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Supreme Court Blasts Economic Protectionism as it Strikes Down Durational Residency Requirements for Business Licenses



12112018-Doug-Ketchum-008-.jpg--e1545326781330-300x160State authority to regulate liquor is not a license for protectionism. John Kramer writes on the Supreme Court’s decision Wednesday in Tennessee Wine and Spirits Retailers Association v. Thomas.

By a 7-2 margin, the U.S. Supreme Court today issued a broadside against state-based economic protectionism as it struck down a Tennessee law that had required anyone seeking a retail liquor license to first reside in the state for two years—and 10 years before they could renew it.

“To put it mildly, today’s opinion by Associate Justice Samuel Alito and the six justices of the Court who joined with him was an indictment against in-state economic protectionism,” said Anya Bidwell, an attorney with the Institute for Justice (IJ), which litigated the case on behalf of Doug and Mary Ketchum.

The Ketchums own Kimbrough Wines & Spirits, a mom-and-pop liquor shop in Memphis, Tennessee, which they purchased in 2016 after moving from Utah. Because they had moved from out of state, the Tennessee Wine & Spirits Retailers Association—a special interest group that exists to protect its members from competition—threatened to sue the Tennessee Alcoholic Beverage Commission if it granted the Ketchums’ application or a separate application submitted by Total Wine around the same time. At that point, the Commissioner himself went to court and asked it to resolve, once and for all, whether Tennessee’s durational residency requirements were constitutional.

The Ketchums and Total Wine won in the federal trial court and before the 6th U.S. Circuit Court of Appeals, and then the liquor cartel appealed the case to the U.S. Supreme Court seeking to preserve its state-based economic protectionist scheme.

The Retailers’ Association tried to defend Tennessee’s durational residency requirements as legitimate exercises of Tennessee’s power under the Twenty-First Amendment, which allows states to regulate alcohol distribution. But today the U.S. Supreme Court rejected that contention, writing:

  • Tennessee’s two-year durational residency requirement “violates the Commerce Clause and is not shielded by Section 2 of the Twenty-first Amendment.”
  • Section 2 of the Twenty-First Amendment “is not a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages.” Tennessee’s law “blatantly favors the State’s residents and has little relationship to public health and safety.”
  • The “Commerce Clause by its own force restricts state protectionism.”
  • “Removing state trade barriers was a principal reason for the adoption of the Constitution.”
  • “Tennessee’s 2-year durational-residency requirement plainly favors Tennesseans over nonresidents.”
  • There is no evidence that the Twenty-First Amendment “was understood to give States the power to enact protectionist laws.”

[John Kramer, “Supreme Court Blasts Economic Protectionism as It Strikes Down Durational Residency Requirements for Business Licenses,” Institute for Justice, June 26]


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