Healy v. Beer Institute Wine and Spirits Wholesalers of Connecticut, Inc v. Beer Institute

• Decision Date: 19 June 1989
• Docket Number: 88-513,Nos. 88-449,s. 88-449
• Citation: 109 S.Ct. 2491,491 U.S. 324,105 L.Ed.2d 275
• Parties: John F. HEALY, et al., Appellants, v. The BEER INSTITUTE, et al. WINE AND SPIRITS WHOLESALERS OF CONNECTICUT, INC., Appellants, v. The BEER INSTITUTE, et al
• Court: U.S. Supreme Court

491 U.S. 324

109 S.Ct. 2491

105 L.Ed.2d 275

John F. HEALY, et al., Appellants,

v The BEER INSTITUTE, et al.

WINE AND SPIRITS WHOLESALERS OF CONNECTICUT,

INC., Appellants,

v. The BEER INSTITUTE, et al.

Nos. 88-449, 88-513.

Argued March 28, 1989.

Decided June 19, 1989.

Syllabus

A Connecticut statute 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. Appellees, a brewers' trade association and major producers and importers of beer, filed suit against state officials in the District Court challenging the statute under the Commerce Clause. The court upheld the statute on the basis of Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35, 86 S.Ct. 1254, 16 L.Ed.2d 336. The Court of Appeals reversed, holding that the statute violated the Commerce Clause by controlling the prices at which out-of-state shippers could sell beer in other States, and that appellants' argument that the statute was a proper exercise of the State's regulatory authority under the Twenty-first Amendment was foreclosed by Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 106 S.Ct. 2080, 90 L.Ed.2d 552.

Held: Connecticut's beer-price-affirmation statute violates the Commerce Clause. Pp. 335-343.

(a) The statute has the impermissible practical effect of controlling commercial activity wholly outside Connecticut. By virtue of its interaction with the regulatory schemes of the border-states, the statute requires out-of-state shippers to take account of their Connecticut prices in setting their border-state prices and restricts their ability to offer promotional and volume discounts in the border States, thereby depriving them of whatever competitive advantages they may possess based on the local market conditions in those States. Moreover, the short-circuiting of normal pricing decisions based on local conditions would be carried to a national scale if and when a significant group of States enacted contemporaneous affirmation statutes similar to Connecticut's that linked in-state prices to the lowest price in any State in the country. It is precisely such results that the Commerce Clause was meant to preclude. Brown-Forman, 476 U.S., at 579, 581-583, 106 S.Ct., at 2084, 2085-2087; cf. CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 88-89, 107 S.Ct. 1637, 1649-1650, 95 L.Ed.2d 67. Pp. 335-340.

(b) The statute, on its face, also violates the Commerce Clause by discriminating against interstate commerce, since it applies only to brewers and shippers engaged in interstate commerce and not to those engaged solely in Connecticut sales, and since it is not justified by a valid purpose unrelated to economic protectionism. Pp. 340-341.

(c) Appellants' reliance on the Twenty-first Amendment as authorizing the statute regardless of its effect on interstate commerce is foreclosed by Brown-Forman, 476 U.S., at 585, 106 S.Ct., at 2087, which explicitly held that that Amendment does not immunize state laws from Commerce Clause attack where, as here, their practical effect is to regulate liquor sales in other States. P. 341-342.

(d) Appellants' reliance on Seagram supra, to validate the statute is also foreclosed by Brown-Forman, 476 U.S., at 581-584, and n. 6, 106 S.Ct., at 2085-2087, and n. 6, which strictly limited Seagram § scope and removed the underpinnings of its Commerce Clause analysis. To the extent that it held that retrospective affirmation statutes do not facially violate the Commerce Clause, Seagram is no longer good law, since such statutes, like other affirmation statutes, have the inherent practical extraterritorial effect of regulating liquor prices in other States. Pp. 342-343.

849 F.2d 753 (CA2 1988), affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, and KENNEDY, JJ., joined, and in Parts I and IV of which SCALIA, J., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, post, p. 344. REHNQUIST, C.J., filed a dissenting opinion, in which STEVENS and O'CONNOR, JJ., joined, post, Pp. 345.

Robert F. Vacchelli, Newington, Conn., for appellants.

Jeffrey Ives Glekel, New York City, for appellees.

Justice BLACKMUN delivered the opinion of the Court.

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. These posted prices would take effect on the first day of the following month and would continue without change for the rest of that month. Conn.Gen.Stat.Ann. § 30-63(c) (1975 and Supp.1982). The 1981 statute further required that out-of-state shippers affirm under oath at the time of posting that their posted prices were and would remain no higher than the lowest prices they would charge for each beer product in the border States during the effective period. § 30-63b(b), quoted in 532 F.Supp., at 1314, n. 3. Moreover, in calculating the lowest price offered in the border States, the statute deducted from the reported price the value of any rebates, discounts, special promotions, or other inducements that the out-of-state shippers offered in one or more of the border States.³ § 30-63c(b), quoted in 532 F.Supp., at 1314, n. 4. To the extent that such inducements lowered border-state prices, the statute thus obligated out-of-state shippers to lower their Connecticut prices as well.⁴

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 unconstitutional under the Commerce Clause. The District Court, relying primarily on this Court's decision in Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35, 86 S.Ct. 1254, 16 L.Ed.2d 336 (1966), upheld the 1981 law. United States Brewers Assn., Inc. v. Healy, 532 F.Supp., at 1325-1326. The Court of Appeals, however, reversed. It held that the 1981 Connecticut statute was facially invalid under the Commerce Clause because it had the practical effect of prohibiting out-of-state shippers from selling beer in any neighboring State in a given month at a price below what it had posted in Connecticut at the start of that month. The court explained: "Nothing in the Twenty-first Amendment permits Connecticut to set the minimum prices for the sale of beer in any other state, and well-established Commerce Clause principles prohibit the state from controlling the prices set for sales occurring wholly outside its territory." United States Brewers Assn., Inc. v. Healy, 692 F.2d 275, 282 (CA2 1982) (Healy I ). This Court summarily affirmed. 464 U.S. 909, 104 S.Ct. 265, 78 L.Ed.2d 248 (1983).

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. Conn.Gen.Stat. § 30-63b(b) (1989).⁵ The legislature also added § 30-63b(e), which provides that nothing in § 30-63b prohibits out-of-state shippers from changing their out-of-state prices after the affirmed Connecticut price is posted.⁶ The legislature, however, did not amend § 30-63a(b), which continued to make it unlawful for out-of-state shippers to sell beer in Connecticut at a price higher than the price at which beer is or would be sold in any bordering State during the month covered by the posting.⁷

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 border State only at the time of posting—the sixth day of each month. Id., at 547, and n. 9. After the moment of posting, the ruling stated, the statute imposes no restrictions on the right of out-of-state shippers to raise or lower their border-state prices at will. Ibid.

Appell...