476 U.S. 573, 106 S. Ct. 2080, 90 L. Ed. 2d 552 (1986)
New York extensively regulates the sale and distribution of alcoholic beverages within its borders.1 Distillers and their agents may not sell to wholesalers in New York except in accordance with a price schedule filed with the State Liquor Authority.2 The distiller or agent must file the price schedule before the 25th day of each month, and the prices therein become effective on the first day of the second following month.3 The schedule must contain a precise description of each item the distiller intends to sell, and a per-bottle and per-case price.4 All sales to any wholesaler in New York during the month for which the schedule is in effect must be at those prices.5
Section 101-b(3)(d) of the ABC Law requires any distiller or agent that files a schedule of prices to include an affirmation that the bottle and case price of liquor to wholesalers set forth in such schedule is no higher than the lowest price at which such item of liquor will be sold by such distiller to any wholesaler anywhere in any other state of the United States or in the District of Columbia during the month covered by the schedule.6 Twenty other States have similar affirmation laws.7 Some require the distiller to set a price that is no higher than the lowest price charged previously anywhere in the United States.8 Others, like New York, require the affirmed price to be no higher than the lowest price that will be charged during the current month.9
Beginning in 1978, Brown-Forman has offered its wholesalers cash payments, or promotional allowances, which are credited against any amounts due appellant.10 The amount of a particular wholesaler’s allowance does depend on its past purchases and projections of future purchases, but accepting the allowance does not constitute an agreement to purchase any particular quantity of Brown-Forman products.11 The allowances are unconditional, lump-sum payments to all wholesalers in every State except New York.12
Brown-Forman offered the promotional allowance to its New York wholesalers, but the Liquor Authority determined that the ABC Law prohibited such payments.13 The Authority also determined that the payment of promotional allowances to wholesalers in other States lowered the effective price of Brown-Forman brands to those wholesalers, and thus violated § 101-b(3)(d) of the ABC Law.14 The Liquor Authority accordingly instituted license revocation proceedings against appellant.15 Brown-Forman sought review in the Appellate Division of the New York Supreme Court and then in the New York Court of Appeals.16 Both courts sustained the Authority’s interpretation and application of the statute.17 The Supreme Court noted probable jurisdiction limited to the question whether the ABC Law, on its face, violates the Commerce Clause.18
Whether New York’s Alcoholic Beverage Control Law § 101-b(3)(d), on its face, violates the Commerce Clause?19
When a state statute directly regulates or discriminates against interstate commerce, the Commerce Clause generally strikes it down without further inquiry.20 A state may not project its legislation into other states by regulating the price to be paid for liquor in those states.21 The critical consideration remains the overall effect of the statute on both local and interstate activity.22
Yes. New York’s ABC Law directly regulates out-of-state transactions because once a distiller has posted prices in New York, it is not free to change its prices elsewhere in the United States during the relevant month without seeking the approval of the New York State Liquor Authority.23 This situation arose when Brown-Forman’s promotional allowances lowered the effective price of its products in other states and triggered enforcement proceedings by the Authority.24 Forcing a merchant to seek regulatory approval in one State before undertaking a transaction in another directly regulates interstate commerce and constitutes the extraterritorial control forbidden by the Commerce Clause.25
The practical effect of the law is to control liquor prices in other States, and the proliferation of state affirmation laws in twenty states has greatly multiplied the likelihood that a seller will be subjected to inconsistent obligations in different States.26
New York’s lowest-price affirmation requirement therefore violates the Commerce Clause on its face and receives no shelter from the Twenty-first Amendment, which authorizes only in-state regulation of liquor sales.27
Related opinions on this issue
Justice Blackmun joined the Court’s opinion except for its footnote six.28 He would have gone further and overruled Joseph E. Seagram & Sons, Inc. v. Hostetter outright.29
Seagram is now a relic of the past.30 It was decided when affirmation statutes were comparatively new and long before the proliferation of overlapping and potentially conflicting affirmation statutes that has taken place in the last two decades.31 He saw no principled distinction that can be drawn for constitutional analysis between New York’s current prospective statute and the same State’s retroactive statute upheld in Seagram.32
Either type, despite one’s best efforts at fine-tuning, operates to affect out-of-state transactions and violates the Commerce Clause.33 Our failure to overrule Seagram now merely preserves uncertainty and will breed or necessitate further litigation.34 The Court should face reality and overrule Seagram.35
Joined by Justice White And Justice Rehnquist
Justice Stevens dissented, joined by Justice White and Justice Rehnquist.36 The facial challenge failed for lack of evidence showing any actual effect on prices in other states because Brown-Forman had sold its products in more than thirty states for two decades without introducing proof that the New York statute affected prices elsewhere.37 He would have adhered to Seagram’s presumption that the Authority would exercise its discretion to avoid constitutional friction.38
The majority’s speculation about hypothetical conflicts did not justify departing from precedent.39 The broad authority the Twenty-first Amendment confers over liquor traffic within state borders should be respected.40