address more fundamental questions about state powers under the 21st Amendment of the U.S. Constitution. But the stakes of Byrd reach far beyond residency. If the Supreme Court reverses the Sixth Circuit on broad grounds and finds that state laws regulating wholesalers and retailers are not subject to challenge under the Dormant Commerce Clause, Byrd would maintain the status quo with respect to direct shipping of beer.

If the Court affirms Byrd on the broad principle that the Commerce Clause's non-discrimination principles apply to state laws regulating wholesalers and retailers (as opposed to only producers), then many state laws prohibiting out-of-state retailers from shipping alcohol beverages (including beer) to in-state consumers could be vulnerable to an attack on constitutional grounds. Most states authorize in-state retailers to ship alcohol directly to a consumer's home, so application of non-discrimination principles could force states to extend similar privileges to out-of-state retailers.

As a final note, several other cases currently being litigated in courts around the country also have the potential to shape the future of alcohol direct shipping. For example, in late September 2018 a federal district court in Michigan struck down a state statute that allowed only in-state retailers to direct-ship alcohol beverages to Michigan consumers and prohibited out-of-state retailers from exercising that privilege. Whether that case survives an appeal likely will depend on the Supreme Court's decision in Byrd, indicating that the outcome of this case could have significant implications for the future of the direct- to-consumer market for alcohol beverages in the U.S.

The Byrd case will take some time to resolve, and a decision will likely come down in mid-2019.

Originally published in The New Brewer, March/April 2019.

The Future Of Direct Shipping

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions