Healy v. Beer Institute/Dissent Rehnquist

by William Rehnquist

Chief Justice REHNQUIST, with whom Justice STEVENS and Justice O'CONNOR join, dissenting.

In Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032 (1935), the Court held that a New York statute setting maximum prices for milk sold in that State violated the Commerce Clause when applied to milk produced more cheaply in Vermont but imported into New York for sale. Today the Court applies the doctrine of that case to invalidate a Connecticut statute which sets a maximum price for beer imported into Connecticut from other States. The Court's analysis seems wrong to me both as a matter of economics and as a matter of law: the maximum prices set by Connecticut in this case have a quite different effect than did the minimum prices set by New York in the Baldwin case, and by reason of the Twenty-first Amendment the States possess greater authority to regulate commerce in beer than they do commerce in milk.

The New York statute passed upon in Baldwin provided that no milk could be sold in the New York City metropolitan area unless it had been purchased from the producer for a price at least equal to the minimum specified by law. When this statute was applied to milk produced in Vermont but brought into the New York City metropolitan area for sale, the result was to require Vermont producers to give up the natural advantage which they would otherwise have obtained from the fact that the costs of production of milk in Vermont were lower than the costs of production in New York. The Court rightly held that this sort of a regulation violated the Commerce Clause because it "set a barrier to traffic between one state and another as effective as if customs duties, equal to the price differential, had been laid upon the thing transported." Id., 294 U.S., at 521, 55 S.Ct., at 500. In Milk Control Board v. Eisenberg Farm Products, 306 U.S. 346, 59 S.Ct. 528, 83 L.Ed. 752 (1939), decided four years after Baldwin, the Court upheld a different state milk price regulation, and in so doing distinguished Baldwin as a case in which "this Court condemned an enactment aimed solely at interstate commerce attempting to affect and regulate the price to be paid for milk in a sister state." 306 U.S., at 353, 59 S.Ct., at 531.

The Connecticut § atute here is markedly different from the New York statute condemned in Baldwin. Connecticut has no motive to favor local brewers over out-of-state brewers, because there are no local brewers. Ante, at 327, n. 2. Its motive unchallenged here-is to obtain from out-of-state brewers prices for Connecticut retailers and Connecticut beer drinkers as low as those charged by the brewers in neighboring States. Connecticut does not seek to erect any sort of tariff barrier to exclude out-of-state beer; its residents will drink out-of-state beer if they drink beer at all, and the State simply wishes its inhabitants to be treated as favorably as those of neighboring States by the brewers who sell interstate. There is no "tariff wall" between Connecticut and other States; there is only a maximum price regulation with which the interstate brewer would rather not have to bother. But that is not a sufficient reason for saying that such a regulation violates the Commerce Clause.

Neither the parties nor the Court points to any concrete evidence that the Connecticut regulation will have any effect on the beer prices charged in other States, much less a constitutionally impermissible one. It is merely assumed that consumers in the neighboring States possess "competitive advantages" over Connecticut consumers. Ante, at 339. But it is equally possible that Connecticut's affirmation laws, a response to a history of unusually high beer prices in that State, see United States Brewers Assn., Inc. v. Healy, 692 F.2d 275, 276 (1982), may be justifiable as a remedy for some market imperfection that permits supracompetitive prices to be charged Connecticut consumers. The Court expresses the view that these regulations will affect the prices of beer in other States and goes on to say that such an effect constitutes "regulating" or "controlling" beer sales beyond its borders. Ante, at 337, 342. But this view is simply the Court's personal forecast about the business strategies that distributors may use to set their prices in light of regulatory obligations in various States. Certainly a distributor that considers the Connecticut affirmation law when setting its prices in Massachusetts, or offering a discount in New York, is under no legal obligation to do so. And it is quite arbitrary, and inconsistent with other Commerce Clause doctrine, to strike down Connecticut's affirmation law because together with the laws of neighboring States it might require a brewer to plan its pricing somewhat farther in advance, ante, at 337-338, than it would prefer to do in a totally unregulated economy.

"[T]he question is not whether what [the State] has done will restrict appellants' freedom of action outside [the State] by subjecting the exercise of such freedom to financial burdens. The mere fact that state action may have repercussions beyond state lines is of no judicial significance so long as the action is not within that domain which the Constitution forbids." Osborn v. Ozlin, 310 U.S. 53, 62, 60 S.Ct. 758, 761, 84 L.Ed. 1074 (1940). See also Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35, 43, 86 S.Ct. 1254, 1260, 16 L.Ed.2d 336 (1966).

I am no more convinced by the Court's alternative rationale, that the Connecticut statute "facially discriminates" against brewers and shippers of beer engaged in interstate commerce in favor of brewers and shippers who do business wholly within the Connecticut. Ante, at 340. As the Court acknowledges, there are no Connecticut brewers, ante, at 327, n. 2, and the Court has not pointed to any evidence of shippers doing business in Connecticut but not in its border States. Consequently, the Court strikes down Connecticut's statute because it facially discriminates in favor of entities that apparently do not exist. But cf. Amerada Hess Corp. v. Director, New Jersey Division of Taxation, 490 U.S. 66, 77-78, 109 S.Ct. 1617, 1623-1624, 104 L.Ed.2d 58 (1989) (absence of oil reserves in New Jersey allays concern about a discriminatory motive or effect of a state tax disallowance of a deduction related to oil production). We do not know what actions Connecticut might take to eliminate discriminatory effects if a local brewer began business and a true danger of discrimination in favor of local business appeared. It is not a proper exercise of our constitutional power to invalidate state legislation as facially discriminatory just because it has not taken into account every hypothetical circumstance that might develop in the market.

All of the foregoing is based on the assumption that a State has no more freedom to regulate commerce in beer than it does commerce in milk or any other commodity. But the Twenty-first Amendment, as the Court concedes, at least in theory, provides otherwise: "The transportation or importation into any State . . . for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

Less than 10 years ago we acknowledged that the Twenty-first Amendment confers on the States "virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system." California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 110, 100 S.Ct. 937, 940, 63 L.Ed.2d 233 (1980). And while this "special power" of the States to regulate liquor, id., at 108, 100 S.Ct., at 944, must coexist with Congress' power to regulate commerce, "[t]his Court's decisions . . . have confirmed that the Amendment primarily created an exception to the normal operation of the Commerce Clause." Craig v. Boren, 429 U.S. 190, 206, 97 S.Ct. 451, 461, 50 L.Ed.2d 397 (1976). The Court in the present cases barely pays lipservice to the additional authority of the States to regulate commerce and alcoholic beverages granted by the Twenty-first Amendment. Neglecting to consider that increased authority is especially disturbing here where the perceived proscriptive force of the Commerce Clause does not flow from an affirmative legislative decision and so is at its nadir. Even the most restrictive view of the Twenty-first Amendment should validate Connecticut's efforts to obtain from interstate brewers prices for its beer drinkers which are as favorable as the prices which those brewers charge in neighboring States.

The result reached by the Court in these cases can only be described as perverse. A proper view of the Twenty-first Amendment would require that States have greater latitude under the Commerce Clause to regulate producers of alcoholic beverages than they do producers of milk. But the Court extends to beer producers a degree of Commerce Clause protection that our cases have never extended to milk producers. I would reverse the judgment of the Court of Appeals.

Notes