In a 7-2 decision last month, the Supreme Court delivered a significant defeat for democratic governance of the marketplace. In Tennessee Wine and Spirits Retailers Association v. Thomas, the majority struck down Tennessee’s residency requirements for alcohol retailers. The Court reasoned that, in practice, such a policy “means that no corporation whose stock is publicly traded may operate a liquor store in the State.” Following the decision, large retailers will have much greater freedom to sell beer, wine, and spirits across the country, and this may well make drinking booze cheaper and more convenient. But before celebrating, we should reflect on the implications for democratic decision-making and society.
Alcohol occupies a unique place in our governing document. In 1919, Americans amended the Constitution to make alcohol illegal everywhere. After witnessing the failures of national prohibition in the 1920s, Americans amended the Constitution again in 1933 with the 21st Amendment, granting the states broad authority to regulate alcohol markets within their borders, up to and including the right to remain “dry.” Now, with its decision in Tennessee Wine and Spirits, the Supreme Court has usurped the states’ constitutional role in alcohol market control. Unelected federal judges now have expansive power to strike down state rules they dislike and let Amazon, Costco, Total Wine, and other powerful retailers overrun the market for beer, wine, and spirits.
While “free markets” are often invoked to defend existing economic arrangements, no market can operate without rules. Indeed, markets cannot even exist without government involvement. Government, at different levels, creates and defines the scope of property, contracts, trademark, money, and consumer rights, among other things. Rules are foundational to a market economy.
In the United States today, Congress, state legislatures, the Federal Reserve, and federal courts make market rules. As these examples indicate, some market governors are more democratic and popularly accountable than others. And in the absence of public rules, private corporations set the standards for markets in their own interests. The question is not whether we have rules but who sets the rules that govern a market.
In the case of alcohol, the 21st Amendment reserves market governance to the states. Indeed, alcohol is the only commodity specially identified in the Constitution. One of the lessons of Prohibition was that attitudes toward alcohol varied greatly by state, and that national prohibition failed in part because it did not account for these differences. Whereas alcohol was widely consumed and integral to everyday life in some states, drinking was viewed as taboo in others. Recognizing this internal diversity, the 21st Amendment gave states the power to regulate alcohol and even prohibit it entirely if their residents wanted that.
Under the plain text of the 21st Amendment, state legislators have the power to structure alcohol markets in accordance with their constituents’ conception of the public interest. As Justice Louis Brandeis wrote in a unanimous 1936 Supreme Court opinion, the 21st Amendment empowers states to ban alcohol entirely and so surely gives them the right to establish lesser regulations on the production and sale of alcohol. Public health and safety are key components of the public interest when deciding on rules for alcohol markets. The Centers for Disease Control and Prevention estimated that in each year between 2006 and 2010, 88,000 Americans died prematurely from excess alcohol consumption and, on average, lost about 30 years of life expectancy.
You can argue, as the Court concluded, that the Tennessee rules were protectionist measures designed to entrench local beer and wine sellers. But states have every right to reasonably decide that only government-owned stores or small, local retailers should sell alcohol, because they do not want a system dominated by large corporate retailers wielding great political power. Similarly, they may conclude that national retailers’ interest in making alcohol cheap and plentiful is a threat to public health. In the United Kingdom, supermarket chains’ practice of selling alcohol at a loss (to draw customers into their stores) contributed to a binge-drinking culture and ultimately a national public health crisis. With good reason, the framers of the 21st Amendment decided that “the free-trade rules this Court has devised for ‘cabbages and candlesticks’ should not be applied to alcohol[,]” as no less than Justice Gorsuch wrote in his dissent in Tennessee Wine and Spirits.
With its latest decision, authored by Justice Alito and joined by all the Court’s liberals and Chief Justice Roberts and Justice Kavanaugh, the Supreme Court has further rewritten the 21st Amendment. In Tennessee Wine and Spirits and two decisions preceding it, the Supreme Court, relying on the judicially manufactured Dormant Commerce Clause, has narrowed the scope of the states’ constitutional authority. Under the Supreme Court’s latest pronouncement, the 21st Amendment only allows states to enact market rules that are closely related to promoting “public health and safety.” This requirement is nowhere to be found in the 21st Amendment—the Court, in effect, grafted this onto the text. Policies that do not advance public health and safety (as determined by a judge or panel of judges) are “protectionist” and presumptively suspect, if not unconstitutional.
Federal judges now have free rein to strike down any state alcohol rule that they deem “protectionist.” Wielding this open-ended concept, judges can invalidate rules that they find personally odious or economically irrational. The Supreme Court’s decision paves the way for Amazon, Costco, Total Wine, and Walmart to expand their alcohol retail operations and potentially make beer, wine, and liquor cheap and plentiful, notwithstanding any opposition from state residents and their elected representatives. Even though that would surely present a public health and safety concern, precisely what the Court says states have the wherewithal to prevent, the justices substituted their preferred market structure for that of the states.
Regardless of whether they set the rules for alcohol rightly or wrongly per a judge’s personal vision of the public good, state governments were given broad power to make these decisions in the 21st Amendment. As Justice Gorsuch stated in dissent, “the regulation of alcohol wasn’t left to the imagination of a committee of nine sitting in Washington, D.C., but to the judgment of the people themselves and their local elected representatives.” The life-tenured officials on the Supreme Court have set the stage for an unchecked flow of alcohol that few of us want or will welcome.
Disclosure: The Open Markets Institute filed an amicus brief in support of the petitioner in Tennessee Wine and Spirits Retailers Association v. Thomas, calling for a restoration of states’ constitutional authority in governing markets for alcohol.