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The rope grew more taut last Friday in the tug of war between retailers that seek more expansive shipping privileges and regulators that aim to tamp down on shipments. The US 6th Circuit Court of Appeals sent one of the many pending wine retailer shipping cases back to a lower court for a closer look on the same day that Tennessee's atty genl filed suit against a half-dozen cos for allegedly shipping spirits into the state. Neither placed a clear "win" on scoreboards for either prospective retail shippers or state regulators, tho both sides are eager to say so. Meanwhile, a pair of recent stories out of Scandinavia, that other bastion of state-owned alcohol control systems, offer intriguing parallels to consider. Dist Ct Must Revisit OH Shipper Suit Like other retailer shipping suits filed by plaintiffs atty James Tanford, suit reviewed by 6th Circuit alleged that Ohio's prohibition against shipments from out-of-state retailers violates the dormant Commerce Clause. Dist Ct in OH disagreed, citing 6th Circuit's ruling in very similar Lebamoff case out of Michigan. Last wk, 3-judge panel at appellate ct affirmed in part and reversed in part the district ct's decisions, ordering the lower ct to review the case further.Judges at 6th Circuit agreed with district ct that the director of OH's dept of public safety was immune from suit, but reversed the lower ct's decision to dismiss claims related to state's transportation limit based on standing. The consumer plaintiff's fear of prosecution was credible, so did in fact have standing to sue, judges found. But on bigger ticket issue of whether out-of-state retailers should be able to ship to OH consumers, the appeals ct found that the district ct took a shortcut when it ruled in favor of the state based on the 6th Circuit's Lebamoff decision, rather than weighing evidence presented by each side.Cts Skeptical of Retailer Arguments, Open to Supplier Suits While fed cts have been reluctant to dismiss claims about cross-border shipping brought by wine retailers, they've also largely upheld state laws barring the practice. Despite years of effort, advocates haven't racked up a ton of wins. Yet suits on behalf of a different kind of plaintiff have already shown green shoots for atty Tanford. A lawsuit filed about a yr ago against Oregon on behalf of brewers in Washington settled earlier this yr, opening that state for direct shipments from out-of-state brewers.Not long after, the atty filed a similar suit on behalf of a NY distiller, going after a WA law that similarly allows in-state suppliers to ship directly to consumers, but not out-of-state suppliers. Arguments that essentially track those successfully made by the same attys in Supreme Ct Granholm case almost 20 yrs ago proved difficult for OR to combat. Now WA faces a similar struggle for a different commodity. Will the cts become the go-to venue for expanding brewer & distiller direct shipping privileges as legislative pathways remain a steep uphill climb?The Sup Ct Meant What It Said The "victory" at the 6th Circuit greeted by retailer advocates may only be temporary. A key question remains. The district ct must put the OH law to the Tennessee Wine test, established in 2020 Supreme Ct decision. That requires weighing evidence presented by plaintiffs that the law is largely protectionist against evidence from the state that it protects public health & safety. So the ct could still go either way and the case's time at the 6th Circuit may not be over, either.The test established in TN Wine sets a higher bar for states, making it harder for them to show that their laws protect the health of their residents in ways that are more powerful than any possible discrimination against out-of-state bizzes. So it also creates new incentives for collaboration between states, regulators and the public health community. And recall, in their comments to the TTB about trade practices, public health orgs offered full-throated support of the 3-tier laws states defend in these lawsuits as well as extreme skepticism of the online alcohol markets these plaintiffs seek (see last issue).TN Steps Up Against 6 Out-of-State Shippers Regulators may be eager for help with the heavier lift defending state laws, given the tenor of discussions about shipping during the last couple of NCSLA conferences. More and more states seem to be coming to terms with the fact that they don't have their arms around all the alcohol crossing their borders without their knowledge. Leaders from OH and (especially) MI have repeatedly taken the stage to explain their use of the 21st Amendment Enforcement Act to go after out-of-state shippers. Recall, that's fed law passed over 20 yrs ago allowing states to seek injunctive relief but not monetary damages for violations of a state's laws on importation of alc bevs.Late last wk, Tennessee followed suit, filing a fed complaint against 6 companies that shipped spirits to state agents between Oct 2022 and Jan 2023. Only one had previously received a cease and desist letter from the state, back in Dec 2021. Suit seeks to block these 6 cos from shipping into the state again, while also making claims based on state consumer protection law that affords TN the oppy to collect only modest fines of $1,000 per violation. That's a far cry from MI, which collected $25K from at least some shippers.Overlap in OH: Consent Decrees and Just $150 Per Shipment The announcement of these 2 developments on the same day highlights the way that these retailer and regulator lawsuits have been unfolding together for years. In July 2020, OH AG Dave Yost became a defendant in the above retailer suit in the weeks after he became the first state AG to use the 21st Amendment Enforcement Act against out-of-state shippers. He filed suit against a mix of wine and spirits retailers, from large online outlets like Wine.com to smaller stores.The state wrapped up those cases by Jan 2021 after dropping charges against 1 defendant. OH signed separate consent decrees with 6 other cos, requiring they 1) stop shipping, 2) change internal systems to block orders from OH, 3) change ads so OH consumers know they can't order shipments, 4) train their employees, and 5) open their books to OH for 5 yrs to ensure compliance. If a violation is found during that period, the state gets just $150 per shipment, according to consent decrees filed with the fed ct. Just one of the 6 agreements clarifies that the shipper admits no liability or wrongdoing.How sustainable is this tactic? Recall recent comments from MA regulators describing shipping cases like a game of Whac-A-Mole, with around 40 such cases at any given time and another in the pipeline each time one wraps up. Our increasingly digital lives and the interests of much larger potential cross-border retail shippers, whether stated or not, only raise the stakes higher. So as states weigh their options for controlling alc bev shipping, what could be only compounds the incentive to control what's already happening.Retail Monopolies in Scandinavia Challenged A couple of recent stories out of Scandinavia speak to similar tensions. Both Sweden and Finland are akin to US control states, where the government runs alcohol retail outlets. Early this mo, Sweden's Supreme Ct issued a blow to that system, opening up the country to shipments from Denmark-based Winefinder. Those shipments should be viewed as allowable personal importation, the ct found, creating a new form of competition for the state-owned Systembolaget stores, which do not run sales or advertise alc bevs, Reuters noted. The country's long-running dispute with Winefinder is one of multiple challenges to Sweden's strict alc bev regime since joining the European Union in 1995, Bloomberg pointed out.Govt officials in neighboring Finland are considering additional exemptions for small suppliers that allow them to bypass its similar state-run Alko stores. The change would allow retail to-go sales from production sites of "domestic small and artisan breweries, distilleries and wineries" for the first time, YLE News reports. It would pave the way for online sales, suggesting shipping, too. It's part of a broader shift in perspective towards alcohol for the country, as it considers increasing the current cap on the strength of beverages allowed to be sold at grocery stores. It also seeks to move consideration of alcohol-related legislation from the Ministry of Social Affairs and Health to the Ministry of Economic Affairs and Employment, per YLE. That reminds of Utah's recent agency name change from the Dept of Alcohol Beverage Control to Alcohol Beverage Services. Ironically, at the end of last mo, the WHO released a short statement praising "the Nordic way" of "reducing alcohol consumption," including thru "retail monopoly systems."Cheers,

Shipping Stories: 6th Circuit Sends Retailer Suit Back; TN Takes Familiar Enforcement Tack; Scandinavian Notes

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