Re: Senate Judiciary Committee hearing on Internet alcohol sales and the Twenty-First Amendment Enforcement Act.
Date: March 9, 1999.
Source: Senate Judiciary Committee.
| Opening Statement by Sen. Orrin Hatch (R-UT). Re: Senate Judiciary Committee hearing on Internet alcohol sales and the Twenty-First Amendment Enforcement Act. Date: March 9, 1999. Source: Senate Judiciary Committee. |
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Today, the Judiciary Committee will hear testimony concerning the growing business of interstate shipments of alcohol. Unfortunately, along with that growing business, problems associated with that trade are also growing. While I certainly believe that interstate commerce should be encouraged and I do not want small businesses stifled by unnecessary or overly burdensome and complex regulations, I do not subscribe to the notion that purveyors of alcohol are free to avoid State laws which are consistent with the power bestowed upon the them by the Twenty-First Amendment.
All States, including the State of Utah, need to be sure that the liquor that is brought into their State is labelled properly and subject to certain quality control standards. States need to protect their citizens from consumer fraud and have a claim to the tax revenue generated by the sale of such goods. And of the utmost importance, States need to ensure that minors are not provided with unfettered access to alcohol. Unfortunately, indiscriminate direct sales of alcohol have opened a sophisticated generation of minors to the perils of alcohol abuse.
I can tell you that my home State of Utah, which has some of the strictest controls in the nation on the distribution of alcohol, is not immune from the dangers of direct sales. Take a look at this story which ran on KUTV in Salt Lake City last Tuesday. If that story does not bother you, it should. If a thirteen year old is capable of ordering beer and having it delivered by merely “borrowing” a credit card and making a few clicks with her mouse, there is something very wrong with the level of control that is being exercised over these sales. Of course the Utah case is not an isolated example. Stings set up by authorities in New York and Maryland have also shown how easy it is for minors to obtain alcohol.
The Twenty-first Amendment was ratified in 1933. That amendment ceded to the States the right to regulate the importation and transportation of alcoholic beverages across its borders. By virtue of that grant of authority, each State created its own unique regulatory scheme to control the flow of alcohol. Some set up “State stores” to effectuate control of the shipment into, and dissemination of alcohol within, their State. Others refrained from direct control of the product, but set up other systems designed to monitor the shipments and ensure compliance with its laws. But whatever the type of State system enacted, the purpose was much the same: to protect its citizens and ensure that its laws were obeyed.
Although not perfect, the systems set up by the States worked reasonably well for many years. However, it is apparent that modern technology has opened the door for abuse and created the need for further governmental action to address those abuses. No longer must a State prosecute just an errant neighborhood retailer for selling to a minor - now, the ones selling to minors and others in violation of a State’s regulatory laws are a continent away. A small winery can create its own web page and accept orders over the internet; a large retailer can advertise “nationally” in the New York Times and accept orders over the phone; an ad can be placed in a magazine with a national circulation offering sales through an 800 number. Let me emphasize that there are many companies engaged in the direct interstate shipment of alcohol who do not violate State laws. In fact, many of these concerns look beyond their own interests and make diligent efforts to disseminate information to others to ensure that State laws are understood and complied with by all within the interstate industry.
I should note that I am certainly sympathetic to the small wineries and specialty micro-breweries who feel that the requirement that they operate through a “three tier” system (producer-wholesaler-retailer) which does not embrace them may, in effect, shut them out of the marketplace. They make the argument that if wholesalers do not carry their product, they have no other avenue to the consumer other than through direct sales. However, if there is a problem with the system, we need to fix the system, not break the laws.
Later today, I will introduce a bill entitled the “Twenty-First Amendment Enforcement Act.” Federal law already prohibits the interstate shipment of alcohol in violation of state law. Unfortunately, that general prohibition lacks any enforcement mechanism. The bill I am introducing simply provides that mechanism by permitting the Attorney General of a State, who believes that his or her State laws regulating the importation and transportation of alcohol are being violated, to file an action in federal court for an injunction to stop those illegal shipments.
The bill is balanced to ensure due process and fairness to both the State bringing the action and the company or individual alleged to have violated the State’s laws. The bill:
1. Permits the chief law enforcement officer of a State to seek an injunction in federal court to prevent the violation of its laws regulating the importation or transportation of alcohol;
2. Allows for venue for the suit where the defendant resides and where the violations occur;
3. Does not permit an injunction without notice to the opposing party;
4. Requires that any injunction be specific as to the parties, the conduct and the rationale underlying that injunction;
5. Allows for quick consideration of the application for an injunction and conserves court resources by avoiding redundant proceedings;
6. Mandates a bench trial; and
7. Does not preclude other remedies allowed by law.
Some will make the argument that State courts are capable of handling this issue. Unfortunately, States have had mixed success in enforcing their laws through State court actions. Companies and individuals have raised jurisdictional, procedural and legal defenses that have stalled those efforts, and that continue to hamper effective enforcement. It is, in part, because of those inconsistent rulings, that federal leadership is needed in this area. Moreover, the scope and limitations of a State’s ability to effectively enact laws under the Twenty-First Amendment are essentially federal questions that need to be decided by a federal court, and perhaps ultimately, by the Supreme Court. Only through such rulings can both the States and companies seeking to conduct interstate shipments be assured of consistency in interpretation and enforcement of the laws.
Of course, the hearing today will help us understand the issues involved and I am sure the individuals providing testimony will greatly enlighten us and give us guidance in passing effective legislation to deal with this problem. It is my hope that, at the end of the day, we can reach an agreement on how best to balance legitimate commercial interests with the Constitutional rights of the States as ceded to them by the Twenty-First Amendment.