Arkansas' New Shipping Law Creates a Legal Conflict

State will allow local wineries to ship to residents; as a result, a Supreme Court ruling could make it open its markets further

Jim Clarke
Posted: May 20, 2005

After passing a law last month to help local wineries, Arkansas has found itself at odds this week with the U.S. Supreme Court over the issue of direct-to-consumer wine shipping. In April, Gov. Mike Huckabee signed a bill allowing Arkansas wineries to ship directly to state residents; it goes into effect on Aug. 11. But the state still prohibits deliveries from wineries outside the state--an inequality that the high court has just ruled unconstitutional.

Sen. Ruth Whitaker sponsored Act 1806 at the urging of some of the wineries in the Altus American Viticultural Area, which lies within her district. She said that the income that direct shipping could generate for local businesses dovetails with her goal of raising the state's per-capita income.

Vintner Michael Post, who runs Mount Bethel winery in Altus, called the shipping law a big success for the state's five wineries. The producers derive a large part of their income from wine tourism, and Post said he has been pushing the state to support its wine industry for years.

However, the law only allows state residents who visit the wineries to ship up to three cases back home to themselves. Post said the law is a "whittled down" version of the original proposal to allow shipments to anyone who visited an Arkansas winery. In light of the Supreme Court decision, he said, "I hope [the new law] gives us leverage."

On May 16, the U.S. Supreme Court ruled that Michigan and New York could not ban interstate direct shipments of wine while allowing in-state wineries to ship to residents. The justices determined that while states have the right to regulate alcohol sales, it is unconstitutional to discriminate against out-of-state wineries in favor of local businesses.

Before the new law passed, Arkansas would have been in compliance with the court's decision: there was no discrimination because no winery could ship directly to Arkansas consumers. Now Arkansas is in the same boat as at least six other states that have potentially discriminatory laws but that were not part of the lawsuits heard by the Supreme Court.

Matt DeCample, a spokesman for the Arkansas attorney general's office, said the state has no immediate obligation to act on the Supreme Court's ruling. Two scenarios could result, he said; the legislature could address the issue or someone (most likely a consumer interested in ordering wine from out-of-state) could bring a lawsuit against the state to force it to comply with the court's findings.

Arkansas could choose to solve the problem by taking away local wineries' shipping privileges, but since the state just passed the law, the court ruling could nudge it toward allowing shipments from both in- and out-of-state wineries. The legislature has twice previously considered "reciprocity" bills--which would allow residents to receive shipments from wineries in other states, as long as those states also allow Arkansas wineries to ship to them--but those measures never made it through both houses.

Post said he is not concerned about out-of-state competition and hopes for "as much shipping rights as possible."

The new law is not the first in Arkansas to discriminate against out-of-state producers; a law passed in 2001 allows the state's wineries to sell wine in grocery stores, while other wines are restricted to licensed liquor stores.

Arkansas' viticultural history dates at least to the 1870s, when Swiss-German immigrant families began making wine there. In 2002, the state's wineries produced more than 500,000 gallons of wine from varieties such as Chardonnay and Merlot, the native American Concord and the locally developed hybrid Cynthiana.