HEALY ET AL. v. THE BEER INSTITUTE ET AL.
No. 88-449
SUPREME COURT OF THE UNITED STATES
Argued March 28, 1989—Decided June 19, 1989
491 U.S. 324
APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
*Together with No. 88-513, Wine & Sрirits Wholesalers of Connecticut, Inc. v. The Beer Institute et al., also on appeal from the same court.
Jeffrey I. Glekel argued the cause for appellees in both cases. With him on the brief were Jerome I. Chapman, Wayne C. Holcombe, William H. Allen, Timothy G. Reynolds, and Gary Nateman.†
The State of Connecticut requires out-of-state shippers of beer to affirm that their posted prices for products sold to Connecticut wholesalers are, as of the moment of posting, no higher than the prices at which those products are sold in the bordering States of Massachusetts, New York, and Rhode Island. In these appeals, we are called upon to decide whether Connecticut‘s beer-price-affirmation statute violates the Commerce Clause.1
I
Although appellees challenge Connecticut‘s beer-price-affirmation statute as amended in 1984, this litigation has its roots in the 1981 version of Connecticut‘s price-affirmation scheme. Having determined that the domestic retail price of beer was consistently higher than the price of beer in the three bordering States, and with the knowledge that, as a result, Connecticut residents living in border areas frequently crossed state lines to purchase beer at lower prices, Connecticut enacted a price-affirmation statute tying Connecticut beer prices to the prices charged in the border States. See United States Brewers Assn., Inc. v. Healy, 532 F. Supp. 1312, 1314, 1316-1317 (Conn. 1982). In an effort to eliminate the price differential between Connecticut and the border States, Connecticut required that brewers and importers (out-of-state shippers)2 post bottle, can, and case prices for each brand of beer to be sold in Connecticut. Id., at 1317.
In 1982, a brewers’ trade association and various beer producers and importers (a subset of the appellees in the instant litigation) filed suit in the United States District Court for the District of Connecticut, challenging the 1981 statute as
In 1984, the Connecticut Legislature responded to Healy I by amending its beer-price-affirmation statute to its current form. The statute now requires out-of-state shippers to affirm that their posted prices are no higher than prices in the border States only at the time of the Connecticut posting.
In the wake of the 1984 amendments, appellees (a brewers’ trade association and major producers and importers of beer) filed suit in the United States District Court for the District of Connecticut, seeking declaratory and injunctive relief and claiming that the effect of the amended law was not different from that of the law struck down in Healy I.8 See United States Brewers Assn. v. Healy, 669 F. Supp. 543, 544-545 (1987). In response to appellees’ complaint, Connecticut filed a “Declaratory Ruling” by the Department of Liquor Control, interpreting the statute as amended as requiring out-of-state shippers to affirm that their posted prices in Connecticut were no higher than their lowest prices in any
Appellees argued, however, that the Connecticut beer-affirmation statute, even as modified by the declaratory ruling, regulated out-of-state transactions, constituted economic protectionism, and unduly burdened interstate commerce, all in violation of the Commerce Clause. On cross-motions for summary judgment, the District Court upheld the statute as modified by the legislature and construed in the Department of Liquor Control‘s declaratory ruling, resting its decision on Seagram, supra, and distinguishing this Court‘s subsequent decision in Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U. S. 573 (1986), which struck down a statute analogous to Connecticut‘s 1981 beer-affirmation statute. The District Court found the 1984 Connecticut law constitutional on its face because, “unlike the version in Healy I and Brown-Forman,” the 1984 law “leaves brewers free to raise or lower prices in the border states before and after posting in Connecticut and does not, therefore, regulate interstate commerce.” 669 F. Supp., at 553.
As in Healy I, the Court of Appeals reversed. It held that the 1984 law (even as interpreted by the declaratory ruling), like its predecessor, violated the Commerce Clause by controlling the prices at which out-of-state shippers could sell beer in other States. First, and foremost, the court held that the Connecticut statute‘s “purposeful interaction with border-state regulatory schemes” means that shippers cannot, as a practical matter, set prices based on market conditions in a border State without factoring in the effects of those prices on its future Connecticut pricing options. In re Beer Institute, 849 F. 2d 753, 760-761 (CA2 1988) (Healy II). Second, the Court of Appeals found that the 1984 statute unconstitutionally restricted the ability of out-of-state shippers
We noted probable jurisdiction. 488 U. S. 954 (1988).
II
In deciding this appeal, we engage in our fourth expedition into the area of price-affirmation statutes. The Court first explored this territory in Seagram, where it upheld against numerous constitutional challenges a New York statute that required liquor-label owners or their agents to affirm that “the bottle and case price of liquor... is no higher than the lowest price” at which such liquor was sold “anywhere in the United States during the preceding month.” 384 U. S., at 39-40, quoting the New York law. The Court ruled that the mere fact that the New York statute was geared to appellants’ pricing policies in other States did not violate the Commerce Clause, because under the Twenty-first Amendment‘s broad grant of liquor regulatory authority to the States, New York could insist that liquor prices offered to domestic wholesalers and retailers “be as low as prices offered elsewhere in the country.” Id., at 43. Although the appellant brand owners in Seagram had alleged that the New York law created serious discriminatory effects on their business outside New York, the Court considered these injuries too conjectural to support a facial challenge to the statute and suggested that the purported extraterritorial effects could be assessed in a case where they were clearly presented. Ibid.
Eighteen years after Seagram, we summarily affirmed the Second Circuit‘s judgment in Healy I, and then, another two years later, granted plenary review in Brown-Forman, supra. The New York law at issue in Brown-Forman required every liquor distiller or producer selling to wholesalers within the State to affirm that the prices charged for
This Court agreed, reaffirming and elaborating on our established view that a state law that has the “practical effect” of regulating commerce occurring wholly outside that State‘s borders is invalid under the Commerce Clause. We began by reviewing past decisions, starting with Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511 (1935). The Court in Seelig struck down a New York statute that set minimum prices for milk purchased from producers in New York and other States and banned the resale within New York of milk that had been purchased for a lower price. Because Vermont dairy farmers produced milk at a lower cost than New York dairy farmers, the effect of the statute was to eliminate the competitive economic advantage they enjoyed by equalizing the price of milk from all sources. Writing for the Court, Justice Cardozo pronounced that the Commerce Clause does not permit a State “to establish a wage scale or a scale of prices for use
The Court squarely rejected New York‘s argument that the Twenty-first Amendment, which bans the importation or possession of intoxicating liquors into a State “in violation of the laws thereof,” saved the statute from invalidation under the Commerce Clause. Although the Court acknowledged that the Amendment vested in New York considerable au-
The Court acknowledged that its Brown-Forman decision was in considerable tension with Seagram. The statutes at issue in the two cases were, it observed, factually distinguishable: the Seagram statute was retrospective, tying New York prices to out-of-state prices charged during the previous month, while the Brown-Forman statute was prospective, mandating that New York prices could be no higher than out-of-state prices for the following month. But the Court explicitly refused to give this retrospective/prospective distinction any constitutional significance, and even suggested that the effects of the two statutes might well be the same for the purposes of constitutional analysis. Nonetheless, since the Court was not squarely presented with a retrospective statute, it declined to evaluate Seagram‘s continued validity. 476 U. S., at 584, n. 6.11
III
In light of this history, we now must assess the constitutionality of the Connecticut statute, which is neither prospective nor retrospective, but rather “contemporaneous.” As explained above, the statute requires only that out-of-state shippers affirm that their prices are no higher than the prices being charged in the border States as of the moment of affirmation.
The principles guiding this assessment, principles made clear in Brown-Forman and in the cases upon which it relied, reflect the Constitution‘s special concern both with the main-
When these principles are applied to Connecticut‘s contemporaneous price-affirmation statute, the result is clear. The Court of Appeals correctly concluded that the Connecticut statute has the undeniable effect of controlling commercial activity occurring wholly outside the boundary of the State. Moreover, the practical effect of this affirmation law, in conjunction with the many other beer-pricing and affirmation laws that have been or might be enacted throughout the country, is to create just the kind of competing and interlocking local economic regulation that the Commerce Clause was meant to preclude.
First, as explained by the Court of Appeals, the interaction of the Connecticut affirmation statute with the Massa-
Second, because New York law requires that promotional discounts remain in effect for 180 days, see
Third, because volume discounts are permitted in Massachusetts, New York, and Rhode Island, but not in Connecticut, the effect of Connecticut‘s affirmation scheme is to deter volume discounts in each of these other States, because the lowest of the volume-discounted prices would have to be offered as the regular price for аn entire month in Connecticut. See 849 F. 2d, at 760.
With respect to both promotional and volume discounts, then, the effect of the Connecticut statute is essentially indistinguishable from the extraterritorial effect found unconstitutional in Brown-Forman. The Connecticut statute, like the New York law struck down in Brown-Forman, requires out-of-state shippers to forgo the implementation of competitive-pricing schemes in out-of-state markets because those pricing decisions are imported by statute into the Connecticut market regardless of local competitive conditions. As we specifically reaffirmed in Brown-Forman, States may not deprive businesses and consumers in other States of “whatever competitive advantages they may possess” based on the conditions of the local market. 476 U. S., at 580. The Connecticut statute does precisely this.
The Commerce Clause problem with the Connecticut statute appears in even starker relief when it is recalled that if Connecticut may enact a contemporaneous affirmation statute, so may each of the border States and, indeed, so may every other State in the Nation. Suppose, for example, that the border States each enacted statutes essentially identical to Connecticut‘s. Under those circumstances, in January, when a brewer posts his February prices in Connecticut and the border States, he must determine those prices knowing
IV
The Connecticut statute, moreover, violates the Commerce Clausе in a second respect: On its face, the statute discriminates against brewers and shippers of beer engaged in interstate commerce. In its previous decisions, this Court has followed a consistent practice of striking down state statutes that clearly discriminate against interstate commerce, see, e. g., New Energy Co. of Indiana v. Limbach, 486 U. S. 269 (1988); Sporhase v. Nebraska ex rel. Douglas, 458 U. S. 941 (1982); Lewis v. BT Investment Managers, Inc., 447 U. S. 27 (1980), unless that discrimination is demonstrably
V
A
Appellants advance two basic arguments in defense of Connecticut‘s statute: first, that the Twenty-first Amendment sanctions Connecticut‘s affirmation statute regardless of its effect on interstate commerce; and, second, that the statute is constitutional under this Court‘s analysis in Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U. S. 35 (1966), in which the Court stated that a retrospective affirmation statute does not violate the Commerce Clause merely because it is geared to prices in other States. Appellants’ reliance
B
More important, Brown-Forman removed the legal underpinnings of Seagram‘s Commerce Clause analysis. 476 U. S., at 581-584, and n. 6. Seagram rested on the following reasoning: the Twenty-first Amendment gives States wide latitude in the field of liquor regulation; although such state regulation might violate the Commerce Clause in some extreme instances, in particular where a State‘s regulations controlled liquor commerce outside the State‘s boundaries, the extraterritorial effects of New York‘s retrospective affirmation statute were too conjectural to support such a claim. 384 U. S., at 42-43. Brown-Forman, however, holds unequivocally that to the extent that an affirmation statute has the practical effect of regulating out-of-state liquor prices, it cannot stand under the Commerce Clause irrespective of the Twenty-first Amendment. 476 U. S., at 585. In striking down the statute at issue, the Court in Brown-Forman found, in light of 20 years of experience with the affirmation laws that proliferated after Seagram, that prospective affirmation statutes have such extraterritorial effects. Indeed, Brown-Forman leaves Seagram intact only to the extent that the Court in the former case felt no compulsion, in a case not directly raising the question, to address whether
In the interest of removing any lingering uncertainty about the constitutional validity of affirmation statutes and of avoiding further litigation on the subject of liquor-price affirmation, we recognize today what was all but determined in Brown-Forman: to the extent that Seagram holds that retrospective affirmation statutes do not facially violate the Commerce Clause, it is no longer good law. Retrospective affirmation statutes, like other affirmation statutes, have the inherent practical extraterritorial effect of regulating liquor prices in other States. By tying maximum future prices in one State to the lowest prices in other States as determined at a specified time in the past, retrospective affirmation laws control pricing decisions in nonaffirmation States by requiring that those decisions reflect not only local market conditions, but also market conditions in the affirmation States—market conditions that would be irrelevant absent the binding force of the affirmation statutes. Every pricing decision made in a nonaffirmation State will reflect the certain knowledge that the price chosen will become in the future the maximum permissible price in the States requiring affirmation.15 For the reasons noted today and in Brown-Forman, this extraterritorial effect violates the Commerce Clause.
The judgment of the Court of Appeals is affirmed.
It is so ordered.
I join the Court‘s disposition of this suit and Parts I and IV of its opinion. The Connecticut statute‘s invalidity is fully established by its facial discrimination against interstate commerce—through imposition of price restrictions exclusively upon those who sell beer not only in Connecticut but also in the surrounding States—and by Connecticut‘s inability to establish that the law‘s asserted goal of lower consumer prices cannot be achieved in a nondiscriminatory manner.* See New Energy Co. of Indiana v. Limbach, 486 U. S. 269, 276-277, 279-280 (1988). This is so despite the fact that the law regulates the sale of alcoholic beverages, since its discriminatory character eliminates the immunity afforded by the Twenty-first Amendment. See Bacchus Imports, Ltd. v. Dias, 468 U. S. 263, 275-276 (1984). Since Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U. S. 35 (1966), upheld a law that operated in like fashion, I agree with the Court that today‘s decision requires us to overrule that case. See ante, at 343.
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 (1935), the Court held that a New York statute setting minimum 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 а maximum price for beer imported into
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 рroduction 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., at 521. In Milk Control Board v. Eisenberg Farm Products, 306 U. S. 346 (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.
The Connecticut statute 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
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 farthеr in advance, ante, at 337-338, than it would prefer to do in a totally unregulated economy.
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 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 (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 Twеnty-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 (1980). And while this “special power” of the States to regulate liquor, id., at 108, 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 (1976). The Court in the present cases barely pays lipservice to the additional authority of the States to regulate commerce and alcoholic beverages grаnted 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 revеrse the judgment of the Court of Appeals.