Twenty-First Amendment, Section 2:

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.

The Twenty-First Amendment recognized that states could regulate or prohibit alcoholic beverages within their jurisdictions for legitimate, nonprotectionist purposes, such as health or safety.1 However, the Amendment did not completely oust Congress’s Commerce Clause power over the manufacture, sale, and transportation of alcoholic beverages.2 After reviewing relevant post-Prohibition cases, the Supreme Court observed that “there is no bright line between federal and state powers over liquor. . . . Although States retain substantial discretion to establish [liquor] regulations, those controls may be subject to the federal commerce power in appropriate situations. The competing state and federal interests can be reconciled only after careful scrutiny of those concerns in a ‘concrete case.’” 3 Since the Twenty-First Amendment’s ratification, the federal government has continued to tax or regulate activities involving alcoholic beverages, including aspects of beverage production, wholesale distribution, importation, labeling, and advertising.4

Under the Supremacy Clause, federal law may preempt conflicting state liquor law when the federal government’s regulatory interests outweigh those asserted by the state, particularly in areas that do not implicate the state’s core Twenty-First Amendment powers.5 For example, in its 1984 decision in Capital Cities Cable, Inc. v. Crisp, the Supreme Court held that various Federal Communications Commission rulings and regulations preempted Oklahoma statutes that prevented local cable television operators from retransmitting out-of-state alcoholic beverage advertisements to their subscribers.6 The Court determined that the Twenty-First Amendment granted the states broad power to regulate the “sale or use of liquor” within their jurisdictions, but that federal law would likely preempt conflicting state regulation outside of that field.7 The Court wrote that when the “times, places, and manner under which liquor may be imported and sold is not directly implicated, the balance between state and federal power tips decisively in favor of the federal law, and enforcement of the [clearly conflicting] state statute is barred by the Supremacy Clause.” 8 In Capital Cities, the federal government’s interest in a “uniform national communications policy” aimed at “ensuring widespread availability of diverse cable services throughout the United States” outweighed the state’s unsubstantiated interest in promoting temperance.9 The Court thus held the conflicting Oklahoma statute regulating cable signals to be preempted.10

The Supreme Court has also weighed competing federal and state interests when deciding whether federal antitrust laws preempted conflicting state liquor laws. For example, in California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., the Supreme Court held that the Sherman Antitrust Act, which prohibits “every contract, combination[,] or conspiracy, in restraint of trade or commerce among the several states,” preempted a California resale price maintenance law.11 The law required “all wine producers, wholesalers, and rectifiers” to “file fair trade contracts or price schedules with the State” and prohibited wine merchants from selling wine to retailers at a price higher than that in the filings.12 In holding that the Sherman Act preempted the state law, the Court determined that the federal interests in competition and free markets outweighed the state’s asserted Twenty-First Amendment interests in promoting temperance and protecting small retailers.13

Footnotes

1

U.S. Const. amend. XXI, § 2; Tenn. Wine & Spirits Retailers Ass’n v. Thomas, No. 18-96, slip op. at 31–32 (U.S. June 26, 2019). For more information on state liquor control regimes after Prohibition, see Amdt21.S1.2.5 Ratification of the Twenty-First Amendment.

2

After Prohibition’s repeal, the Supreme Court adopted a more expansive view of the federal commerce power. By 1942, the Court held that Congress’s power under the Commerce Clause and Necessary and Proper Clause extended to intrastate activities that, in the aggregate, substantially affect interstate commerce. Wickard v. Filburn, 317 U.S. 111, 124 (1942). See also Gonzales v. Raich, 545 U.S. 1, 33 (2005) (considering whether the cultivation, distribution, or possession of marijuana for personal medical purposes pursuant to the California Compassionate Use Act of 1996 could be prosecuted under the federal Controlled Substances Act and holding that the Court would defer to Congress if there was a rational basis to believe that regulation of home-consumed marijuana would affect the market for marijuana generally); Proposed Legislation to Restrict the Sales of Alcoholic Beverages in Interstate Commerce, 8 Op. O.L.C. 53, 57 (1984) (opining that Congress’s Commerce Clause power would authorize enactment of a federal law prohibiting the sale in interstate commerce of alcoholic beverages to persons under 21 years of age, and that such a law would not violate the Twenty-First Amendment). Congress might also rely on other provisions of the Constitution, such as the Fourteenth Amendment’s Enforcement Clause, to regulate matters related to alcoholic beverages. See generally Amdt14.S5.1 Overview of Enforcement Clause.

3

Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980) (citation omitted); see also Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 332 (1964) ( “Both the Twenty-First Amendment and the Commerce Clause are parts of the same Constitution. Like other provisions of the Constitution, each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case.” ); William Jameson & Co. v. Morgenthau, 307 U.S. 171, 172–74 (1939) (per curiam) (rejecting the notion that the states’ Twenty-First Amendment powers had rendered the Federal Alcohol Administration Act unconstitutional and finding “no substance” in the argument that Congress lacked constitutional authority to regulate foreign imports of alcoholic beverages).

4

See, e.g., 15 U.S.C. § 1 (prohibiting “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations” ); 26 U.S.C. ch. 51 (imposing taxes on various activities related to distilled spirits, wines, and beer); Federal Alcohol Administration Act, 27 U.S.C. §§ 201–212 (requiring producers, importers, and wholesalers of alcoholic beverages to obtain federal permits, obey state law, and comply with federal regulations relating to beverage advertising and labeling); Rubin v. Coors Brewing Co., 514 U.S. 476, 480 (1995) (discussing Congress’s enactment of the Federal Alcohol Administration Act, which “establishes national rules governing the distribution, production, and importation of alcohol and established a Federal Alcohol Administration to implement these rules” ); United States v. Rizzo, 297 U.S. 530, 533 (1936) (noting that the Eighteenth Amendment’s repeal did not extinguish liability for federal taxes on alcohol unless such taxes were imposed as penalties for violating liquor laws); Ohio v. Helvering, 292 U.S. 360, 369–70 (1934) (holding that the Eighteenth and Twenty-First Amendments implied that a state could not engage in the liquor trade while claiming sovereign immunity from federal tax laws).

5

Capital Cities Cable, Inc. v. Crisp., 467 U.S. 691, 711–16 (1984). Under the doctrine of federal preemption, federal law may displace conflicting state law. See generally U.S. Const. art. VI ( “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” ); ArtVI.C2.3.4 Modern Doctrine on Supremacy Clause.

6

Capital Cities Cable, Inc., 467 U.S. at 694, 698, 716.

7

Id. at 713 ( “In rejecting the claim that the Twenty-First Amendment ousted the Federal Government of all jurisdiction over interstate traffic in liquor, we have held that when a State has not attempted directly to regulate the sale or use of liquor within its borders—the core § 2 power—a conflicting exercise of federal authority may prevail.” ).

8

Id. at 716; cf. Ziffrin, Inc. v. Reeves, 308 U.S. 132, 140 (1939) (determining that a Kentucky law that, as applied, required the carriage of alcoholic beverages between Kentucky distillers and another state to occur only by state-licensed common carrier did not conflict with the federal Motor Carrier Act of 1935).

9

Capital Cities Cable, Inc., 467 U.S. at 712–16. The Supreme Court determined that Oklahoma’s interest in temperance was not substantial in part because the state allowed print and broadcast advertisements for beer. Id. at 715.

10

Id. at 712–16.

11

445 U.S. 97, 99 (1980).

12

Id. “If a wine producer [did] not set prices through a fair trade contract, wholesalers [were required to] post a resale price schedule for that producer’s brands.” Id.

13

Id. at 103–06, 113–14 (determining that the Sherman Act prohibited producers from fixing the prices charged by wholesalers and retailers and rejecting the state’s attempt to rely on the state action immunity doctrine because the state merely enforced the prices set by private parties and did not exercise complete control over the establishment of prices, review “the reasonableness of the price schedules,” or “regulate the terms of fair trade contracts.” ). See also, e.g., Liquor Corp. v. Duffy, 479 U.S. 335, 337, 342–43, 350–52 (1987) (concluding that the Sherman Antitrust Act preempted New York resale price maintenance laws requiring retailers to “charge at least 112 percent of the ‘posted’ wholesale price for liquor” but allowing “wholesalers to sell to retailers at less than the ‘posted’ price” because the state’s interest in aiding small liquor retailers was “unsubstantiated,” it was outweighed by the federal interest in competition, and “the Twenty-First Amendment provide[d] no immunity for New York’s authorization of private, unsupervised price fixing by liquor wholesalers” ); Joseph E. Seagram & Sons v. Hostetter, 384 U.S. 35, 45–46 (1966) (determining that the Sherman Antitrust Act did not preempt New York laws that required liquor brand owners to file monthly schedules of prices at which liquor would be sold to wholesalers and retailers in the state and to affirm that “the bottle and case price of liquor” was “no higher than the lowest price at which sales were made anywhere in the United States during the preceding month” by the brand owner, his agent, or a related person), overruled on other grounds by Healy v. Beer Inst. 491 U.S. 324, 343 (1989); United States v. Frankfort Distilleries, Inc., 324 U.S. 293, 295, 299 (1945) (upholding the federal government’s prosecution of alcoholic beverage producers, wholesalers, and retailers for violating the Sherman Antitrust Act by conspiring to fix and maintain retail prices of alcoholic beverages imported into Colorado and noting the absence of conflicting state law).