Brown-Forman v. N.Y. State Liq. Auth., 476 U.S. 573 (1986)

Brown-Forman Distillers Corp. v. New York State Liquor Authority

No. 84-2030

Argued March 3, 1986
Decided June 3, 1986
476 U.S. 573

APPEAL FROM COURT OF APPEALS OF NEW YORK

New York’s Alcoholic Beverage Control Law (ABC Law) provides that a distiller, licensed to do business in the State, may not sell its products to wholesalers within the State except in accordance with a monthly price schedule previously filed with appellee State Liquor Authority, and requires that the distiller include with the schedule an affirmation that the prices in the schedule are no higher than the lowest prices that the distiller will charge wholesalers anywhere else in the United States during the month. Appellee determined that the ABC Law prohibited appellant distiller, which sells its liquor in New York and in other States, from offering certain promotional allowances (based on past purchases and projections of future purchases) to wholesalers in the State, and that the payment of the allowances to wholesalers in other States lowered the "effective price" of appellant’s products to those wholesalers, thus violating the affirmation provision of the ABC Law. After license revocation proceedings were instituted against appellant, it sought review of appellee’s ruling in the Appellate Division of the New York Supreme Court, which held, inter alia, that the affirmation provision did not, on its face, directly regulate interstate commerce in violation of the Commerce Clause of the Federal Constitution. The New York Court of Appeals affirmed.

Held:

1. The affirmation provision of New York’s ABC Law, on its face, violates the Commerce Clause. Pp. 578-585.

(a) In analyzing state economic regulation under the Commerce Clause, the critical consideration is the overall effect of the state law on both local and interstate activity. Pp. 578-579.

(b) While a State, as here, may seek lower prices for its consumers, it may not insist that producers or consumers in other States surrender whatever competitive advantages they may possess. Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511. Economic protectionism is not limited to attempts to convey advantages on local merchants; it may include attempts to give local consumers an advantage over consumers in other States. The mere fact that the effects of New York’s ABC Law are triggered only by sales of liquor within New York therefore does not validate the law if it regulates the out-of-state transactions of distillers who sell in New York. Pp. 579-580.

(c) A "prospective" statute such as the affirmation provision of the ABC Law -- requiring that prices in the State in the current month not be higher than those that will be charged in any other State during the same (as opposed to the previous) month -- directly regulates out-of-state transactions in violation of the Commerce Clause. Once a distiller’s posted price is in effect in New York, it must seek appellee’s approval before it may lower its prices for the same item in other States. By defining the "effective price" of liquor (in view of appellant’s promotional allowance program) differently from other States, New York can effectively force appellant to abandon its allowance program in States in which that program is legal, or force those other States to alter their own regulatory schemes in order to permit appellant to lower its New York prices without violating the affirmation laws of those States. Pp. 582-584.

2. The Twenty-first Amendment does not save the ABC Law’s affirmative provision from invalidation under the Commerce Clause. That Amendment gives New York only the authority to control sales of liquor in New York, and confers no authority to control sales in other States. The Commerce Clause operates with full force whenever one State attempts to regulate the sale of alcoholic beverages in another State. Moreover, New York’s affirmation provision may interfere with the ability of other States to exercise their own authority under the Twenty-first Amendment. Pp. 584-585.

64 N.Y.2d 479, 479 N.E.2d 764, reversed.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and POWELL and O’CONNOR, JJ., joined, and in all but n. 6 of which BLACKMUN, J., joined. BLACKMUN, J., filed a concurring opinion, post, p. 586. STEVENS, J., filed a dissenting opinion, in which WHITE and REHNQUIST, JJ., joined, post, p. 586. BRENNAN, J., took no part in the consideration or decision of the case.